Eric Watkins
Senior Correspondent
LOS ANGELES, Dec. 12 -- Royal Dutch Shell PLC, under stepped-up pressure from the Russian government, is close to making a deal that would allow Russia's OAO Gazprom a stake in the Sakhalin-2 oil and natural gas project.
Dmitry Medvedev, who serves as chairman of Gazprom as well as Russia's deputy prime minister, Dec. 12 said talks with Shell were going quickly and that the Russian side hoped to reach a deal soon.
Reports suggested that Shell's share in the project would drop from 55% to 25%, while its Japanese partners Mitsui (25%) and Mitsubishi (20%) would each sell 10% of their shares to Gazprom. However, it was expected that Shell would remain as operator of the project since Gazprom has never run an LNG project before.
Medvedev did not confirm those reports, saying only, "as far as the size of the stake is concerned, it is important but not critically important." He told a press conference in Moscow, "We are looking at all options ranging from cash to an exchange of assets."
The announcement of a deal coincided with further threats by the Russian government to undertake legal action against the Shell-led project for alleged violations of the country's environmental laws.
Oleg Mitvol, deputy head of natural resources watchdog Rosprirodnadzor, Dec. 12 claimed that damages inflicted by the operator of the Sakhalin-2 project are estimated at $10 billion, according to preliminary calculations.
Mitvol said that the agency would come up with a more-precise figure by the end of next summer but that the estimated amount included damage to the environment, lost revenue, and compensation for lawyers that Rosprirodnadzor would hire for litigation.
He said that Rosprirodnadzor plans to start court proceedings in March over violations at the Sakhalin-2 project and that it would file Sakhalin-2 suits in several court jurisdictions, including in Russia and in the Stockholm Arbitration Court.
The announcements followed earlier pressure from the Russian government, which last week withdrew key environmental permits from Shell and its Japanese partners. As a result of the withdrawn permits, construction on the project has effectively come to a halt (OGJ Online, Dec. 7, 2006).
Japan's Economy, Trade, and Industry Minister Akira Amari Dec. 12 underscored the urgency of reaching an agreement, urging the operators of the Sakhalin-2 project to abide by a plan to supply LNG to Japan beginning in 2008.
"It is important that the resource is properly delivered to the final user," such as Japanese electric power and gas companies, Amari told a news conference in Tokyo.
Contact Eric Watkins at [email protected].
