Exxon Seen Selling Sakhalin Gas to Gazprom

KHABAROVSK -- Gazprom will sign a deal to buy the entire annual gas output from ExxonMobil's Sakhalin-1 field this spring, an executive said Thursday.

The move will mark another milestone in the Kremlin's drive to bring large energy assets back under state control and allow Gazprom to get more resources without tapping its own rich hydrocarbon base.

Gazprom came to Sakhalin last year, when Royal Dutch Shell was forced to sell control of its $22.5 billion oil and gas Sakhalin-2 project after months of state pressure, while Exxon was banned from exporting gas from Sakhalin-1 to China.

"We are talking to Exxon about buying this gas," Gazprom's deputy head, Alexander Ananenkov, told chairman and First Deputy Prime Minister Dmitry Medvedev.

"The dynamics [of talks] have recently been positive, and we hope to sign a binding agreement with Exxon to buy 11 billion cubic meters of gas in April or May," he added.

Exxon and its partners -- Rosneft, Japan's Itochu and Marubeni and India's ONGC -- have invested more than $12 billion in Sakhalin-1 to launch oil production in 2006 and hit peak oil output of 250,000 barrels per day last year.

The companies also signed a deal to supply China with 8 bcm of gas per year and had hoped to start supplies from next decade.