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Exxon suspends drilling in Russia amid environmental dispute Company will press government for permission to drill at $15 billion Sakhalin project next summer by The Associated Press
U.S. oil giant Exxon Corp. has suspended drilling off the Russian island of Sakhalin because of an environmental dispute with the Russian government.
Exxon, one of the few major Western oil companies actively exploring in Russia, abandoned preparations for drilling at the Sakhalin-I oil fields Aug. 6 after the State Ecological Committee refused to endorse plans for an oil well, Exxon spokesman Tom Cirigliano said Aug. 19.
The dispute concerns how Exxon would discharge mud and other byproducts brought up during drilling.
The Irving, Texas-based company will press the government for permission to drill next summer in the $15 billion Sakhalin project, which is just north of Japan and much closer to Alaska than to Moscow.
Because of ice and extreme weather conditions, drilling can be conducted only in the summer months. The suspension will set the drilling back at least a year. Cirigliano said the cancellation would cost the consortium developing the Sakhalin I field $9 million in lost preparation costs and result in hundreds of lost jobs.
Exxon said their problems highlight the difficult climate foreign companies face in trying to develop Russia’s energy resources since the 1991 Soviet collapse.
“This decision makes it apparent that much more remains to be done before we can proceed with the significant investments,” Exxon said in its statement.
Environmental problems endemic But Russia is also facing immense environmental problems following decades of unbridled pollution by the Soviet government.
Earlier this year, an independent group of experts at the State Ecological Committee gave a negative assessment of Exxon’s plans to discharge drilling byproducts into surrounding waters. Greenpeace Russia has repeatedly objected to the Sakhalin oil projects, arguing that they endanger marine life in the Okhotsk Sea near Japan. But Exxon contends that what it calls “low-toxicity” discharge is allowed by Russian law and has been approved in other offshore projects.
Following the Russian experts’ assessment, however, Russia’s prime minister intervened and issued a decree endorsing Exxon’s drilling plan. But the committee declined Exxon’s recent request to reverse the negative appraisal in the wake of the prime minister’s decree.
The legal status of the project remains murky. Exxon says its interpretation of Russian law is that it can’t go forward without the experts’ endorsement, which it is now seeking to be able to drill next summer.
Exxon holds a 30 percent stake in the Sakhalin I development and is the operator. The consortium also includes two Russian companies and a Japanese concern.
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