Reuters: Russia may cut payments to Sakhalin operators

MOSCOW, April 13 (Reuters) – Russia is considering cutting payments to the operators of the Sakhalin-1 and Sakhalin-2 offshore oil and gas production sharing projects after independent auditors reviewed the costs of the work.

Russia’s energy ministry said in a report on the projects’ results for 2006 that independent auditors recommended cutting reimbursable expenses to Sakhalin-1 operator ExxonMobil by 10.4 percent, or $370 million, for 2004 and 2005 together.

The 76-page report, obtained by Reuters, also said that reimbursable expenses of Sakhalin Energy, the operator of the Sakhalin-2 project, should be lowered by 7.2 percent, or $362.5 million, for 2004.

Royal Dutch Shell-led led the project at that time, but Russian gas monopoly Gazprom struck a deal late last year to buy a majority stake.

Under the production sharing agreements’ (PSA) terms, Russia only gets royalties after reimbursing operators’ capital investments.

The ministry said ExxonMobil had disagreed with the auditors’ conclusion.

“The (Sakhalin-1) project operator did not agree with the results of the auditors’ check and sent us its objections. Auditors decided to stick to their opinion after they examined the objections,” the report said.

The ministry said its officials would meet the project operators and the auditors in the near future to discuss the auditors’ conclusions and to take a final decision.

An ExxonMobil spokesman in Sakhalin told Reuters by phone that his company was considering the information in the report and had yet to formulate its position.

A Sakhalin Energy spokesman declined to comment.

The companies are developing big oil and gas projects off Russia’s remote Pacific island of Sakhalin.

ExxonMobil’s Sakhalin-1 partners are Russian state-controlled oil firm Rosneft , India’s ONGC , and a Japanese consortium, Sodeco.

Sakhalin-2 is being developed by Gazprom, Shell and Japanese companies Mitsui <8031.T> and Mitsubishi <8058.T>.

Last year, Shell ceded control in Sakhalin-2 to Gazprom after doubling the project’s estimated costs to $22 billion.

The auditors for Sakhalin-1 were BKR Interkom-Audit and for Sakhalin-2 were Top-Audit, both private Russian companies.
 
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