The
consulting company International Project Analysis has
prepared a report for Royal Dutch Shell in which it states that
the oil company is “excessively reliant” on contractors
to manage large production projects and does not have control
over its expenses because of a lack of control over its
contractors. The consulting company mentioned Sakahlin-2 as an
example. The report was based on analyses of 13 Royal Dutch
Shell projects, including Sakhalin-2. Parts of the report were
published yesterday in The
Financial Times.
Shell's recent efforts to increase expenses on the
Sakhalin-2 project from $12 billion to $20 billion have recently
annoyed
Russian President Vladimir Putin. Its explanations for the
need for the additional financing were incomprehensible that
Russian ministries are still enquiring into its financing.
Russian President Vladimir Putin said during his state visit to
The Netherlands that the addition financing would not be
granted. The IPA report recommended maximally centralizing
management of projects. It will probably complicate relations
between Shell and the Russian government. The company has stated
that selection of additional management personnel has already
begun.
Shell has problems in the United States as well. A Senate
hearing yesterday was held on the activities of the largest oil
companies in third quarter of the year. Managers from
ExxonMobil, Royal Dutch Shell and
ConocoPhillips took part. Thanks to the record high world
oil prices, those companies also received record profits.
Shells' profits were 68 percent higher in the third quarter of
2005 as compared to the third quarter of the previous year.
Observers say that the Senate hearings are a run up to
considerations of taxation of excessive profits. Such taxes were
imposed on oil companies in the U.S. in the 1980s.
