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Email to Jeroen van der Veer: Sakhalin II: the destruction of Shell’s reputation for prudent project management

Email to Mr Jeroen van der Veer, CEO, Royal Dutch Shell Plc .com

Tuesday 10 October 2005 

Dear Mr Van der Veer

The Moscow Times has published a news report this morning indicating a projected cost of $50 billion for the Sakhalin II project.

This is what happens when you rudely ignore a legitimate question from a long term Shell shareholder (me) – the cost doubles again.

I asked in a recent email which estimated project costing figure was correct: –

    $20 billion: the official costing according to Shell.

    $22 billion: the sum now quoted routinely by Bloomberg and confirmed to me by Bloomberg as being correct.

    £25 billion: the figure mentioned recently by The Observer newspaper.

    $26 billion: the figure repeatedly given to us by Shell insiders following a Shell top secret technical review of the project. I notice there is even a posting on our Live Chat facility today mentioning this figure.

    We now have the figure of $50 billion which Sakhalin Energy refuses to comment on.

    Considering that this is far and away the most important white elephant project in which Shell is involved, when are you going to come clean and tell shareholders what the current project cost is for Sakhalin II?

    It is no good sticking your head in the sand like an *Ostrich in the hope that the questions over Sakhalin II will go away. The uncertainty over the true current estimated cost needs to be cleared up as a matter of urgency.

    The typical trickery and deception by Shell senior management over the true cost of this project has resulted in the current crisis. What ever made you think that you could pull a fast one over the Kremlin and Gazprom without coming to grief?

    Mitsui and Mitsubishi must bitterly regret that they became partners in a project led by such an incompetent and dishonest Shell Management.

    If you take issue with this description, the libel courts are available to you.

    Have a nice day.

    Yours sincerely
    John Donovan

    *definition: somebody who tries to avoid unpleasant situations by refusing to acknowledge that they exist…

    Cc

    President Putin
    Deputy Minister Oleg Mitvol, Russian Ministry of Natural Resources
    Malcolm Brinded, Chief Executive Shell Exploration & Production
    Richard Wiseman, General Counsel, Shell International Petroleum Co Ltd

    Related emails:

  • 27/09/2006: Sakhalin II: $20 billion, £22 billion, $25 billion or $26 billion?
  • 26/09/2006: Email to Jeroen van der Veer: the Sakhalin II crisis
  • 25/09/2006: Email to Van der Veer: Resolving Sakhalin II impasse

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