UPDATE 1-Exxon: Chalmette could be part of Venezuela deal

(Adds more CEO quotes, details)

By Michael Erman

NEW YORK, March 5 (Reuters) - Exxon Mobil Corp (XOM.N) Chief Executive Rex Tillerson said on Wednesday that Venezuela could offer up its share of their jointly run Chalmette refinery in Louisiana as part of a settlement of a dispute over an oil project the country nationalized last year.

"We think the right thing for us to do is to sit down and work out a mutually agreeable settlement for the assets that have been exproporiated," Tillerson said in a wide ranging briefing with reporters after the company's annual meeting with analysts in New York.

"Absent any conversation around that, we're left with no choice but to pursue the international legal remedies that are available to us under Venezuelan foreign investment law and were available to us under our contract with (state oil firm) PDVSA," he said.

In the dispute over the assets, Exxon has won court orders freezing up to $12 billion of Venezuelan assets, heating up the quarrel.

PDVSA and Exxon both own half of the Chalmette refinery in Louisiana, which can process about 193,000 barrels of crude oil daily.

Tillerson also commented on the recent surge in oil prices, which hit a record of more than $104 a barrel on Wednesday after OPEC decide to maintain current output levels.

"It's pretty crazy, isn't it? ... There's been a disconnection in the price (of oil) from the fundamentals," he said. The disconnect has been driven by the weak dollar, geopolitical uncertainty and market speculation, he said.

SAKHALIN GAS TO HIGHEST BIDDER

Tillerson said Exxon plans to sell natural gas from its Sakhalin-1 project in Russia to the highest bidder, despite moves by Russia's gas export monopoly, Gazprom (GAZP.MM), to block Exxon from exporting the fuel.

Gazprom has asked the Russian government to block Exxon from selling Sakhalin gas in Asia, saying the output is needed for Russia's domestic market.

"We're going to sell the gas to the person who will pay us the most money for it," Tillerson said.

Exxon reached a memorandum of understanding to supply gas from Sakhalin Island to China's state oil company, CNPC, in November 2004. But Tillerson said the company is also in talks with Gazprom.

"We're not opposed to selling the gas to Gazprom, we're not opposed to selling the gas to the Japanese, or any other buyer," he said.

The company's obligation is to provide the highest value for the gas to the Russian government, Tillerson said. He does not expect the issue to effect Exxon's continuing activities in Russia. (Reporting by Michael Erman; Editing by Steve Orlofsky and John Wallace)