Resource Investor: Putin chastises Shell over Soaring Sakhalin bill: "If Mr Putin sticks to his stance on the issue analysts believe that Shell and its partners will see their profits cut sharply.": Posted Saturday 5 November 2005

By Karl Heilman
04 Nov 2005

The Russian President Vladimir Putin has launched a withering attack on the Anglo-Dutch energy giant Royal Dutch Shell's activities, dealing a potentially serious blow to the company's future profitability in Russia.

In a meeting with Shell executives in the Netherlands during an official visit on Tuesday, Mr Putin is reported to have criticised the group for massive cost overruns at its multibillion-dollar oil and gas project in the Russian Far East.

Sakhalin-2 is one of the largest direct foreign investments in Russia but Daily Kommersant said Mr Putin told the group's chief executive Jeroen van der Veer the Kremlin would not allow the energy titan to double its investment to $20bn (pounds 11bn) as it has requested.

If Mr Putin sticks to his stance on the issue analysts believe that Shell and its partners will see their profits cut sharply. 'This would be another blow for Shell in Russia.... We estimate it will further depress the project IRR (internal rate of return) from an already low 12 percent to 8.5 percent,' analysts at Citigroup said.

 

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