Production at the Sakhalin-1 project collapsed after Exxon refused to accept local insurance for tankers, a source told Reuters.
Western companies stopped insuring tankers operated by state-owned Sovcomflot after Russia invaded Ukraine.
The next round of EU sanctions against Moscow will include a broader ban on Russian oil tanker insurance, among other energy-related services.
Production at a Russian oil project run by Exxon Mobil collapsed after the US company refused to accept local insurance for tankers, giving a potential clue as to what could happen to Moscow’s energy sector once new European sanctions take hold.
Sources told Reuters that production at the Sakhalin-1 project in the Russian Pacific plummeted from 220,000 barrels a day to just 10,000 barrels a day this year before Russia invaded Ukraine.
Production collapsed after Western companies stopped insuring tankers operated by state-owned Sovcomflot, which Reuters said was the target of a previous round of sanctions.
Exxon’s Russian unit, Exxon Neftegas, has had trouble chartering tankers due to the sanctions and has refused to work with Sovcomflot, the report said.
An Exxon spokesman told Insider that in March the company announced its intention to take the necessary steps to exit the Sakhalin-1 project, end its role as operator and stop investing in projects in Russia.
“The exit was a complex process and we remain committed to working in a manner that protects the safety of employees, the environment and the integrity of the Sakhalin-1 project,” Exxon said in an emailed statement . “With its two most recent decrees, the Russian government unilaterally terminated our participation in Sakhalin-1 and the project was transferred to a Russian operator.
Earlier this year, Russian President Vladimir Putin signed a mandate that gave control of Sakhalin-1 to Sakhalinmorneftegaz-Shelf, a subsidiary of Rosneft. Exxon said in August it would transfer its 30 percent stake in Sakhalin-1 to a third party.
The slump in production at the Sakhalin project comes ahead of a new round of European Union sanctions that will include a broader insurance ban on Russian oil tankers, coming into effect on December 5.
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