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Posts on ‘October 20th, 2006’

Reuters: EU vows united front to press Putin on energy


Fri Oct 20, 2006 1:16 PM ET

By Rex Merrifield and Ingrid Melander

LAHTI, Finland (Reuters) – European leaders agreed on Friday to deliver a blunt message to President Vladimir Putin that Russia must give European firms more chance to exploit its huge energy resources or risk an investor exodus.

Putin arrived as guest at a potentially fraught EU summit dinner, with bloc president Finland pledging to raise the killing of journalist Anna Politkovskaya and the Kremlin’s heavy handed treatment of the former Soviet republic of Georgia.

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Bloomberg: Putin to Spurn EU Demands for More Access to Oil, Gas (Update5)

By Sebastian Alison

Oct. 20 (Bloomberg) — President Vladimir Putin is likely to defy calls to give European companies more access to the Russian energy market, using state control of the oil and gas industry to boost Russia’s economic clout.

European Union leaders said they will push Putin at a summit in Lahti, Finland, tonight to let western energy producers build up operations in Russia in exchange for promises of increased sales of Russian gas to European customers.

Russia is using its status as the world’s largest fuel exporter as an economic weapon, shutting off the natural gas tap to Ukraine at the start of the year and threatening to scrub a $22 billion Royal Dutch Shell Plc project in September.

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RIA Novosti: Sakhalin II expert review to be ready by Dec. – energy ministry

20:21 | 20/ 10/ 2006

MOSCOW REGION, October 20 (RIA Novosti) – A new expert review that envisions increased spending on the giant Sakhalin II project will be ready by December, a deputy Russian industry and energy minister said Friday.

“The term for the state expert review to be implemented is the fourth quarter of 2006,” Andrei Dementyev told journalists. “I think it will reach us in early December.”

Earlier, it was reported that Sakhalin Energy, the operator of the oil and gas project on Russia’s largest Far East island, proposed increasing expenditures on the project to $21.9 billion.

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Reuters: BP and Shell to end record earnings run

Fri Oct 20, 2006 10:17 AM BST

By Tom Bergin

LONDON (Reuters) – BP and Royal Dutch Shell are expected to report a fall in underlying third-quarter profits in the week ahead, ending a three year run of record earnings on the back of rising oil prices.

Analysts believe higher oil prices quarter will fail to have compensated for soaring oil field costs, higher taxes, a fall in refining margins and lower production.

The results will bolster the view that big oil companies’ earnings have peaked and that a fall of over 20 percent in oil prices since early August points to tougher times ahead.

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AFX News Limited: Shell-led group pledges to urgently address remaining Sakhalin-2 issues


LONDON (AFX) – Royal Dutch Shell PLC-led Sakhalin Energy has assured the Russian government it will urgently address the remaining environmental issues that were raised about the 20 bln usd Sakhalin-2 gas project.

Ian Craig, chief executive of Sakhalin Energy, said in a letter to Russian Minister for Natural Resources Yuri Trutnev that it will ‘respond quickly and adequately to correct any more non-conformances’ identified during the project inspection this month.

He assured Trutnev the group will engage in a ‘constructive dialogue’ with the authorities and treat any findings of the inspection ‘with the highest priority’.

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MosNews: Environmental Watchdog Seeks to Annul Licenses of State Oil Company Rosneft

Created: 20.10.2006 12:23 MSK (GMT +3), Updated: 12:41 MSK

Russia’s environmental protection agency Rosprirodnadzor has submitted the documents on revoking licenses held by the Sakhalin branch of state-controlled oil company Rosneft. This information was reported by the country’s Natural Resources Ministry on Thursday, Oct. 19.

The ministry said serious violations had been revealed during inspections of Sakhalinmorneftegaz’s compliance with environmental protection legislation. The company in question works on the oil-rich island in Russia’s Far East, which is also the site of the controversial Sakhalin-2 project led by Anglo-Dutch oil major Royal Dutch/Shell.

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International Herald Tribune: Russian official says Energy Ministry in talks on changing business model at Sakhalin-2

Fulll headline: International Herald Tribune: Reports: Russian official says Energy Ministry in talks on changing business model at Sakhalin-2 

The Associated Press
Published: October 20, 2006
MOSCOW Russia’s Industry and Energy Ministry is in talks with investors in the Sakhalin-2 liquefied natural gas project on changing the business model of the giant endeavor after costs more than doubled to nearly US$22 billion (€18 billion), Russian news agencies reported.
The comments were made by Andrei Dementyev, the ministry’s deputy head, at a specially convened discussion of the Royal Dutch Shell-led project in Russia’s upper house of parliament.
Ivan Chernikovsky, a spokesman for Sakhalin Energy, the consortium developing the project, told The Associated Press that as long as negotiations on the budget overrun were continuing “we cannot comment on the contents and status of these confidential discussions.”
The project has come under intense pressure from environmental regulators. Analysts say the probes are being used to pressure the company to reconsider the terms of the original agreement to develop the fields, which are located off the Pacific island of Sakhalin, and to secure access for a Russian state-controlled company to the project.
The so-called production sharing agreement, which was signed in the 1990s, allows Shell to recoup all of its expenses before sharing any profits with the Russian state. The cost overrun announced last year would therefore massively delay the point at which the government would see revenues from the project.
Also speaking at the parliamentary hearing, Russia’s Natural Resources Minister Yuri Trutnev said that while he had received assurances from the consortium running the project that the oversights were being rectified, he could not rule out that work at the development may be halted.
“The Russian Natural Resources Ministry is responsible for the observance of environmental legislation. If Russian laws are going to be trampled on and if the environment is going to be damaged, then we will take measures to stop the project,” the Interfax agency news agency quoted him as saying.
Trutnev is due to met with representatives of the consortium on Sakhalin next week, at which they will present a plan to resolve the environmental violations.
“It will be proposed that Sakhalin Energy compensate for and resolve the damage,” Trutnev said in televised remarks. He said that the consortium’s chief executive officer, Ian Craig, had sent him a letter “in which the company acknowledges — virtually in full — … that it has violated the ecological legislation of Russia.”
In a statement, Sakhalin Energy said that it had notified Trutnev of the state of work to rectify “non-compliant environmental practices” identified in an August environmental audit and would respond “quickly and adequately” if further problem were identified in a check that began on Oct. 3. 

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RIA Novosti: Sakhalin II project becoming less beneficial for Russia

14:16 | 20/ 10/ 2006 
MOSCOW, October 20 (RIA Novosti) – The giant Sakhalin II oil and gas project on Russia’s largest Far East island is becoming less effective for Russia, and raises doubt over product sharing agreements in the country, a member of parliament’s upper house said Friday.

Devised in the 1990s when oil prices were much lower, production sharing agreements such as Sakhalin II offer investors major tax benefits. Under such agreements, Russia will start receiving its share of profits only after investors have recovered their costs.

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AFX News Limited: Sakhalin-2 development cost estimate hiked, business model may change – minister

10.20.2006, 04:58 AM 
MOSCOW (AFX) – Sakhalin Energy, the operator of the Sakhalin-2 hydrocarbons development, has raised its estimate of the cost of the project to 21.9 bln usd from 9.9 bln, Interfax news agency quoted Deputy Industry and Energy Minister Andrei Dementyev as saying.

The ministry is now in talks with Sakhalin’s investors regarding the possibility of reviewing the project’s business model, he added.

Royal Dutch Shell PLC-led consortium holds a 55 pct stake in the project, whose permits Russia’s ministry of natural resources revoked last month on environmental grounds.

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Interfax (Russia): Trutnev not ruling out suspension of Sakhalin-2 project

MOSCOW. Oct 20 (Interfax) – Russian Natural Resources Minister Yury Trutnev said he did not rule out the possibility of the Sakhalin-2 hydrocarbons project being suspended.

“The Russian Natural Resources Ministry is responsible for the observance of environmental legislation. If Russian laws are going to be trampled on and if the environment is going to be damaged, then we will take measures to stop the project,” Trutnev told reporters on Friday.

AFX News: Sakhalin-2 must comply with clean-up laws or face shutdown – minister UPDATE

Friday, 20th October 2006 09:25

MOSCOW (AFX) – The giant Sakhalin-2 oil and gas project must comply with Russian environmental laws or face being shut down, said Natural Resources Minister Yury Trutnev.

‘If the Russian Federation’s laws are going to be violated, if damage is done to the environment, we will take measures to stop the project,’ Trutnev told reporters.

A Royal Dutch Shell PLC-led consortium holds a 55 pct stake in the project, whose permits the ministry revoked last month.

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Itar-Tass: Sakhalin-2 operator admits project problems: ‘Pursuit of fast profit often leads to unscrupulous, barbaric treatment of nature’

20.10.2006, 11.49
MOSCOW, October 20 (Itar-Tass) – The situation over the Sakhalin-2 project prompts the need for a closer look at the progress of other oil and gas projects, Russian Minister of Natural Resources Yuri Trutnev said.

He spoke at an irregular meeting of Russian parliament’s upper house over the Sakhalin-2 project on Friday.

The operator of Sakhalin-2 is ready for a constructive dialogue, Trutnev said.

The operator company Sakhalin Energy “practically has fully admitted violations of Russia’s environmental legislation”, he said.

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