Exxon says to raise Sakhalin gas supplies to Russia

MOSCOW Oct 21 (Reuters) - ExxonMobil Corp (XOM.N) said on Tuesday it has agreed to raise gas supplies from its Russian Sakhalin-1 project to Russia's Far East, yielding to pressure from Gazprom (GAZP.MM) to prioritise the domestic market.

ExxonMobil said it would increase gas supplies to Russia's Pacific regions by 50 percent from 2012 in addition to the 3 billion cubic metres (bcm) a year it has already promised, conditional on the timely development of the project.

"Exxon Neftegas Ltd confirms the Sakhalin-1 consortium is prepared to supply an additional 1.5 bcm a year of gas to the Russian domestic market for gasification of Primorsky region, starting in 2012, in addition to the contracts already committed with Khabarovsk region buyers," said spokeswoman Dilyara Sydykova.

Gazprom, Russia's state-controlled gas export monopoly, has long said it needs the gas produced at Sakahlin-1 to cover domestic needs, while Exxon was planning to export the fuel to China.

Sakhalin-1, which along with Exxon includes Russian state oil firm Rosneft (ROSN.MM), Japan's Itochu (8001.T) and Marubeni (8002.T) and India's ONGC (ONGC.BO), has signed a deal to supply China with 8 bcm of gas a year and had hoped to start supplies in the next decade.

A source close to the talks told Reuters Exxon had not given up its export plan and was still in talks with Gazprom, which has said it would be prepared to pay market price for Sakahlin-1 gas. Exxon has said it would choose the most competitive offer.

Gazprom, the world's largest gas producer, itself has a rival plan to supply China from East Siberia via two links but talks have been stalled for a year due to price disagreement. (Reporting by Vladimir Soldatkin, writing by Tanya Mosolova)