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The Globe & Mail: Russia pressures Exxon to divert Sakhalin exports

Gazprom looks to ban shipments to Asia

TANYA MOSOLOVA
Reuters News Agency, with files from Associated Press
August 3, 2007

MOSCOW — Moscow wants Exxon Mobil Corp. to ship gas from its Sakhalin project to Russia rather than Asian markets, the energy ministry said yesterday, signalling a new round of pressure on the country’s last big foreign-led energy project.

“The state representatives informed the investors’ consortium about Russia’s priority to supply gas from Sakhalin-1 to the domestic market,” the ministry said in a statement following a meeting of Sakhalin-1’s supervisory committee.

Exxon signed a preliminary agreement in 2004 to supply eight billion cubic metres of Sakhalin-1 gas to China’s CNPC, but it has also held talks with Japan and India, which want to import Sakhalin’s gas as liquefied natural gas.

Russia’s OAO Gazprom, which has a monopoly right to export Russian gas, asked the government in June to block the plan saying it would create a shortage in the Russian domestic market.

 “Given Gazprom’s strong positions on Sakhalin, I would not be surprised if it gets what it wants,” said Igor Kurinnyy from ING Groep NV.

Also yesterday, the Belarusian president said his country would pay a $460-million (U.S.) gas bill to Russia in the next few days, possibly with the help of Venezuelan President Hugo Chavez, as a cutoff threatened by Gazprom approached.

Gazprom said Wednesday it would nearly halve the volume of gas Belarus receives if it did not pay the debt. That sparked fears Belarus could siphon gas from pipelines taking 20 per cent of Russia’s gas exports to Europe, and rekindled bitter memories of Gazprom’s past disputes with Ukraine and Belarus.

President Alexander Lukashenko’s comments in Minsk suggested another protracted dispute was not likely. “I gave the order for the money to be taken from our reserves and for the payment of $460-million to be made,” an angry Mr. Lukashenko told a gathering of Belarusian officials. “Let them live in peace.”

Gazprom spokesman Sergei Kuprianov said Mr. Lukashenko’s comments “give us hope.” A delegation from Belarus pipeline operator Beltransgas will continue negotiations this morning in Moscow, he said.

The gas standoff grows out of a hard-fought deal signed in the last minutes of 2006 that obliged Belarus to pay $100 per 1,000 cubic metres of gas, instead of $46. Disputes over energy supplies have pushed relations between the traditional allies to a new low, and Mr. Lukashenko said he would be turning to “good friends,” including Mr. Chavez, for help paying the debt.

Gazprom boosted its positions on Sakhalin last year when it obtained control over the nearby Sakhalin-2 project, forcing Royal Dutch Shell PLC to cede control following months of state pressure. That deal was followed by Gazprom’s purchase of control in Kovykta, a East Siberian gas field, previously led by BP PLC’s Russian vehicle. Both moves are seen as part of a Kremlin drive to strengthen its grip over economy.

Exxon’s Sakhalin is a rare production sharing project between foreign investors and the Russia state, which are not governed by Gazprom’s export monopoly.

http://www.theglobeandmail.com/servlet/story/LAC.20070803.IBRUSOIL03/TPStory/TPBusiness/?page=rss&id=GAM.20070803.IBRUSOIL03

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