[A-List] Russia: blow to US oil groups

["Michael Keaney" <michael.keaney@xxxxxx>]

US oil groups face the loss of $60m
By Andrew Jack in Moscow
Financial Times, January 30 2004

ExxonMobil and ChevronTexaco are set to lose up to $60m in investment
following a Russian government decision to renege on a tender for the
Sakhalin 3 oilfield that awarded exploration rights to the two groups 10
years ago.

The move represents a fresh challenge to the property rights of foreign
investors, and the latest of a series of intiatives suggesting a growing
preference by the authorities for Russian and state-owned companies in the
development of the country's energy sector.

Viktor Khristenko, deputy prime minister, said yesterday that a new tender
should be held for Sakhalin 3. This followed a decision that the field would
not be one of the projects benefiting from the long-term tax-advantageous
status of a production sharing agreement (PSA).

The decision -- against which the two US groups are vigorously appealing --
comes at a time of aggressive lobbying by Rosneft, the state-controlled oil
group, which has attempted to boost its influence and gain access to new
Russian oil reserves.

ExxonMobil says it has spent $48m on exploration and research since winning
the tender on Sakhalin 3 in 1993. It holds two-thirds of two of the three
blocks within the offshore zone in Russia's Far East, while Rosneft owns the
remaining third of the equity. A third block has been equally split between
ExxonMobil, ChevronTexaco, which invested $12m, and Rosneft.

Glenn Waller, vice-president for ExxonMobil in Russia, said: "As a major
investor in the Russian Federation, we would be very disappointed if the
decision is taken to retender Sakhalin 3. This would be a violation of our
property rights and send a very negative signal to the foreign investment
community."

Mr Khristenko said it was possible that the sums already invested by
ExxonMobil and ChevronTexaco would be taken into account in any new tender.
ExxonMobil has already pledged more than $10bn for the development of the
Sakhalin 1 field.

Rosneft was forced in 2001 to sell a share of its equity in the Sakhalin 1
project to the Indian state-owned group ONGC to meet its financing
commitments, and has asked BP to "carry" its funding obligations in Sakhalin
4.

It is believed to have lobbied to become a partner in the Northern
Territories oil project alongside Lukoil. It has also expressed an interest
in the Talakanskoye and other fields in eastern Siberia previously sought by
Yukos. Separately yesterday, Alexei Miller, head of Gazprom, expressed his
reservations over proposals to participate in a project to develop the
Kovytka gas field near Irkutsk due to licence requirements.