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The Moscow Times: Exxon’s Sakhalin Exports Face Delays

Wednesday, November 8, 2006. Issue 3535. Page 5.
Reuters

The Federal Service for Ecological, Technological and Atomic Inspection does not expect to clear the Sakhalin-1 project, led by ExxonMobil, for full-scale oil exports at least until December, an official said Tuesday.

The news represents at least a 15-day delay from the agency’s previous plan, announced at the end of September, and means the project will continue low-level shipments for another month or more despite healthy demand from Asian consumers.

“The deadline is December. I hope it will be met,” said Alexander Polishchuk, head of the inspection service in the Far East.

Exxon’s troubles in Sakhalin are seen as part of a broader Kremlin move to limit foreign control in the strategic energy sector, with the emphasis on the Shell-led Sakhalin-2 oil and gas project.

Some analysts say official pressure on Exxon and some Russian firms over technical and ecological compliance are meant to show equal treatment for all companies, camouflaging attempts by the Kremlin to force Shell to cede a big part of Sakhalin-2.

Russian companies have no stake in Sakhalin-2, but Exxon has state-controlled oil firm Rosneft as a minority partner in Sakhalin-1. Polishchuk said his agency had no major issues with Exxon despite the delay issuing clearances signaling that pressure on the project was set to subside.
 
“The Americans have sped up work and things are going pretty well,” he said.

Repeated delays to Sakhalin-1 oil exports have already upset Asian clients as the project is meant to represent the biggest addition to regional production in decades. Exxon had initially planned to begin large exports in mid-2006 and reach peak production of 250,000 barrels per day by the end of this year.

This plan is being threatened by the recent developments, as the group has managed to export only two trial 100,000-ton cargoes over the past month despite having presold five or six.

Polishchuk said a third trial tanker could load around mid-November. By comparison, the group’s De Kastri terminal will load one cargo every four days when the project comes fully on stream.

One refiner in Japan, who bought a November loading cargo of Sokol crude from Sakhalin-1, said he had not been notified of any delivery delays.

Polishchuk said the newly built facilities of Sakhalin-1 should undergo more checks and added his inspection would not be the last, implying more possible delays.

He said that he would visit the project’s sites in mid-November, then probably issue a clearance, which in turn will serve a basis for a final state clearance.

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