Financial Mail on Sunday
By Tom McGhie
10 September 2006
SHELL is accusing Russia of using blackmail to seize control of the world’s biggest oil and gas project. It fears that its £6 billion investment in two 800-kilometre pipelines and a new liquefied natural gas plant on the Pacific island of Sakhalin is at risk.
Concerns were raised last week when Rosprirodnadzor, Russia’s environmental watchdog led by green maverick Oleg Mitvol, said it would try to have the project’s approval revoked.
Mitvol claimed that environmental recommendations had not been fulfilled. Shell has now stopped work on a small section of the pipeline that runs over a geological fault.
The company’s suspicions were further aroused when it learned that Igor Shuvalov, a close aide to President Vladimir Putin, had suggested that one solution to the problems faced by Shell and its partners, Mitsui and Mitsubishi, was the effective nationalisation of the project. Sources close to Shell claimed this was a thinly disguised blackmail tactic to force it to surrender some control to the Russians.
Shuvalov also said that Shell and its Japanese partners would be allowed to run the project, but they would be forced to pay full tax and only Russian gas goliath Gazprom would be allowed to export the natural gas.
There is no suggestion that Mitvol and Moscow are working together, but Russian analysts made it clear that the Kremlin authorities would not object to further pressure being put on Shell.
The Sakhalin development is the only energy project in the country that has no Russian involvement. Shell has agreed that Gazprom can have a 26 per cent share in return for a SO per cent stake in the Siberian Zapolyarnoye-Neocomian gas project.
But since the agreement in principle was made last year, Shell has announced that its costs have soared. As a result, the Russians now want to give Shell less than 50 per cent of the Siberian gas field.
Related article from 6 September 2006
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