Russ Oil-Gas

04 September 2007 - Upstream OnLine - Russian gas giant Gazprom said today it needs gas from ExxonMobil's Sakhalin 1 project for domestic use, adding to pressure on the US supermajor to drop its plans to export the development's gas to China. "Given that nearly all the gas from the Sakhalin 2 project has already been sold under long-term contracts, and other Sakhalin projects are not expected to start production in the middle term, the gas from Sakhalin 1 can be the only source for domestic supplies until at least 2015," Vladimir Kozlov, head of Gazprom's Sakhalin office, told Reuters. Speaking at the annual oil and gas conference in the island's capital of Yuzhno-Sakhalinsk, Kozlov said the growing domestic demand for gas in Russia's four Far Eastern regions will reach 13.1 billion cubic metres by 2010 and grow to 16 Bcm by 2015, hitting 19.2 Bcm by 2020. He added that Sakhalin 1 alone could supply the regions with 3.2 Bcm of gas by 2010, and 11.4 Bcm from 2015 to 2020. "We are in discussions with Gazprom and have regular meetings with them to explore various options and find ways of mutual co-operation," an ExxonMobil spokesman told the news agency. Sakhalin 1 is being developed via a production sharing agreement, which excludes the project from Gazprom's legal monopoly on gas exports. It gives ExxonMobil the right to sell the gas to a consumer of its choice, such as China, with which the US supermajor reached a preliminary agreement in 2004 on annual supplies of 8 Bcm of gas. "Our main principle is economic profitability. So far, we consider the Chinese direction to be the most attractive from the economic point of view," Margarita Tsoy, ExxonMobil's government and public affairs manager, told Reuters.