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The Times: Gazprom takes aim at Exxon in battle against foreign ownership

December 28, 2007
Carl Mortished, World Business Editor

Gazprom has renewed its campaign against foreign ownership of Russian gas resources with an attack on ExxonMobil’s Sakhalin-1 project in Eastern Siberia, the last remaining Russian gas venture under foreign control.

ExxonMobil’s plan to sell gas to China was criticised heavily by Alexander Ananenkov, Gazprom’s deputy chairman. He described ExxonMobil’s efforts to export gas from Sakhalin as “attempts to sidestep Russian gas consumers, depriving them of gas which belongs to them by right”.

Mr Ananenkov’s comments, which were reported in the Russian press, were part of a broadside against the foreign ownership of Russian energy resources. He cited Shell’s Sakhalin-2 gas project, Total’s Kharyaga oilfield and ExxonMobil’s Sakhalin-1 project, all developed under production-sharing contracts agreed in the 1990s, as “negative experiences”.

Last year Shell was forced to accept a rewrite of its contract with the Russian Government after a campaign of persecution by Russian environmental agencies, which threatened to shut down Shell’s Sakhalin operation. The attacks ceased when Shell and its Japanese partners agreed to each sell part of their interest in a liquefied natural gas project to Gazprom, giving the Russian gas utility control over the venture.

Similar pressure was exerted this year on BP when TNK-BP, the British company’s Russian joint venture, was forced to yield to Gazprom control of Kovytka, another huge gasfield in Eastern Siberia.

The statements from Mr Ananenkov suggest that ExxonMobil may be coming under similar pressure over the Sakhalin1 production-sharing contract. A deal with China National Petroleum Corporation, struck last year, to build a pipeline to export gas to China is under threat from the Russian Energy Ministry, which has cut $600 million from ExxonMobil’s proposed $1.8 billion 2008 budget for Sakhalin-2. The higher figure included investment in the gas pipeline, but the Russian Government wants ExxonMobil to sell the gas in the less profitable domestic market.

Mr Ananenkov said: “Companies using our subsoil do not intend to organise supplies to the Russian Far East. They seem to be motivated by some economically more advantageous possibilities for deliveries of gas.”

The Russian Government’s rejection of the export pipeline reflects its wish that Gazprom should exert control over all gas export business. Efforts by TNK-BP to secure approval for an export pipeline to China for Kovytka gas was similarly rejected. Gazprom has a legal monopoly over Russian gas exports, but the Sakhalin production-sharing contracts, agreed during the mass privatisations under President Yeltsin, were exempted from normal regulatory control. The present administration resents the privileged fiscal and legal structure of the production-sharing contracts.

Sakhalin-1 is a huge resource, with estimated reserves of 2.3 billion barrels of oil and 17,000 billion cubic feet of gas from three offshore oil and gasfields. Exxon Neftegas, the project operator, is already producing about 250,000 barrels of oil per day from the Chayvo field.

Exxon has a 30 per cent interest in Exxon Neftegas. Other partners include Rosneft, the state oil company, with 20 per cent, a Japanese consortium, with 30 per cent, and ONGC, of India, with 20 per cent. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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