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Exxon halts Russia dig
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August 19, 1999: 11:07 a.m. ET
U.S. company said to suspend drilling plan amid dispute with ecological group
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LONDON (CNNfn) - Exxon Corp. has suspended drilling activities in Russia after the country's ecological watchdog group failed to endorse the U.S. company's plan for extracting oil at its $15 billion patch in Russia's Far East, according to a published report.
Exxon, one of a handful of Western companies prospecting for oil in Russia, suspended plans to drill a well at its Sakhalin field after the State Ecological Agency, Gosecolog, raised environmental objections, The Wall Street Journal reported Thursday.
Exxon holds a 30 percent stake in the so-called Sakhalin I project, a consortium that also includes two Russian companies and one Japanese company, the newspaper said.
Gosecolog reportedly voiced concern about the process by which Exxon would discharge mud and other byproducts during drilling. Exxon, the newspaper said, has countered by claiming it employs a "low-toxicity" method of extraction that is legal under Russian law and which has been approved at similar projects elsewhere in the nation.
The Journal cited an Exxon statement as portraying the company's setback in Russia as another instance of the impediments to Western firms trying to invest in the developing nation's vast energy industry.
"This decision makes it apparent that much more remains to be done before we can proceed with the significant investment plans," Exxon was quoted as saying.
The suspension of the Sakhalin project will cost Exxon $9 million in lost preparation expenses and could results in hundreds of layoffs, the newspaper reported. But a company spokesman was quoted as saying the cancellation would not affect Exxon's plans to market Sakhalin's natural gas reserves via a planned undersea pipeline to Japan.
The newspaper said Gosecolog had also turned down a request from Exxon to rescind its objections after the country's prime minister backed Exxon's drilling plan.
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