Russian Agency: Rosneft Will Take Lebedinsky License

MOSCOW Sep 22, 2006 (Dow Jones Newswires)

Russia will issue a development license for the Lebedinsky oil bloc to state-owned OAO Rosneft (ROSN.RS), in spite of an attempt by Exxon Mobil Corp. (XOM) to have the reserves counted as part of its adjacent Sakhalin-1 development site, a state official told Dow Jones Newswires Friday.

The move signals a further strengthening of Russia's position against foreign oil majors operating in the country.

Rosneft was the only company to apply for the rights to develop the Lebedinsky bloc before a Sept. 14 cut-off date, a spokeswoman for the Federal Subsoil Use Agency said. The license will therefore be issued to Rosneft without a competitive tender, she said.

Analysts have said the Kremlin appears to be ramping up the pressure on foreign oil majors to get better terms for agreements that were negotiated several years ago, when prices were lower and Russia was more in need of foreign investment to develop its natural resources.

ExxonMobil's Moscow office said no one was immediately available to comment.

ExxonMobil had earlier appealed to expand the boundaries of its Sakhalin-1 production-sharing agreement, or PSA, to include extra reserves found in the adjacent area, including the Lebedinsky bloc and additional oil found inside its Chayvo field.

Exploration by ExxonMobil after the PSA was negotiated had revealed the Lebedinsky reserves in the vicinity of the PSA, and also that the Chayvo field actually extended beyond the original borders set under the PSA.

An interagency government commission recently announced that the additional Chayvo reserves should be auctioned off rather than automatically passed to the Sakhalin-1 consortium, which also includes Rosneft and India's Oil and Natural Gas Corp. (500312.BY).

Unlike the Chayvo field, however, it has still not been determined whether the Lebedinsky bloc is actually connected to a field that Sakhalin-1 has the rights to develop, the spokeswoman said.

ExxonMobil owns a 30% interest in the Sakhalin-1 consortium. A Japanese consortium called SODECO, which comprises several Japanese firms including Itochu Corp. (8001.TO) and Marubeni Corp. (8002.TO), owns another 30%. Rosneft and ONGC each hold 20%.

Copyright (c) 2006 Dow Jones & Company, Inc.

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