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Russia: Exxon Stunned By Loss Of Oil Deal

Moscow, 21 August 1997 (RFE/RL) -- Exxon Corporation of Houston appears to have lost a bid to develop a major oil deposit in the Nenets region of northwestern Russia.

Russian officials confirm that the results of a tender which Exxon won last December have been invalidated. This is unique instance of the Russian government overturning a major and controversial foreign investment decision.

Russia's federal Minister of Natural Resources, Victor Orlov, and the Nenets governor, Vladimir Butov, reportedly accepted the recommendation of the government's Expert Council to overturn the Exxon award for development of oil deposits at the Central Khoreyver Depression.

Igor Lazarev, executive secretary of the Expert Council, to which the disputed tender result was referred in May, said his organization had found procedural violations, and recommended a new tender. Lazarev said that tender conditions and the list of participants should not be changed during the course of a tender.

Russian oilmen say that, in addition to alleged procedural violations, Russian Exxon failed to come up with any Russian partners for the project. There was a tender requirement that 50 percent of the project be held by Russian companies.

The size of the Khoreyver deposit hasn't been made public. During the tender bidding between October and December of last year, Exxon reportedly outbid its rivals with a $20 million signing bonus for the project. Amoco Inc. of Chicago, with Russian oil giant Rosneft and Arkhangelskgeoldobycha, a regional mining concern, was beaten in the tender, as was a partnership between Norsk-Hydro of Norway, Total of France, and Komitek. Texaco was another United States oil company to be passed over in the tendering.

Amoco officials were away from Moscow and unable to comment. Rosneft spokesman, Vladimir Tamarkin, said his company and Amoco had been protesting the Exxon award since early in the year.

The head of Exxon's Moscow office, George MacDonald, was travelling and unavailable. A Russian working with Exxon said the company wasn't aware of the cancellation decision, and wouldn't comment. The company appeared stunned by the loss, and James Riley, Exxon's press spokesman in Houston, did not return calls for comment.

The Russian government has come under heavy fire in recent weeks from the domestic press, along with Western corporate lawyers and investors, for tendering practices that violate Russian law. Critics say the technical violations open the process to suspicion that awards are determined by official favouritism and corruption.