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Rosneft Suing Exxon-Led Oil Project over Dispute Between Neighbours

Source: Reuters 7/25/2018, Location: Asia

Russian oil major Rosneft’s $1.4 billion lawsuit against the ExxonMobil-led Sakhalin-1 consortium relates to a row over how oil should be shared between the Sakhalin-1 concession and an adjacent Rosneft field, court papers show.

By bringing the legal action, Rosneft is taking on one of its closest foreign partners: Rosneft and ExxonMobil have multiple joint projects. But Rosneft and its powerful boss Igor Sechin have a track record of assertively fighting their corner in commercial disputes.

Rosneft filed the suit in the Sakhalin district arbitration court in Russia’s far east, accusing the consortium of unjust enrichment, an allegation the consortium denied. Rosneft did not disclose the exact nature of the dispute.

According to court documents reviewed by Reuters on Tuesday, the court asked Rosneft to present documents related to an agreement over the 'cross-flows' of oil from the Northern Chayvo oilfield, controlled by Rosneft.

The Northern Chayvo field is adjacent to the concession area controlled by the Sakhalin-1 consortium.

It is commonplace in the oil industry for extraction activities on one concession to influence oil flows on a neighbouring permit, because the oil lies in rock formations that straddle two or more permits.

'Since oil cross-flows can be determined by an examination, most disagreements between companies of this nature are resolved out of court by negotiation,' Aton, a Russian brokerage, said in a research note.

Asked whether the suit concerned a dispute over 'cross-flows' between the Sakhalin and Rosneft permits, a Rosneft spokeswoman said the company had no comment.

Sakhalin-1 is operated by Exxon Neftegaz, through which ExxonMobil owns 30 percent in the project. Rosneft and India’s ONGC control 20 percent each. Japanese consortium Sodeco owns 30 percent.

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