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Energy Tribune: The Bell Tolls for XOM’s Russian Oil and Gas Operations?

Posted on Aug. 16, 2007
By Pavel Romanov and Michael J. Economides

Over the last several years, Russian gas production capacity has been growing mainly because of the Sakhalin projects, which have been very successful due to the professional management of the supermajors.

Beyond Sakhalin, Russia’s gas production – as we have written many times in these pages – has been stagnant. This has occurred at the same time that Gazprom, the gas monopoly fully supported by the Kremlin, has continued its efforts to extend its reach both in and outside Russia.

And what better way for Gazprom to feed its voracious appetite than by getting a big slice of Sakhalin-1?

We’ve already seen what happened at Sakhalin-2. The Russian government used the pretext of environmental violations to force Shell to surrender its controlling interest to Gazprom. We’ve also seen what happened to TNK-BP on the Kovykta field, where Gazprom forced BP to hand over its controlling interest for less than $1 billion.

So why should Exxon Mobil worry? Well, consider the recent statement by Gazprom’s deputy chairman Alexander Ananekov, who said that a “directive” should be issued requiring “Sakhalin-1 gas to be sold to Gazprom, so we could supply gas to Russia’s regions, and for the gas not to be exported as proposed by Exxon Mobil.” In other words, Gazprom, armed with its new controlling interest in Sakhalin-2, which has an LNG plant, wants to be able to supply the Asia market. If it can force the gas from Sakhalin-1 to be consumed domestically, where it will likely get a lower price, Gazprom’s profits will grow, and those profits will be had at the expense of Exxon Mobil.

http://www.energytribune.com/articles.cfm?aid=584

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