July 14, 2008

Three Psa Operators Fail to Ensure Planned Oil Production in 2007 – Audit Chamber

MOSCOW. July 14 (Interfax) - Companies operating three oil projects in Russia under product-sharing agreements failed to ensure the planned level of oil production stipulated in the PSAs in 2007, the Audit Chamber said in a statement.

An Audit Chamber session chaired by Chairman Sergei Stepashin in early July considered the results of inspections into the effectiveness of the government's activities in managing existing projects being carried out based on PSAs.

The statement says that shortcomings were also found in the work of the Industry and Energy Ministry.

The inspection also revealed the government's improper control over the activities of PSA operators, including the payment of fines for violating Russian legislation and payments for environmental damage, the statement says. In addition, a widespread problem for all PSAs is control over preferences at customs when registering goods brought into the country for the realization of PSAs as well as the their further use in accordance with the preferences given.

The Audit Chamber decided to send statements to Total Exploration and Development Russia, Exxon Neftegaz Limited and Sakhalin Energy Investment Company, Ltd. Letters will also be sent to the Russian government, the Finance Ministry and the Federal Antimonopoly Service (FAS), while a report will be submitted to the Federal Assembly, the government and the Energy Ministry.

Materials considered by the Audit Chamber indicate that investment in the Sakhalin-1 and Sakhalin-2 projects as well as the Kharyaga PSA have totaled $28.5 billion.

According to the Fuel and Energy Central Dispatch Center, a total of 14.061 million tonnes of oil and 6.652 billion cubic meters (bcm) of gas were produced as part of PSAs last year, including 11.2 million tonnes of oil and 6.3 bcm of gas in the Sakhalin-1 project.

The Sakhalin-1 project participants are: Exxon Neftegaz Ltd. (30%), India's ONGC (20%), Rosneft (20%) and Japan's SODECO (30%). The project involves the development of the three fields in Sakhalin's northeastern shelf: Chayvo, Odoptu, and Arkutun-Dagi.

Gazprom (RTS: GAZP) holds a 50%-plus-one stake in Sakhalin Energy. The other consortium members are Shell Sakhalin Holdings B.V. with 27.5%, Mitsui Sakhalin Holdings B.V. with 12.5% and Diamond Gas Sakhalin B.V., a Mitsubishi subsidiary, with 10%.

Total owns a 50% stake in the project. Norway's Hydro holds 40% and Russia's Nenets Oil Company 10% interest in it.

(c) 2008 Daily News Bulletin; Moscow - English. Provided by ProQuest Information and Learning. All rights Reserved.