Russia will seize control of the world’s biggest liquefied gas project, Sakhalin-2, after Shell was forced to give up its controlling stake.
Shell will hand over its share of the US $22 billion scheme to the Russian government, raising fears about the Kremlin’s willingness to use the country’s growing strength in natural resources as a political weapon.
After months of relentless pressure from Moscow, the Anglo-Dutch company will cut its stake in the far east of Russia in favour of the state-owned energy group Gazprom.
Shell’s CEO, Jeroen van der Veer has been meeting Gazprom boss, Alexi Miller in Moscow to discuss the Russian gas monopoly’s bid to join the Sakhalin-2 project.
In a statement, a Shell spokesperson said, “We can confirm Jeroen van der Veer is in Moscow for talks, but details remain confidential. Discussions are ongoing but their contents remain confidential.”
The Russian company said that “Shell did indeed make several proposals concerning Sakhalin-2” at one of the meetings, which came after Shell was threatened with having its operating licence withdrawn.
A Gazprom official also said no deal had yet been reached to sell the stake in Sakhalin-2, and presidents of Shell’s two Japanese partners in the project, Mitsui’s Shoei and Mitsubishi’s Yorihiko Kojima, have also been in Moscow for talks, according to spokesmen for both companies.
Gazprom’s chairman, Dmitry Medvedev, has confirmed that the company wants to acquire a 50% share in Sakhalin-2, and industry sources said that Shell had offered to let Gazprom take a controlling stake in the project, which is the largest single foreign investment in Russia.
Russia’s Energy Minister, Viktor Khristenko said a deal could be done in the first quarter of 2007.
It has been suggested that under the proposed deal, Shell may retain 30% out of its 55% holding, while Mitsui and Mitsubishi may each sell 10% of their respective stakes of 25% and 20%, allowing Gazprom to secure to controlling share.
The Russian authorities are also threatening BP over alleged environmental violations on a Siberian field in what has been deemed a wider attempt to seize assets handed over to foreign companies when energy prices were low. The Sakhalin-2 project is scheduled to start operations in 2008 and involves finding and producing oil and gas near Sakhalin Island. The two fields that make up Sakhalin-2 contain an estimated 1.2 billion barrels of oil and 500 billion cubic metres of natural gas. The gas will be brought ashore, liquefied and frozen before being shipped to Japan and elsewhere.
Follow us on
