Audit Chamber Criticizes Foreign Oil Majors

Several energy projects, all of which have foreign participation, failed to achieve their oil production targets in 2007, the Audit Chamber said Monday.

The projects in question were ExxonMobil's Sakhalin-1, Gazprom's Sakhalin-2 and Total's Kharyaga, the state auditor said in a statement. All of them operate under production-sharing agreements, or PSAs.

The Audit Chamber's report went on to criticize the government for its lax supervision of the PSAs, claiming that they had failed to ensure the payment of fines for violations, including environmental damage.

Analysts speculated that the Audit Chamber's report could be used either to justify Gazprom's actions two years ago, when Shell was pressured into ceding control at Sakhalin-2, or to strengthen the government's hand in a future push for control at Sakhalin-1.

Gazprom has also sought to prevent Exxon Neftegaz from exporting its gas abroad, a dispute which analysts say has affected oil output from the project.

The Audit Chamber has sent letters to Exxon Neftegaz, Sakhalin Energy — where Shell is the No. 2 shareholder after Gazprom — and Total. The auditor has also forwarded details of its claims to the Finance Ministry and the Federal Anti-Monopoly Service.

Sakhalin Energy, Exxon Neftegaz and Total representatives could not be reached for comment Monday evening.

Russia devised PSAs in the 1990s to lure foreign investment into some of its more difficult and inaccessible oil fields. Under PSAs, companies were able to recoup their investment costs before sharing profits with the Kremlin.

But such contracts fell out of favor after Vladimir Putin took over the presidency, a period marked by growing resource nationalism.

Declining oil production has emerged as a hot topic in Russia, after the world's No. 2 oil exporter saw output fall in the first half for the first time in years.