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UPDATE 1-ExxonMobil says not planning to leave Sakhalin project in Russia
May 16, 2014 / 3:24 PM / in 4 years

UPDATE 1-ExxonMobil says not planning to leave Sakhalin project in Russia

* Exxon works with Rosneft, whose CEO Sechin is on US sanctions list

* Putin said Russia could revise participation of West in its economy

* Russia needs new technology to develop tight oil, Arctic (Adds details, quotes, background)

By Katya Golubkova and Denis Pinchuk

MOSCOW, May 16 (Reuters) - U.S. energy company ExxonMobil has no plans to pull out of an oil project off Russia’s Pacific Sakhalin island, it said on Friday, denying a media report that it could do so due to tensions between Moscow and the West over the crisis in Ukraine.

The United States and the EU have imposed sanctions on Moscow and put some Russian officials and businessmen on sanction lists following Russia’s annexation of Ukraine’s Crimea peninsula in March.

Those included Igor Sechin, a close ally of President Vladimir Putin and the head of Russian state oil major Rosneft , which co-owns the Sakhalin-1 project with Exxon.

The fate of the partnership is being closely watched after Putin said last month Russia could reconsider the participation of Western companies in its economy, including energy projects.

Russian state news agency ITAR TASS quoted a Sakhalin region source as saying Exxon may leave the project and local authorities would buy its stake.

“These rumours are groundless. This situation (sanctions) has neither an effect on our activity in Russia, nor on our investment plans in Sakhalin-1. We have no other plans than to go ahead with the project,” an Exxon official said.

Regional authorities declined to comment on Friday.

Asked about the TASS report Russian Energy Minister Alexander Novak said on Friday that he had not received “official information” that Exxon may leave the project.

“This needs to be rechecked,” he said.

Rosneft said it was interested in developing “partnerships” with all global players but declined further comment.

ExxonMobil holds a 30 percent stake in Sakhalin 1, Japan’s Sodeco has 30 percent, India’s ONGC holds 20 percent and the rest is controlled by Rosneft.

Last year, the project produced 7 million tonnes of oil - 140,000 barrels per day.

Exxon and Rosneft are also partners in a yet-to-be-built liquefied natural gas plant in Russia’s Far East and plan to jointly develop Russian Arctic fields and explore for unconventional oil in Siberia.

Russia, the world’s largest energy producer, is hoping to repeat the success of the United States in shale oil as output is set to decline from conventional mature fields in West Siberia.

“ExxonMobil possibly exiting the project would be a significant negative scenario for Rosneft,” Alfa Bank said in a note on Friday.

“That could seriously jeopardize Rosneft’s partnerships with ExxonMobil in terms of Arctic shelf exploration and tight oil reserves...where Rosneft lacks the experience and technology, and relies heavily on international majors.”

SANCTIONS

The United States has so far imposed tougher sanctions on Moscow than the European Union, which gets a third of its gas and oil from Russia.

Many global CEOs are cancelling their trips to Russia’s main economic conference in St Petersburg next week - Russia’s answer to the Davos World Economic Forum - after the White House said it would be inappropriate for heads of big U.S. firms to attend this year.

Exxon’s boss Rex Tillerson has attended several forums in the past but is not featuring on the programme this year.

Royal Dutch Shell, which sold part of its stake in Sakhalin-2 project to Gazprom in 2006 after months of pressure, said in April it was unlikely to jump into new investments in Russia in the short term.

Energy Minister Novak said on Friday that foreign companies are still interested in working in Russia. “I know that many companies are contacting their governments to stop these talks about sanctions,” he said. (Additional reporting by Olesya Astakhova in Moscow and Nidhi Verma in New Delhi; editing by Dmitri Zhdannikov and Susan Thomas)

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