Exxon Considers Adding to Its Russian Oil Fields

Exxon Mobil Corp., the world’s largest publicly traded oil company, may develop a second oil field off Russia’s Pacific coast, provided Russia changes its laws on exploration licenses.

Exxon may seek an exploration license for the Sakhalin-3 fields, close to the $15-billion Sakhalin-1 project where Exxon expects to start pumping oil in 2006. The company would apply for a permit only if Russian lawmakers amend licensing laws after elections this year to the country’s lower house of parliament, or Duma, said Rex Tillerson, a senior vice president at Exxon.

“We are prepared to go forward with exploration,” Tillerson said Tuesday during the U.S.-Russia Energy Summit in St. Petersburg, Russia. “We expect the new Duma to pass the amendments we’re seeking.”

Exxon, BP and Royal Dutch/Shell Group, the world’s top publicly traded oil companies, are expanding in Russia, the world’s top gas producer and second-biggest oil producer, to reduce their reliance on the Middle East. Exxon is interested in the Sakhalin-3 area’s Kirinsky field, which has estimated reserves of 687 million tons of oil (5 billion barrels) and 873 billion cubic meters of gas.

Exxon wants Russia to change its law on subsoil resources so that exploration licenses will grant their holders rights to develop oil fields if recoverable reserves are discovered, he said. Under the existing law, a new tender is held for development licenses once recoverable reserves are found.

Developing Kirinsky would take at least $1 billion, Russia’s Economy Ministry said. Exxon has told Russia it already invested $60 million in the field.

The country’s Economy and Natural Resources ministries have been discussing Kirinsky with Exxon, Economy Minister German Gref said.

“Ten years ago they won the tender for this field. Now we have to find an appropriate solution to accelerate the project,” Gref said. “Obviously, this would also require political approval.”

Exxon had been discussing development of Sakhalin-3 fields under so-called production-sharing accords, which would have fixed the amount of money Russia could take for the oil and provided permits for exploration and production.

Russia this year said such accords would be granted only in “extraordinary” cases, after attempts to auction oil field licenses have failed.

Exxon is ready to work under Russia’s existing tax regime, Energy Minister Igor Yusufov said.

In 1993 Mobil, which is now part of Exxon Mobil, won the right to 33% of Kirinsky, with Texaco Inc., now part of ChevronTexaco Corp., also winning 33%.

The same year, Exxon won the rights to two-thirds of the Ayashsky and East Odoptinsky blocks in Sakhalin-3, with estimated reserves of 114 million tons of oil and 513 billion cubic meters of gas.