Exxon Pipeline to China Is Blocked

ExxonMobil has been denied permission to start work on a gas pipeline to China from Sakhalin-1 this year, the Industry and Energy Ministry said in a statement on its web site Friday.

The government also refused to allow Exxon to invest in drilling oil deposits discovered near the Sakhalin-1 boundaries, the ministry said.

The government approved a 2008 budget of $1.26 billion for Sakhalin-1 instead of the $1.84 billion sought by Exxon. The higher figure included spending on the gas pipeline and drilling for the contested oil resources.

Gazprom has said it needs gas from Sakhalin-1 for domestic consumption. Exxon's partners in Sakhalin-1 are Rosneft, Japan's Sodeco and India's ONGC.

The government approved 2008 spending for the country's three production-sharing agreements, including $2.08 billion for Gazprom's Sakhalin-2 oil and gas project, the ministry said.