Jeroen Van Der Veer, CEO of Royal Dutch Petroleum
Photo: GAMMA
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Kommersant (Russia):
Shell Doesn’t Reach $20 Bln: "Visiting the Netherlands, Russian
President Vladimir Putin lambasted the efforts of Shell to drive
the budget of the Sakhlin-2 project up to $20 billion from $12
billion.": Wednesday 2 November 2005
Vladimir Putin has
defended Gazprom’s interests in Sakhalin-2
Power and Business
Visiting
the Netherlands,
Russian President Vladimir Putin lambasted the efforts of
Shell to drive the budget of the Sakhlin-2 project up to $20
billion from $12 billion. Yesterday’s statement of the Russian
energy ministry, which calls the revising of the project’s
budget economically unfounded, also proves that Russia said “no”
to Shell.
Vladimir Putin devoted a big part of his meeting with the
Dutch business elite, according to a source in the Dutch
delegation, to the discussion of the Sakhalin-2 project where
Sakhalin Energy (largely owned by Royal Dutch Oil) operates
under the production-sharing agreement. Shell International’s
head Jeroen van der Veer, the main opponent of the Russian
president, was disappointed, as his colleagues say, as Vladimir
Putin proved to him that Sakhalin Energy’s shareholders should
not expect an increase in the project’s budget (and,
consequently, no investment that the state returns under the
product-sharing agreement). Even if the budget exceeds the
earlier approved level of $12 billion, it will not reach $20
billion.
Vladimir Putin thus save money from state coffers and explained
it to Shell that delays in the negotiations with
Gazprom on the exchange of a stake in Sakhalin for a share
in the Zapolyarnoe-Neokom joint venture are unacceptable.
Gazprom and Shell came to an agreement to exchange their
holdings in this JV and Sakhalin Energy this spring. The July
rapport memorandum says that Gazprom gets 25 percent plus one
stock in Sakhalin Energy, while Shell gets a 50-percent stake in
Zapolyarnoe-Neokom. The parties mentioned that these assets are
not equivalent, so one of the companies will have to pay in
addition. Yet, the parties still disagree who is to do this.
Perhaps, Shell decided to safeguard itself against unexpected
expenditures of the exchange agreement. It announced a week ago
that after the memorandum with Gazprom was signed, the
investment in the second stage of the development of Sakhalin-2
might rise to $20 billion from $12 billion. The experts accounts
the statement for with the company’s reluctance to pay extra
money for Zapolyarnoe. Russian officials must have also noticed
the connection, that’s why an increase in the expenditures on
Sakhalin-2 has not been agreed on yet, Russian agencies wanting
additional grounds from the Dutch.
Yesterday, when Vladimir Putin talked to Dutch businessmen, the
Russian Industry and Energy Ministry circulated information
about the session of the advisory board of Sakhalin-2 held the
previous week. Members of the board considered a further
implementation of the project and demanded detailed information
on the evaluation of the project’s economic efficiency and
foundation fro the changes in the budget. “Issues concerning the
changes in the budget, which operating company’s wants to
introduce without grounds for that, are still uncertain for the
Russian party,” the statement runs.
The deal with Gazprom cannot be struck till Russin agencies
decide either to sustain or to turn down the new budget for
Sakhalin-2. Alexander Medvedev, director general of
Gazpromexport, said a week ago that Gazprom is determined to
exchange the stocks with Shell by August 2006.
Meanwhile, rivals of Shell, the developers of the Sakhalin-2
project (the Exxon Neftegaz operating company) understood the
current situation around the company right and agreed to bring
down the 2006 budget by $40 million, or, according to the
information of
Kommersant, by $140 million. So, we may suppose that
they will have no problems with their would-be projects in
Russia. But the only trouble is that Exxon Mobile has not
declared its major interest in extracting the Russian oil so
far.
by Oleg Petrovsky
Russian Article as of Nov. 02, 2005
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