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. Last Updated: 07/27/2016

Exxon Hope for Sakhalin Is Dashed

Russia told ExxonMobil on Thursday that it was still ruling out any automatic enlargement of the U.S. oil major's Sakhalin-1 license territory, just as the project has hit peak output and is seeking new reserves.

Moscow said it would put the adjacent deposits into an auction, despite their discovery by Exxon.

The Natural Resources Ministry said in a statement that Deputy Minister Alexei Varlamov told the head of Exxon in Russia, Ben Haynes, that "the ministry's position was unchanged."

Exxon said this week it had hit peak production of 250,000 barrels per day at the Sakhalin-1 project.

The group has been seeking to enlarge the license territory of Sakhalin-1 to sustain peak production, which otherwise will last only for a few years and then start to decline.

The move is seen as part of the Kremlin's broader drive to limit foreign involvement in the strategic energy sector. Some analysts have said Exxon could come under pressure, while others say the presence of influential state-controlled oil firm Rosneft among its Sakhalin-1 partners is making that unlikely.

The statement said Varlamov told Haynes that the ministry wanted to re-auction the Sakhalin-3 block later this year but added that this would happen only after the new subsoil law was approved by the parliament. The law would ban foreign investors from holding control in strategic fields.