FAR EASTERN OIL PROJECT LAUNCHED.

An international oil consortium comprised of companies from the U.S., Japan, and Russia announced the signing of a $15 billion deal June 10 to begin work on the Sakhalin-1 project. The deal involves the development of three fields off Sakhalin Island in the Pacific that are estimated to contain some 2.5 billion barrels of crude oil and 15 trillion cubic feet of gas. The companies involved are Exxon, which will be the operator of the project, the Japanese Sakhalin Oil and Gas Development Co. Ltd. (SODECO), and the Russian groups Rosneft-Sakhalin and Sakhalinmorneftegas. The two Russian companies share a 40 percent interest in the project while Exxon and SODECO each hold 30 percent. (UPI, June 10)

Russian fuel and energy minister Yury Shafranik hailed the project as a "big, shining example to other oil deals," but some Western experts reportedly remained concerned that a defeat for Boris Yeltsin in Russia’s upcoming presidential election could jeopardize such projects. Western oil companies have long sought the normalization of resource, production-sharing and tax laws, and have also reportedly struggled to find the right balance between legal guarantees and Kremlin patronage in negotiating big energy projects. While Shafranik was quoted as telling the Sakhalin-1 group that he would like to see oil flowing within two to three years, an Exxon executive suggested a less ambitious timetable. (Reuter, June 10)

Uncertainty in Ukraine Over Constitutional Agreement.