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The Los Angeles Times: Oil Firms Pressured by Russia

Exxon loses out when an offshore field is given to a company controlled by the state, and a key permit is pulled at a Shell project.

From the Associated Press
September 23, 2006

MOSCOW — An offshore oil field originally claimed by Exxon Mobil Corp. has been given to state-controlled oil giant OAO Rosneft, a Russian government official said Friday.

Western oil companies operating in Russia have been dealt a series of blows recently by the Kremlin, which appears to be seeking a greater stake in the country’s natural resources at a time of high prices.

The decision by Russia’s Natural Resources Ministry to give the Lebedinsky field off Sakhalin Island to Rosneft comes days after the ministry announced that it would pull a key environmental permit at a $20-billion liquefied natural gas project on the Pacific island controlled by Royal Dutch Shell.

Irving, Texas-based Exxon Mobil had asked to have the Lebedinsky bloc allotted as part of its adjacent Sakhalin-1 project.

That request was rejected and a spokeswoman for the Natural Resources Ministry said only that Rosneft had applied for the field as of a Sept. 14 filing deadline.

Earlier, Exxon’s work at Sakhalin-1 was complicated by new environmental checks at its recently completed De Kastri oil terminal.

In a twist that hinted at possible internal governmental dissent over the Royal Dutch Shell decision, a Russian state regulator said it had refused to revoke the environmental permit at Shell’s Sakhalin-2 project. A short while later, however, the regulator, Rostekhnadzor, retracted that statement.

A Rostekhnadzor spokesman said the information was incorrect and the news release had been annulled.

In a related development, ministry officials said this week that French company Total’s license to develop Arctic oil fields at its Kharyaga project was under review for possible cancellation.

Meeting with French President Jacques Chirac in Paris on Friday, Russian President Vladimir V. Putin told reporters that rumors that Total could lose its license were exaggerated.

Analysts have interpreted the Russian moves as an effort by the government to seek greater influence at three projects — Total’s Kharyaga, Exxon Mobil-led Sakhalin-1 and Shell-led Sakhalin-2. The Western oil companies are developing those projects under so-called production sharing agreements — deals that were struck in the early 1990s, when oil prices were low and Russia lacked the funds to develop reserves on its own.

With world oil prices now at record levels, Russia is eager to take greater control of its hydrocarbons and appears to be angling to renegotiate the deals to the benefit of its own energy companies.

Analysts have suggested that Shell’s difficulties have arisen because natural gas monopoly OAO Gazprom, which is seeking to join the project via an asset-swap deal, is pushing for better terms. Gazprom has denied this.

In Washington on Friday, State Department spokesman Tom Casey said the United States was very concerned by the recent Russian government actions toward Shell, saying the actions cast doubt on commitments the government made at the Group of 8 summit this summer in St. Petersburg, Russia. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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