Russia And Exxon Mobil To Settle Tax Dispute Out-Of-Court

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Reports indicate that Exxon Mobil and the government of Russia have reached an agreement to settle a Sakhalin-1 legal dispute out of court. The dispute involves a tax claim totalling over $600 million on the Sakhalin gas and oil project.

“An amicable agreement was signed on September 12 between Russia and ExxonMobil. The parties have reached a mutually beneficial compromise,” said a press statement issued by the Russian finance ministry.

Tax overpayment

The dispute started in 2015 when Exxon Mobil which was then headed by Rex Tillerson, the reigning U.S. Secretary of State. Exxon Mobil then challenged the tax demand claiming it had overpaid the taxes due from the Sahkalin-1 offshore project where the American oil major has a 30% interest. The lawsuit had been filed at the Stockholm Arbitration Court where Exxon wanted the tax bill on taxes cut from 35% to 20%. Exxon claimed that in a period of seven years it had overpaid taxes by approximately $637 million

The statement from the Russian finance ministry indicating that Russia and Exxon will solve the dispute out-of-court comes about a week since Vladimir Putin, the president of Russian, claimed that the two parties had come to an agreement. Besides Exxon Mobil other parties involved in the Sakhalin-1 gas and oil project include Indian ONGC, Russia’s Rosneft and Japanese Sodeco. Two months ago Exxon Mobil was slapped with a fine of $2 million after it was found to have failed to comply with sanctions that had been imposed on Russia in 2014 while Tillerson was its chief executive officer.

Hurricane Harvey

The out-of-court deal between Russia and Exxon coincides with the chief executive officer of the oil major, Darren Woods, revealing that progress is being made with regards to restarting the second biggest refinery in the United States after Hurrican Harvey. As a result of the hurricane between 20% and 25% of the refining capacity in the United States was temporarily suspended. Exxon’s Baytown refinery which processes approximately 585,000 barrels per day was closed temporarily due to flooding.

Speaking to CNBC in an on-air interview, Woods said it was hard to predict when the refinery would become fully operational again. Some units at the refinery would begin operating sooner than others with more units coming on board in coming weeks. Though the oil was yet to assess the impact of Hurricane Harvey on earnings, Woods assured investors that the capital spending plans of Exxon would not be affected.