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Reuters: Russia won’t hand Exxon bigger Sakhalin reserves

MOSCOW, Feb 15 (Reuters) – Russia told Exxon Mobil (XOM.N: Quote, Profile , Research) on Thursday it was still ruling out any automatic enlargement of the U.S. oil major’s Sakhalin-1 licence territory, just as the project has hit peak output and is seeking new reserves.

Moscow said it would put the adjacent deposits into an auction, despite their discovery by Exxon.

The resources ministry said in a statement that deputy minister Alexei Varlamov told the head of Exxon in Russia, Ben Haynes, “the ministry’s position was unchanged”.

Exxon said this week it had hit peak production of 250,000 barrels per day at the Sakhalin-1 project off Russia’s Pacific island.

The group has been seeking to enlarge the licence territory of Sakhalin-1 to sustain peak production, which otherwise will last only for a few years and then start to decline.

The move is seen as part of the Kremlin’s broader drive to limit foreign involvement in the strategic energy sector.

The drive reached its climax last year, when the neighbouring Sakhalin-2, led by Royal Dutch Shell (RDSa.L: Quote, Profile , Research), came under unprecedented pressure from environmental and technical officials, ultimately forcing Shell to sell control to Russian state gas monopoly Gazprom (GAZP.MM: Quote, Profile , Research).

Some analysts have said Exxon could come under similar pressure, while others say the presence of influential state-controlled Russian oil firm Rosneft (ROSN.MM: Quote, Profile , Research) among its Sakhalin-1 partners was making that unlikely.

The statement said Varlamov told Haynes the ministry wanted to re-auction the Sakhalin-3 block later this year but added that this would happen only after the new subsoil law is approved by parliament. The law would ban foreign investors from holding control in strategic fields.

Exxon and fellow U.S. company Chevron (CVX.N: Quote, Profile , Research) had won a preliminary deal to tap Sakhalin-3 in the mid-1990s, but Russia never finalised it and scrapped the earlier agreement several years ago despite protests from U.S. firms and officials.

© Reuters 2007. All Rights Reserved.

 

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