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MosNews:
Putin Slams Sakhalin-2 Operators for Project Cost Overruns — Paper: "Putin’s
criticisms come as a big blow for Shell...": Wednesday 2 November 2005
Created: 02.11.2005 11:15 MSK (GMT +3),
Updated: 11:15 MSK
, 30 minutes ago
MosNews
Russian President Vladimir Putin told executives of
major oil company Royal
Dutch/Shell that Russia would not approve Shell’s request to let it
double costs at its huge Sakhali-2 oil and gas project to $20 billion,
Kommersant daily reported on Wednesday, Nov. 2.
The paper quoted sources, who attended a meeting between Dutch
businessmen and Putin during his visit to Amsterdam, as saying Putin had
spent more than 30 minutes criticizing the cost overruns at the
Shell-led
Sakhalin-2. Putin’s criticisms come as a big blow for Shell, which
wants the government to approve a new budget for its project, which has
been producing oil since 1999 and is building the world’s largest
liquefied natural gas (LNG) plant.
The government is reluctant to allow any production-sharing deal to
boost costs as it automatically delays the moment when the project
becomes profitable and the state starts receiving its share of revenues.
On Tuesday, Nov. 1, Russia’s Energy Ministry asked Shell to provide more
information about the increased spending plans, saying that so far all
requests for changes were poorly grounded.
Shell announced the cost increases days after signing a preliminary deal
under which Russia’s natural gas monopoly
 Gazprom
would take 25 percent in Sakhalin-2 in return for giving Shell access to
a Siberian gas field. Gazprom later said Shell might have to pay it cash
as part of the planned asset swap since the revision diminished the
value of Sakhalin.
Other shareholders of Sakhalin-2 are Japanese trading houses Mitsui &
Co. and Mitsubishi Corp.
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