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The Wall Street Journal: Russia Favors Rosneft Over Exxon on Project

September 22, 2006 10:17 p.m.; Page A3

MOSCOW — Russia said it would grant OAO Rosneft a development license for a Pacific coast oil bloc, despite an attempt by Exxon Mobil Corp. to have the reserves counted as part of its adjacent Sakhalin-1 consortium.

The move came amid crossed signals from within the Ministry of Natural Resources over an order to pull the environmental permit for the nearby Sakhalin-2 project led by Royal Dutch Shell PLC. Analysts have said Russia is trying to force foreign oil majors to give up part or all of their advantageous production-sharing agreements, negotiated when oil prices were much lower.

The order to cancel the Sahkalin-2 environmental permit had been passed for final confirmation to the Rostekhnadzor agency, which unexpectedly said it didn’t have the authority to fulfill the order. The agency then retracted its statement, saying it had been issued by mistake.

A spokesman for the Ministry of Natural Resources said Rostekhnadzor would study the order and issue a ruling, most likely within the next two weeks.

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