Tuesday, January 18, 2005
Sakhalin Goes After ExxonMobil, Shell
Moscow Times 01.19.2005
The Sakhalin government is forcing an ExxonMobil venture to start producing gas for local customers to avoid losing its development permit, and checking a Shell-led venture for cost overruns that will lead to a "serious discussion" about the project.
"Exxon is delaying its gas part of the project. We convinced them to start, otherwise we could have withdrawn the permit," Galina Pavlova, director of Sakhalin's oil and gas department, said by telephone from Yuzhno-Sakhalinsk.
Exxon, the world's largest publicly traded oil producer, is heading the $12 billion Sakhalin-1 venture, which plans to start pumping crude and gas this year off the coast of Sakhalin Island.
Pavlova said Exxon is in talks with Japan and China about gas deliveries and may make a decision on exports in the next six months.
"The [domestic] gas price will be lower than the export price," Pavlova said, declining to be more specific. Russia "will help the venture to market gas."
Sakhalin-1 holds 2.3 billion barrels of oil and 485 billion cubic meters of gas in terms of recoverable reserves, according to Exxon Neftegas, the project operator. At least $5.3 billion will be spent on the project by 2006 with $1.8 billion invested this year.
ExxonMobil will initially pump 2 billion cubic meters of gas per year from the Yastreb land rig, the world's largest. The fuel will be shipped by Rosneft-Sakhalinmorneftegaz's pipelines to the Khabarovsk region on the continent, Pavlova said. The venture will also extract 30,000 barrels of oil per day.
Gazprom, the world's largest producer of natural gas, and Exxon are jointly studying opportunities for cooperation at Sakhalin-1.
Gazprom plans to enter the venture through the acquisition of state-owned Rosneft, owner of a 20 percent stake in the project. Gazprom is planning to link the gas fields by pipeline with those in eastern and western Siberia and may export the fuel to China and South Korea.
The government will also examine the costs of Sakhalin-2, a venture led by Royal Dutch/Shell, after the producer said investments in the project rose.
Sakhalin Energy Investment, in which Shell holds a 55 percent stake, had planned to invest about $12 billion in Sakhalin-2. The project partners plan to produce liquefied natural gas to sell in Asia.
Shell, which claims to be Russia's largest foreign investor, requested approval for more than $2 billion of spending on the venture this year.
Total spending will reach as much as $10 billion by the end of the year, said Pavlova.
"It's not a secret that Sakhalin-2's cost rose, and it's clear that it won't stop at $12 billion," Pavlova said. "We will have a government examination of the project costs and a serious discussion. So far, they are following their basis proposal for this year."
Pavlova declined to comment on the total increase in spending on the project .
"We are working with our partners, the Sakhalin administration and the government agencies on the budget approval along with the terms of the production-sharing agreement," Ivan Chernyakhovsky, a spokesman for Sakhalin Energy, said by telephone from Moscow. He declined to comment further.
The Sakhalin government is forcing an ExxonMobil venture to start producing gas for local customers to avoid losing its development permit, and checking a Shell-led venture for cost overruns that will lead to a "serious discussion" about the project.
"Exxon is delaying its gas part of the project. We convinced them to start, otherwise we could have withdrawn the permit," Galina Pavlova, director of Sakhalin's oil and gas department, said by telephone from Yuzhno-Sakhalinsk.
Exxon, the world's largest publicly traded oil producer, is heading the $12 billion Sakhalin-1 venture, which plans to start pumping crude and gas this year off the coast of Sakhalin Island.
Pavlova said Exxon is in talks with Japan and China about gas deliveries and may make a decision on exports in the next six months.
"The [domestic] gas price will be lower than the export price," Pavlova said, declining to be more specific. Russia "will help the venture to market gas."
Sakhalin-1 holds 2.3 billion barrels of oil and 485 billion cubic meters of gas in terms of recoverable reserves, according to Exxon Neftegas, the project operator. At least $5.3 billion will be spent on the project by 2006 with $1.8 billion invested this year.
ExxonMobil will initially pump 2 billion cubic meters of gas per year from the Yastreb land rig, the world's largest. The fuel will be shipped by Rosneft-Sakhalinmorneftegaz's pipelines to the Khabarovsk region on the continent, Pavlova said. The venture will also extract 30,000 barrels of oil per day.
Gazprom, the world's largest producer of natural gas, and Exxon are jointly studying opportunities for cooperation at Sakhalin-1.
Gazprom plans to enter the venture through the acquisition of state-owned Rosneft, owner of a 20 percent stake in the project. Gazprom is planning to link the gas fields by pipeline with those in eastern and western Siberia and may export the fuel to China and South Korea.
The government will also examine the costs of Sakhalin-2, a venture led by Royal Dutch/Shell, after the producer said investments in the project rose.
Sakhalin Energy Investment, in which Shell holds a 55 percent stake, had planned to invest about $12 billion in Sakhalin-2. The project partners plan to produce liquefied natural gas to sell in Asia.
Shell, which claims to be Russia's largest foreign investor, requested approval for more than $2 billion of spending on the venture this year.
Total spending will reach as much as $10 billion by the end of the year, said Pavlova.
"It's not a secret that Sakhalin-2's cost rose, and it's clear that it won't stop at $12 billion," Pavlova said. "We will have a government examination of the project costs and a serious discussion. So far, they are following their basis proposal for this year."
Pavlova declined to comment on the total increase in spending on the project .
"We are working with our partners, the Sakhalin administration and the government agencies on the budget approval along with the terms of the production-sharing agreement," Ivan Chernyakhovsky, a spokesman for Sakhalin Energy, said by telephone from Moscow. He declined to comment further.
# posted by Deval : 10:05 PM
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