Exxon, Shell say Sakhalin, Chayovo costs up

Russia’s Energy and Industry Ministry reaffirmed the total cost of an oil and gas project led by Exxon Mobil Corp. off the coast of Russia’s Far Eastern island of Sakhalin, the ministry said Dec. 14. The total budget is US$12.8 billion, including US$6.5 billion in costs for developing the Chayovo oil field — the largest field in the area under development, the ministry said.

ExxonMobil has a 30 percent interest in Sakhalin-1; another 30 percent is held by several Japanese firms, while India’s ONGC Videsh Ltd. and Russia’s OAO Rosneft have 20 percent each.

A neighboring project — the Royal Dutch Shell PLC-led Sakhalin-2 liquefied natural gas development — has requested permission for a doubling of costs to some US$22 billion announced in 2005. Analysts say state resistance to approving the budget and a broad environmental probe against the project is aimed at pressuring Shell to hand over control of the project to natural gas monopoly OAO Gazprom.

Under the terms of the original agreements both Shell and Exxon’s projects must break even before the government can share profits, something which a major cost hike would delay.

—The Associated Press