Exxon Group May Be Leading in Soviet Oil Race : Energy: The pact, which could be worth up to $20 billion, is for exploration of Sakhalin Island.

Exxon Corp., together with the Japanese government and several major Japanese companies, appears to be on the verge of winning approval from Soviet authorities to explore for oil and gas on Sakhalin Island off the Siberian coast, an area off-limits to foreign oil explorers for the past 70 years but considered one of the most promising untapped oil fields in the world.

Speculation has mounted for weeks in the international oil and gas industry over which of six bidders would get the go-ahead for the deal, which could be worth as much as $20 billion. A Soviet official said Thursday that the Exxon consortium had gotten the nod.

“This agreement covers a gigantic area and should be concluded very soon,” Boris Kurakin, described as the managing director of the Soviet’s scientific and industrial union, told a Moscow correspondent for Agence France-Presse, the French news service.

But spokesmen for U.S. oil companies were uncertain that a deal had been completed.

“I can’t confirm that,” Exxon spokesman Lance Lamberton said Thursday.

“We don’t think an official decision has been made yet,” said Mobil Corp. spokesman John Lord. “There have been an awful lot of stories like this for the past month . . . a maelstrom of conflicting information.” Mobil is also among the bidders for exploration rights around the 29,000-square-mile island.

The largely unexplored Sakhalin energy fields, particularly those offshore, are described by industry observers as a plum among the vast oil and gas resources being opened to Western exploration under current Soviet policies.

Several fields in the Sakhalin area are suspected to be what are known in the oil patch as “elephant class,” the largest of fields, with a billion barrels or more of recoverable reserves. Prudhoe Bay, on the Alaskan North Slope, was estimated at the time of exploration to have 10 billion barrels of recoverable reserves.

The potential value of contracts for exploration and development work in the Sakhalin fields has been estimated by Oil & Gas Journal at $6 billion to $10 billion, mostly for drilling wells and installing offshore platforms.

According to Thursday’s report, the deal would be worth $20-billion--which seemed high to some oil-industry observers for prospecting and exploration on the island itself and in the adjacent Okhotsk Sea.

“Increasingly in the international oil industry, the Soviet Union is considered the next and perhaps the last great prize in 20th-Century oil,” said Daniel Yergin, author of “The Prize: The Epic Quest for Oil, Money & Power.”

North American and European companies have been particularly interested in making investments in Soviet energy fields, but Japan has largely hung back--wary of both its long history of friction with the Russians and current political uncertainties.

“But the Japanese have a very intense and practical interest in Sakhalin because it’s a gas-oriented project,” said Yergin, president of Cambridge Energy Research Associates. “They are increasingly concerned that they have enough supplies of gas to meet their growing power needs. And Sakhalin is virtually at their back door.”

A previous newspaper report, which appeared in the Japanese press on Oct. 20, also gave the nod to the Exxon consortium, known as the Sodeco group. But that report rankled relations between the provincial and federal governments and prompted denials from Soviet officials that the decision, promised for Oct. 6, had been made.

One executive with a U.S. oil company involved in the bidding, who asked that his name not be used, said it was his understanding that only today would the provincial official for Sakhalin Island make his formal recommendation for the winning bid to Moscow authorities.

“And from what we know,” he added, “it could take at least a week or perhaps into next year for them to make up their mind.”

Another industry insider found eventual success by the Sodeco group likely, however. “It would be no great surprise really,” said one industry insider. “The Japanese have been real aggressive trying to bag that one.”

Bids were invited in July by the Soviet ministry for the oil and gas industry and the Russian Republic’s State Committee on Geology and Utilization of Fuel, Energy and Mineral Resources. The day before bidding closed--Aug. 10--16 companies in six groups had submitted proposals.

The Sodeco group includes Exxon, C. Itoh & Co. and the Sakhalin Oil Development Cooperation Co., a joint venture of the Japanese government and private companies. Another bidder, the Mitsui group, is made up of Mitsui & Co., and the U.S. firms McDermott International Inc. and Marathon Oil Co.

In the Shell group are Showa Shell Sekiyu K.K., Showa Shell Sekiyu Development, Nissho Iwai Corp., Mitsubishi Corp. and the Royal Dutch/Shell Group.

What is termed the U.S.-South Korea-Australia group includes Amoco Corp., South Korea’s Hyundai Group and EHP Petroleum, an Australian company. Submitting separate bids were Mobil Corp. and Idemitsu Oil Development, a subsidiary of a major Japanese oil refiner and distributor.