ExxonMobil's Russian Project May Get Nod To Export To China

U.S. energy giant ExxonMobil Corp.’s (NYSE:XOM) oil and gas project on the Russian Pacific island of Sakhalin is likely to get rights to export natural gas to China. The announcement was made by Russian Energy Minister, Alexander Novak.

ExxonMobil is the operator of the Sakhalin-1 offshore deposits. The project is being jointly developed by the company and Russian state-owned energy firm, Rosneft, under a production-sharing agreement (PSA) signed in the 1990s.

The gas deposits of the project have remained unused for a long time. This is mainly due to a price-related issue between Sakhalin-1 and Gazprom (MCX:GAZP), which has a monopoly right to export gas.

Novak also met ExxonMobil’s chief on the sidelines of the St Petersburg International Economic Forum, where the former discussed three options to allow Sakhalin-1 to sell gas.

These included liquefying the fuel with Rosneft and selling it to the nearby Sakhalin-2. Notably, the proposed buyer is the sole Russian LNG producer and a joint venture of Gazprom, Royal Dutch Shell (LON:RDSa) plc (RDS.A) and Japanese partners.

The third option comprised gas supplies to China. The Energy Minister added that the PSA will facilitate Sakhalin-1 to sell gas abroad despite Gazprom’s monopoly.

Interestingly, Gazprom has constructed a pipeline from Sakhalin to Vladivostok near the Chinese border with a similar aim to transfer gas to the nation.

A tender was called by Sakhalin-2 to build a third production train for the Gazprom-Royal Dutch Shell LNG plant. This plant also requires gas from Sakhalin-1 to expand its capacity.

ExxonMobil carries a Zacks Rank #3 (Hold). Some better-ranked players from the energy sector are CVR Refining, LP (NYSE:CVRR) , FutureFuel Corp. (NYSE:FF) and ReneSola Ltd. (NYSE:SOL) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).