Japan’s Nikkei newspaper has reported that Exxon Mobil Corporation (NYSE:XOM) has reach an agreement to sell about 1.5 billion cubic meters/year of natural gas from the Sakhalin-1 project to Russia’s gas monopoly Gazprom. Exxon has denied the report, saying discussions continue but no agreements have been signed.
Last month Exxon got budget approval from the Russian government for 2009 spending. The dispute over where and to whom Sakhalin-1 gas is sold is a continuing story, and an important one for both Exxon and Gazprom.
The Sakhalin-1 project is sitting on about 17 trillion cubic feet of natural gas that so far doesn’t have a market expect for about 2 billion cubic meters (about 70 billion cubic feet) that it sells to a nearby Russian province. At full production, the Sakhalin-1 project will pump out 11 billion cubic meters of natural gas annually, and Exxon wants to sell its share of that (30%) for the highest price it can get. That is not the price that Gazprom will pay, but without Gazprom’s blessing, that gas is going nowhere.
Paul Ausick
May 7, 2009
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