RUSSIA MUDDIES SAKHALIN TENDER SCENE

Russia has added a new twist to the long saga of who will conduct the feasibility study of developing oil and gas reserves off Sakhalin Island.

After awarding the contract to a group of Marathon Oil Co, McDermott International and Mitsui, (MMM) the Russians suggested two unsuccessful bidders, Mobil Oil Corp. and Sakhalin Oil Development Co. (Sodeco) should be asked to collaborate in the work.

Mobil bid for the feasibility study work without a partner, but Sodeco, in which Japan National Oil Corp. is a major partner, sought the contract in partnership with Exxon Corp. Japanese sources say if MMM accepts the suggestion, it will be easier for the Japanese government to award development of Sakhalin reserves the title of a national project. This status will open the way for Japan to provide substantial support for the project, including low cost finance through Export-Import Bank of Japan, an important factor in a high risk project in a harsh environment. Japan's Ministry of International Trade and Industry is keen to see the new partners added to the 3M consortium and will support state backing for the project.

This would represent a change of policy for the Japanese government which set its face against endorsing development projects in Russia until the territorial dispute over the four Kurile islands off the northern coast of Hokkaido has been solved.

Japanese sources also point out Sodeco has long experience off Sakhalin and has conducted its own feasibility study of developing Odoptu and Chaivo fields on concessions awarded in 1975.

The presence of Sodeco in the group could pave the way for a coordinated development of these two fields with Piltun Astoskoye and Lunskoye.

The Japanese newspaper Nikkei Weekly reported Mitsui officials are concerned about future cooperation from Sakhalin's governor, Valentin Fedrov, who resigned from the tender committee, claiming opinions of local government officials had been ignored. These officials had backed Sodeco/Exxon.

The local officials had also asked the Russian Federation to postpone tender results until plans from bidders for investing in the local infrastructure had been evaluated. Fedrov is still expected to demand a contribution from the winning bidders to the development of local services.