By Shigeru Sato

Russia’s government refused to approve a budget proposal for the Sakhalin-1 oil and natural gas project led by Exxon Mobil Corp. and a Japanese venture, the Sankei newspaper reported, citing unnamed officials.

The project partners were unable to start development work on two of three fields near Sakhalin island that would be the main production sources for its natural gas, Sankei said in the report on its Web site.

Russia has called on Sakhalin-1 investors to sell all natural gas from the project to Russian gas export monopoly OAO Gazprom at prices lower than domestic market levels, the report said. Exxon Mobil, the project operator, had planned to construct an export pipeline to China.

Exxon owns 30 percent of the Sakhalin-1 project as does Japan’s Sakhalin Oil & Gas Development Co., or Sodeco. OAO Rosneft, Russia’s largest oil producer, and India’s ONGC Videsh Ltd. each own a 20 percent stake.

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