On August 15, just as the much-anticipated meeting between President Trump and President Putin was taking place, a development of potentially far-reaching consequences but little immediate attention surfaced in Moscow. President Putin signed an alteration to his 2022 decree that had transferred the Sakhalin-1 project fully under Russian jurisdiction, this time supplementing it with conditions for the possible return of foreign companies to the venture. The change carries more weight than the quiet timing suggested. At its core lies Russia’s willingness to signal that U.S. companies — and ExxonMobil in particular — could once again have a place in one of Russia’s most strategic energy projects.
Sakhalin-1 is no ordinary asset. Located on the northeast shelf of Sakhalin Island, it consists of the Chayvo, Odoptu and Arkutun-Dagi fields, with recoverable reserves estimated at 2.3 billion barrels of oil and 17.1 trillion cubic feet of natural gas. ExxonMobil entered the project under a production-sharing agreement in the 1990s, after the fields – first discovered in the 1970s – had been left undeveloped for decades. Commercial production began in 2005, with ExxonMobil as operator. At its launch, the project set a world record in extended-reach drilling, reaching 11,282 meters (37,320 feet) with its Z-11 well back in 2007. The equity structure allocated 30% each to ExxonMobil and Russia’s Rosneft, with India’s ONGC Videsh and Japan’s SODECO each holding 20%.
Related: Energy Transition Stalls as Oil Super-Cycle Risks Return
For nearly two decades, this carefully balanced partnership not only demonstrated the viability of large-scale foreign involvement in Russia’s upstream sector but also withstood considerable geopolitical turbulence. Even the 2014 Crimea crisis, which unleashed the first wave of Western sanctions against Moscow, failed to derail Sakhalin-1, despite widespread speculation that the project’s multinational framework would become unfeasible. Yet what it survived in 2014, it could not withstand in 2022. With the outbreak of war in Ukraine and the far more sweeping sanctions that followed, ExxonMobil announced its withdrawal in March, just weeks after hostilities began, triggering a collapse in production from 220,000 b/d to just 10,000 b/d, grinding to a near halt within months. By April, Exxon booked a $4.6 billion impairment charge tied to Sakhalin-1, underscoring the scale of its retreat.
Exports also crashed. Annual shipments of Sakhalin-1 crude fell from 229,000 b/d before the war to 98,000 b/d in 2022, according to Kpler data. For four straight months — June through September — no exports left the terminal. Flows later recovered to 198,000 b/d but still have not reached the pre-war volumes, as sanctions complicated logistics and buyers grew more cautious. Before 2022, the crude had a diverse customer base, including South Korea, Japan, Thailand, China, and even the United States. By 2023, only India and China remained, with a small volume reaching Pakistan in 2024. Today, China has emerged as the largest buyer, taking in 118,000 b/d in 2025 to date.
Story Continues
This reshaping of trade flows coincided with a fundamental shift in the project’s ownership structure. Putin’s first decree on 7 October 2022 formally transferred Exxon’s stake into Russian hands, ending its tenure as the project’s lead. Exxon had explored the option of selling its 30% stake to Indian partners, but Moscow intervened, seizing the equity and placing it in a new state-backed entity, Sakhalinmorneftegaz-Shelf. India’s ONGC and Japan’s SODECO opted to remain. Exxon, for its part, viewed the forced transfer as hostile and unfair, but had little recourse.
Three years later, Moscow decided to soften its uncompromising stance. The amendment issued on 15 August 2025, reopened the door to foreign participation – but only under strict conditions. Partners may reclaim their shares if they succeed in lifting or mitigating sanctions that constrain the project, securing agreements for the supply of foreign-made equipment and spare parts, establishing new technical cooperation deals, and transferring previously accumulated funds from liquidation accounts into the new operator. In practical terms, Russia is signaling a willingness to reengage with foreign stakeholders, but only on terms that advance its own strategic and operational needs. The timing of the decree, however, suggests that more is at play. Signed on the very day of the Trump–Putin meeting, the amendment reads less like a technical adjustment and more like a political gesture — an overt signal to Washington that Russia is prepared to welcome US partners back into Arctic oil development if the broader climate allows. For President Putin, it amounts to a calculated offering, a card placed on the table to prepare the ground for future negotiations and potential concessions.
Yet even if the American side were to reconsider its involvement in Russian Arctic projects, the playing field would look very different from when they first entered. ExxonMobil’s original involvement rested on a production-sharing agreement – a ownership regime that raised controversies when first introduced under President Boris Yeltsin in the 1990s. These agreements were widely criticized in Russia for granting overly generous terms to foreign investors, depriving the state of substantial revenue and limiting transparency in how contracts were awarded and implemented. By the mid-2000s, only two PSAs remained: Sakhalin-1 and Sakhalin-2. The latter became a case study in Moscow’s assertiveness when in 2006, Putin pressured foreign investors to sell a controlling stake to Gazprom. A revived Exxon role today would come under a new legal and commercial regime, one far more tilted in Russia’s favor.
That said, the significance of such a return could extend well beyond Sakhalin itself. If ExxonMobil were to re-enter this project, it could also signal a pathway back into Russia’s broader Arctic ambitions. In 2014, the US sanctions forced Exxon to abandon its joint Arctic exploration with Rosneft after the discovery of the giant Pobeda field in the Kara Sea. With proven reserves of 130 million tonnes of oil and 422 billion cubic meters of gas (and potentially much more), the find rivaled or exceeded resource bases in the Gulf of Mexico, Brazil’s and Alaska’s continental shelves. At the time, the project’s potential was labelled as transformational. A thaw in US-Russia relations that could enable Exxon’s possible return to Sakhalin could open the door to reviving such ventures, which remain some of the most promising untapped hydrocarbon prospects in the world.
For now, Putin’s August decree is a signal, not a deal. But it underscores how tightly the fate of strategic energy projects like Sakhalin-1 is bound to the arc of geopolitics. The legal structures, the buyers, the flows – all have shifted under sanctions and war. What Putin offered on August 15 was not simply a regulatory amendment. It was an invitation, timed to a pivotal political moment, hinting at how energy remains a currency of diplomacy as much as commerce.
Attendees at Fortune’s Brainstorm Tech conference last week witnessed a demonstration of both technological innovation and human resilience when Noland...
