ExxonMobil has held talks of record length with the government over the global oil industry champion's plans to spend $3.5 billion on an offshore project near Sakhalin Island this year, but it has won no approval as yet.
There are no deadlines in sight as the company is answering inquiries from the Energy Ministry-led supervisory board, Exxon spokeswoman Dilyara Sydykova said Friday. Nevertheless, the company is hoping to reach an agreement in the near future, she said.
The government is accusing Exxon of inflating costs. Higher costs mean less revenue for the federal budget because development is governed by a production-sharing agreement.
Exxon had to suspend work at its $17 billion Sakhalin-1 project for several weeks during similar talks last year in an effort — the second-longest one on record — to get its budget approved by the project's board, known as the Authorized State Body. The assent came on April 8 last year.
This time, work on the fields did not grind to a halt because the company had secured permission to spend $1 billion this year as a portion of its spending needs.
An Energy Ministry spokesman said he was unable to comment immediately Friday evening on why the final approval was taking so long.
In the other reported delay, the government had not endorsed Exxon's budget for 2006 until March 29 that year.
Exxon is the operator in the project that it co-owns with Rosneft, Japan's Sodeco and India's ONGK Videsh. The consortium, which has been producing oil at the Chayvo field for a few years, is focusing its investment on the nearby Odoptu field.
Gazprom has been pushing the consortium to sell it the project's gas, saying no other option is possible. Exxon believes that it can sell to China because the production sharing agreement exempts it from Russian legislation establishing Gazprom as the country's gas export monopoly.