Posts Tagged ‘Sakhalin Energy’

By Yuliya Fedorinova – Feb 8, 2012 4:53 AM GMT

Sakhalin Energy, Russia’s liquefied natural-gas producer, increased its revenue by $1 billion last year after raising prices, Vedomosti reported today, citing Chief Executive Officer Andrey Galayev.

The project may break even as soon as this spring rather than in 2013 or 2014, as initially planned, Galayev told the Moscow-based newspaper.

OAO Gazprom has a 50 percent stake in Sakhalin Energy.

To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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RELATED ARTICLES

LEAKED EMAILS LOST SHELL BILLIONS ON SAKHALIN-2

Shell $22 billion Sakhalin-2 Project devastated by insider leaks: 10 July 2007

Sakhalin Pep Talk From ‘Old Blood and Guts’: By Max Delany, Moscow Times 9/6/07

(Extract: Greer’s memo, which was leaked to an anti-Shell web site, Royaldutchshellplc.com, appears to show the pressure that he and his fellow managers have been under, as it talks of “the risk of becoming a team that doesn’t want to fight and lacks confidence in its own ability.”)

David Greer, Deputy CEO of Sakhalin Energy resigns in disgrace: 21 June 2007

Gazprom Expansion of Sakhalin-2 LNG Plant May Cost $7 Billion

January 30, 2012, 5:20 AM EST

By Jake Rudnitsky

Jan. 30 (Bloomberg) — OAO Gazprom and its partners in the Sakhalin-2 project may decide on expanding their liquefied natural gas plant this year, to add supplies by 2018, said Andrey Galaev, the venture’s chief executive officer.

An expansion may cost $5 billion to $7 billion based on preliminary estimates, Galaev told reporters today in Moscow. Depending on changes in oil and gas prices, the construction cost may drop as low as $3 billion or climb as high as $8 billion, he said.

A decision should be made this year to reach a window for supplies in 2016 to 2018, before global LNG production capacity rises, according to Galaev.

Royal Dutch Shell Plc holds 27.5 percent of the project after agreeing to cede control of Russia’s first LNG plant to Gazprom in 2006. Mitsui & Co. has 12.5 percent and Mitsubishi Corp. owns 10 percent.

–Editors: Torrey Clark, Stephen Cunningham

To contact the reporter on this story: Jake Rudnitsky in Moscow at jrudnitsky@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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Putin call to ‘cut Gazprom stake’

Russian Prime Minister Vladimir Putin has called for the government to reduce its stake in state-owned companies, including gas monopoly Gazprom, according to a report.

Steve Marshall and newswires 30 January 2012 13:41 GMT

Meanwhile, Russian Energy Minister Sergey Shmatko said all outstanding issues with production sharing contracts signed with companies such as ExxonMobil and Shell on Sakhalin projects in the country’s far east have now been resolved.

The PSAs were signed in the 1990s but Russia subsequently backpedalled as it felt the terms were too favourable to foreign players and sought to renationalize its oil and gas sector.

Shell was forced to relinquish control of the Sakhalin 2 project to state-owned Gazprom in 2007, while Russian officials have threatened to revoke ExxonMobil’s operator status on Sakhalin 1 over the past two years.

FULL ARTICLE

By Stephen Bierman – Dec 7, 2011 12:15 PM GMT

Royal Dutch Shell Plc. (RDSA) said its Sakhalin venture with OAO Gazprom, Russia’s natural gas export monopoly needs to expand fast to sell liquefied natural gas to Asia at maximum profit.

There’s a window of opportunity in the Asia Pacific from 2015 to 2020, Harry Brekelmans, the head of the energy company’s Russian unit, told reporters today in Moscow. The market will tighten after that with additional LNG volumes coming from Australia, Shell spokesman Maxim Shoob said today.

Shell, Gazprom and Japanese partners Mitsui & Co. and Mitsubishi Corp. are considering investing in a third processing train to the Sakhalin-2 LNG plant to add capacity. Demand for LNG has soared in Japan, South Korea and other Asian markets after an earthquake and tsunami led to the Fukushima nuclear disaster and boosted Japan’s need for other fuels.

The Sakhalin project is in a position to capture this demand window, Brekelmans said.

The group will have to resolve how to supply natural gas for any additional train it seeks to build. Gazprom may seek an asset swap with a foreign partner in the project before committing further reserves off the Pacific coast of Sakhalin Island for the expansion of the LNG plant, Gazprom’s Deputy Chief Executive officer Alexander Medvedev said on Sept. 27.

To contact the reporter on this story: Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editor responsible for this story: Torrey Clark at tclark8@bloomberg.net

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Purported leaked email with video link received from an anonymous source with the covering message:

“Potential for another Shell director playing *General Patton…listen to the video…”

THE INTERNAL EMAIL

On behalf of Bob Turner,

All,
We have just posted the latest video clip on the IPO website. In this clip I talk about Gas to Offshore and our preparations and some issues around our culture which I call “NO” will no longer be the low risk option”.

Please have a look. I hope you find it informative and topical. My previous clips will be archived in the Library folder.

As always I welcome your feedback.

Have a safe day

Bob.

Bob Turner Video

ENDS

*From Wikipedia article “List of plagiarism controversies“

On 6 June 2007, the Financial Times published a front page article under the headline: “‘Pipeliners All!’ Shell’s memo to Sakhalin”^[24]

The article was about a leaked motivational memo in the form of an email from David Greer, the deputy chief executive of Sakhalin Energy circulated to Sakhalin-2 staff. Some keen eyed readers noticed that inspirational passages were appropriated from a famous speech given by the legendary U.S. General George S. Patton, on 5 June 1944 on the eve of D-Day the Sixth of June. On 7 June 2007, a quarter page follow-up article was published in the Financial Times newspaper and on the FT.com website, under the headline: “Sakhalin motivational memo borrows heavily from Patton”^{[25][citation needed]}

On Monday 11 June 2007, the Financial Times published another article at^[26] on the subject, this time headlined: “Motivational memos must make their message clear”. One of the opening paragraphs stated: “The memo (www.ft.com/shell) is crass, poorly punctuated and most of it wasn’t even written by its author, David Greer, deputy chief executive of Royal Dutch Shell‘s Sakhalin Energy Investment Company. He had lifted the words of General George S. Patton with no attribution, and clumsily adapted them to spur on his team of recalcitrant pipeline engineers”.^{[citation needed]}

On 9 June 2007, The Moscow Times published a front page article on the controversy headlined: Sakhalin Pep Talk From ‘Old Blood and Guts’.

On Friday 22 June 2007, The Moscow Times published a front page story with the headline: “Sakhalin Energy’s Greer Steps Down”. The newspaper reported that “David Greer, the Sakhalin Energy deputy CEO running the giant Sakhalin-2 oil and gas project, has left the company unexpectedly just weeks after a leaked e-mail he wrote revealed the pressure that managers working there were facing”. The article said that Greer had been a 27-year Shell veteran, and was leaving to pursue other business interests.

By Motley Fool Staff Posted 9:58PM 11/03/11

EXTRACTS

Last week, my Foolish colleague Alex Planes wrote a superb article offering the conclusion that “Cheap Oil Isn’t Coming Back,” an assessment with which I completely agree. Beyond that, though, I’d add, “And Cheap Gas Has a Brief Future, Too.” With that in mind, it’s crucial to look back at the recent earnings season to garner what we can about which major oil companies appear to offer the biggest boosts for our portfolios.

Shell’s full of LNG
Royal Dutch Shell also doubled its earnings in the past quarter, chalking up a growth rate that one advertisement used to refer to as “a silly millimeter” beneath Chevron’s. The company is casting a major lot with LNG, where it leads the world in production and distribution. That’s a sufficient reason for placing the Anglo-Dutch giant next to Chevron as another member of Big Oil’s most promising trio.

As an indication of the potential in natural gas — obviously including LNG — Shell’s gas earnings jumped by a whopping 40% outside the Americas, while they eked out just a 1% increase in this part of the world. A large part of that massive differential stemmed from the fact that gas is sitting near a paltry $4 in the U.S., while it yielded $15 for Shell in Asia. That being the case, should we deny that the U.S. price is headed for higher ground? Indeed, Asia’s levies appear to be headed even higher.

And then there’s Russia. Several years ago, I began a Motley piece with the observation, “Only a few things are absolutely inevitable in today’s world: death, taxes, and the Russian government’s lusting after energy projects once they’ve been developed by Western companies.” For instance, you’re probably aware that Shell was squeezed out of the operatorship of the country’s Sakhalin-2 project precisely five years ago.

I’m not certain of Shell’s likely future with the Russkies, since, with the world running low on potential major oil finds, the Western companies have displayed a curious tendency of dusting themselves off after having been body-checked by Vladimir Putin’s minions and heading right back into the game.

FULL INTERESTING ARTICLE

From pages 48 & 49 of “Royal Dutch Shell and its sustainability troubles” – Background report to the Erratum of Shell’s Annual Report 2010

The report is made on behalf of Milieudefensie (Friends of the Earth Netherlands)
Author: Albert ten Kate: May 2011.

The Sakhalin-2 project

According to its developers, the Sakhalin-2 project is the world’s largest integrated oil and gas project. The capital expenditure for this project amounted to USD 21.3 billion from 2001 through 2009, while total costs exceeded USD 24 billion.

The project is about extracting gas and oil offshore Sakhalin Island, in the Russian Far East. The fields are called Lunskoye (mostly gas) and Piltun-Astokhskoye (mostly oil). The company Sakhalin Energy Investment Company Ltd. (Sakhalin Energy) is the operator of the project. Royal Dutch Shell is a partner and lead technical adviser to the operator. Under the shareholding structure of Sakhalin Energy, Gazprom holds 50% (plus one share), Shell 27.5% (minus one share), Mitsui 12.5% and Mitsubishi 10%.

The field development of the Sakhalin-2 project involved:

− two offshore platforms (Lunskoye-A and Piltun-Astokhskoye-B);

− an 800 kilometres onshore pipeline system to the south of the island; − offshore pipelines systems;

− an onshore processing facility;

− a liquefied natural gas (LNG) plant;

− offloading terminals for crude oil and LNG.

At the end of 2010 the liquefied natural gas (LNG) plant of Sakhalin Energy reached its full production capacity of 9.6 million tonnes a year. Sakhalin Energy now has a 5% share in the world’s LNG market. The entire output is contracted under long-term arrangements (for 20 and more years). Around 65% of the Sakhalin LNG will be supplied to customers in Japan. The rest is intended for consumers in South Korea and North America. In 2009, Sakhalin Energy produced and offloaded over 5.5 million tonnes of oil and condensate. Oil produced from the Molikpaq and the PA-B is blended with gas condensate from the Lunskoye field. The blend of crude is used to produce petrol, kerosene, diesel fuel, and source materials for the petrochemicals industry. Molikpaq (Piltun-Astokhskoye-A) was the first offshore oil platform, installed in 1998 during phase 1 of the Sakhalin 2 project.

Case: the Western gray whale is on the brink of disappearing forever

The offshore gas and oil extraction by Sakhalin Energy interferes with the feeding grounds of the Western gray whale. Western gray whales feast throughout the summer and autumn in the waters off Sakhalin Island. The estimated population size in 2009 was about 130 whales, including only around 30 mature females. The population, which is listed as critically endangered on the IUCN Red List of Threatened SpeciesTM, could be driven to extinction by the mortality of just a small number of reproductive females.

In 2006 the International Union for Conservation of Nature (IUCN) created a panel of independent scientists – the Western Gray Whale Advisory Panel (WGWAP) – which provides scientific advice and recommendations on the operational plans and mitigation measures by Sakhalin Energy. On the first day of the 9th meeting of the WGWAP (4-6 December 2010, Geneva, Switzerland) Sakhalin Energy announced a plan to construct another offshore oil and gas platform.

The NGOs World Wildlife Fund (WWF), Pacific Environment, International Fund for Animal Welfare (IFAW) and Sakhalin Environment Watch strongly oppose the construction of a new platform and associated subsea pipeline. Subsequently, they also oppose the seismic survey in preparation for this platform, which is announced by Sakhalin Energy to take place during the summer of 2011.

The NGOs have urged the WGWAP to strongly recommend that Sakhalin Energy will not develop the extra platform. To underpin their statement, the NGOs have put forward several arguments:

− The acoustic pollution due to all platform-related activities near an area of high whale density might scare the whales away from their feeding grounds.

− There are increasing risks that a vessel might strike a whale.

− The risk of a Sakhalin-2 platform-related oil spill and/or additional subsea pipeline accident risk increases by 50%.

− The marine ecosystem may get polluted through drilling.

− The Western gray whales are likely already stressed from major seismic surveys which took place in 2010. Assessment of the full range of impacts (including impacts to feeding and reproduction) of the 2010 seismic surveys will not be possible until late 2011.

− It is essential to, at first, evaluate the cumulative impacts on the Western gray whales from the variety of different off shore oil and gas activities off Sakhalin Island.

− There is no good reason why the seismic survey needs to happen in 2011, as Sakhalin Energy has reiterated that a decision whether or not to go ahead with building the new platform would not be taken for several years.

− Sakhalin Energy has already put out a tender for the seismic survey and ruled out some design alternatives. The proposed route of the associated subsea pipeline(s) have not been disclosed even in the most cursory form. All this contradicts the repeated call for information on company activities to be presented to the WGWAP and observer organizations in a timely manner.

− The construction of a new platform fundamentally changes the full Sakhalin II project scope. Prior WGWAP recommendations (which are required by lenders) were based on an assumption that a total of two platforms would be built. The same is true of prior lender decisions, and Russian environmental regulatory decisions. Thus, Sakhalin Energy’s revelation brings into question whether the WGWAP should review the adequacy of prior recommendations.

THE COMPLETE 73 PAGE REPORT (with reference sources)

RELATED ARTICLE: 6 Oil Wells On Sakhalin Go Offline Moscow Times 14 October 2011

14 October 2011
Vedomosti

Dysfunctional oil wells at Sakhalin-2 are threatening to decrease production at the field in Russia’s Far East and could be indicative of more serious problems.

Last year Sakhalin Energy extracted 6.1 million tons of oil, while Molikpaq yielded 2.2 million tons. If all factors remain the same, Molikpaq will be short 440,000 tons of oil this year, and the production for the entire project will fall short 7 percent.

ENDS

SOURCE

RELATED ARTICLES

(1) The inside story of Shell’s Sakhalin II debacle

(2) Shell Fixes Sakhalin Violations (Moscow Times)

(3) Sakhalin Pep Talk From ‘Old Blood and Guts’ (Moscow Times)

(4) Sakhalin Energy’s Greer Steps Down (Moscow Times

Sakhalin Energy’s Greer Steps Down

Friday, June 22, 2007. Issue 3683. Page 5.
By Max Delany
Staff Writer

David Greer, the Sakhalin Energy deputy CEO running the giant Sakhalin-2 oil and gas project, has left the company unexpectedly just weeks after a leaked e-mail he wrote revealed the pressure that managers working there were facing.

Greer’s departure comes as Shell is adjusting to ceding control of the $20 billion project to Gazprom after sustained state pressure.

“I can confirm that David Greer has left the company to pursue other business interests,” Sakhalin Energy spokesman Ivan Chernyakhovsky said Thursday. He did not elaborate on Greer’s future plans.

“He decided to leave the company and left the company,” Chernyakovsky said. “We wish him well in his future after working at Sakhalin Energy for 3 1/2 years.”

Chernyakovsky said any suggestion that the departure of Greer, a 27-year Shell veteran, was connected to the leaked e-mail was “pure speculation.”

Shell spokesman Maxim Shub could not say when Greer had offered his resignation, saying only that the announcement was made Thursday.

Greer could not be reached by cell phone Thursday evening.

Sakhalin Energy’s technical director, Jaap Huijskes, has been appointed as the new project director for the remainder of the Phase-2 development, a source inside Shell confirmed.

A motivational e-mail written by Greer to staff working on the project, originally leaked to an anti-Shell web site, Royaldutchshellplc.com, was the subject of a front-page story in the Financial Times earlier this month.

It also emerged that Greer had borrowed heavily in the e-mail from a speech made by U.S. General George Patton on the eve of the D-Day landings in World War II, with phrases such as “Lead me, follow me or get out of my way.”

Greer’s memo, written shortly after Gazprom officially took control of the Sakhalin-2 project this spring, took the form of a bombastic pep talk.

Citing bad body language and comments at a biannual meeting, the e-mail said that senior managers at Sakhalin Energy were running “the risk of becoming a team that doesn’t want to fight and lacks confidence in its own ability.”

Last December, Shell and its Japanese partners ceded majority control of the project, Russia’s first to process and export liquefied natural gas, to Gazprom after a sustained 1 1/2-year campaign of state pressure over purported environmental violations.

Ian Craig, head of Sakhalin Energy, the project operator, is due to be replaced by a Gazprom manager once the project comes on line. LNG shipments to Asia are due to begin next year.

That’s in marked contrast to Shell, which while operating Sakhalin-2 in 2006, was forced to execute a below-market sale of its operating position at bargain prices to Gazprom, the country’s giant gas gathering and distribution company.

By Anna Shiryaevskaya – Sep 14, 2011 4:04 PM GMT+0100

OAO Gazprom expects the Sakhalin-2 venture to produce enough fuel to support the expansion of Russia’s only liquefied natural gas plant as its partner Royal Dutch Shell Plc (RDSA) seeks resources outside the project.

The partners plan to extend the Piltun-Astokhskoye field to feed Sakhalin-2’s liquefied natural gas plant, Vsevolod Cherepanov, head of Gazprom’s gas, condensate and oil production department, told reporters today in St. Petersburg. Additional volumes from producing fields may feed the plant’s expansion or be shipped via the Gazprom-owned pipeline network, he said.

There will be enough gas for a third LNG train “if there is such a will,” Cherepanov said. The project’s two LNG units, called trains, are working at their full capacity, producing more than 9.6 million metric tons of liquid fuel a year.

Shell has been pushing to add a third LNG production unit at the $22 billion Sakhalin-2 venture north of Japan as the Hague-based producer seeks to boost gas production worldwide. Gazprom hasn’t yet agreed as it tries to balance its obligations to supply gas domestically against the attractiveness of exports to Asia’s growing markets.

Cameron in Moscow

Expansion of the LNG plant, which was designed to accommodate a third unit, was on the agenda for talks between Russian President Dmitry Medvedev and U.K. Prime Minister David Cameron in Moscow earlier this week. Shell Chief Executive Officer Peter Voser met with his Gazprom counterpart Alexei Miller yesterday, the Russian company said in a statement.

Producing gas at the southern part of Piltun-Astokhskoye, one of the two offshore fields that feed the plant, may be challenging as it lies under layers of oil and condensate, Cherepanov said. Gazprom, Shell and its partners in Sakhalin-2 Mitsubishi Corp. (8058) and Mitsui & Co. will seek to develop the extension as “the next stage,” boosting profitability, Cherepanov said.

Output at the Lunskoye field may be increased, a Kremlin official said ahead of Cameron’s visit.

The two producing fields may boost output by 4 billion cubic meters a year for as long as five years, Cherepanov said. The additional gas may be supplied to the LNG plant or into the pipeline system to supply to domestic consumers, he said. That volume would be sufficient for about 3 million metric tons of LNG, while the additional LNG unit may have a capacity to produce almost 5 million tons.

Supply Sources

“Sources of supply will be discussed by Gazprom and Shell as part of a protocol signed in November 2010,” Vera Surzhenko, a spokeswoman for Shell in Russia, said by phone today. They will include existing fields and potentially new fields, she said.

Gazprom and Shell in November agreed to expand cooperation in Russia and abroad. Shell may offer Gazprom assets in Asia in exchange for a deal to expand Sakhalin-2, people with knowledge of the negotiations said in February.

Gazprom last week opened a domestic pipeline from Sakhalin Island to the port city of Vladivostok on Russia’s Pacific coast under government orders to build pipelines and supply gas to Russia’s infrastructure-poor eastern regions.

Output from Gazprom’s Kirinskoye field, part of the neighboring Sakhalin-3 project, will be the main field feeding the link after production starts next year. Reserves at Yuzhno- Kirinskoye, also part of Sakhalin-3, may rise by as much as 100 billion cubic meters to 360 billion cubic meters this year after new exploration data, Cherepanov said.

Shell looked at Gazprom’s nearby Sakhalin-3 development for reserves on concerns the Sakhalin-2 fields may not be sufficient for the expansion. Prime Minister Vladimir Putin invited Shell to participate in Sakhalin-3 during a meeting in 2009 with outgoing CEO Jeroen van der Veer and his replacement Voser. Gazprom has since said it wants to develop Sakhalin-3 without foreign partners.

Gazprom, Russia’s biggest gas producer and export monopoly, agreed in 2006 to buy just more than 50 percent of the Sakhalin- 2 venture for $7.45 billion. Shell controls 27.5 percent of the Sakhalin Energy Investment Co. operator, and Mitsubishi and Mitsui hold the balance.

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Torrey Clark at tclark8@bloomberg.net

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EXTRACT FROM RELATED ARTICLE:

Will Exxon Be Safe in Russian Hands?

That’s in marked contrast to Shell, which while operating Sakhalin-2 in 2006, was forced to execute a below-market sale of its operating position at bargain prices to Gazprom, the country’s giant gas gathering and distribution company.

Restrictions put on development are not enough, delegates urged

12 July 2011

Oil and gas exploration in the Russian Far East continues to threaten whales, delegates at the International Whaling Commission (IWC) meeting have warned.

The critically endangered western population of gray whales spends its summer feeding around Sakhalin island.

Companies using seismic guns to find oil and gas in the area do take steps to reduce the impact; but scientists with the IWC say they need to do more.

Surprising new evidence has also emerged on the whales’ migration.

The western population of gray (or grey) whales is one of the most threatened group of cetaceans on the planet, with only about 130 remaining, including an estimated 26 breeding females.

A small area on the Sakhalin coast is their only known feeding ground.

The IWC’s scientific committee recommended that “appropriate monitoring and mitigation plans” should be implemented for oil and gas exploration in the area.

It also urged companies to work with independent scientists to “co-ordinate seismic surveys and other noise producing activities”.

Making a noise

Seismic surveys entail the use of underwater sound at intensities that can force whales out of the area nearby, and may damage their hearing.

Following last year’s IWC meeting, a group of 12 countries sent a letter to the Russian Ministry of Natural Resources and Environment urging the postponement of a major survey for at least a year.

However, the survey, for a local branch of the giant Rosneft corporation, went ahead.

Observers from non-governmental organisations report that surveying did not always stick within rules designed to minimise impacts on whales – for example, by detonating the seismic guns at night, when ships could not tell whether any whales were close by.

They also reported seeing fewer whales in the feeding area in days immediately following the surveys.

At this year’s IWC meeting, the US and UK were among governments expressing concern about the situation and asking Russia to take tougher action.

And Belgium’s delegate Alexandre de Lichtervelde said plans for expanding infrastructure at the site were premature.

“We are concerned that one of the companies (Sakhalin Energy) has announced a plan for a new oil and gas platform offshore,” he told the meeting.

“That is happening while the full impact of events in 2010 have not been fully assessed.”

Valentin Ilyashenko, leader of the Russian delegation here, said all oil and gas projects had to go through an impact assessment; but some effect on the whales could not be avoided.

“Human activities do influence the western gray whale; our task is to minimise the impact from human activities,” he told BBC News.

“But we can’t stop [human] progress, and we can’t stop using oil.”

Whale of a surprise

Last year, scientists attempted to put tags on 12 western gray whales in order to track their route to their breeding grounds, believed to be further south.

It was thought that if their migration route could be mapped, other conservation measures could be put in place, such as keeping them out of fishing gear.

In the end, only one tag was placed before time ran out – on a male that scientists dubbed “Flex”.

Some weeks later, to the researchers’ complete surprise, Flex started heading not south but north and east, ending up on the other side of the Pacific on the US west coast.

This is the area occupied by the separate – and much bigger – eastern gray whale population. Genetic studies show that the two populations do not generally interbreed.

“It was completely the opposite of what any of us had suspected,” said Greg Donovan, the IWC’s head of science.

“So then we started to look at photos from the catalogue of our animals off Sakhalin island, and compare with those taken down the Pacific coast of the US and further south.

“And we’ve now ended up with 10 animals that have been seen on both sides.”

What that means for our understanding of the western gray whales, or for their conservation, is as yet unclear. Other tagging studies are planned this year that might provide more information.

The gray whale that found its way into the Mediterranean Sea last year, however, probably sheds no light on the issue, said Mr Donovan – it probably just got lost.

Guide to the Great Whales

SOURCE BBC NEWS ARTICLE

Royal Dutch Shell Plc may offer OAO Gazprom assets in Asia in exchange for a deal to expand Russia’s only liquefied gas export plant, part of talks on a wider global alliance, said people with knowledge of the negotiations.

Shell wants to add a third liquefied natural gas production unit at the $22 billion Sakhalin-2 venture north of Japan, raising output 50 percent. The Hague-based company is selecting overseas assets to win support from Gazprom, said three people, declining to be identified because the plans are private. Shell may gain access to new offshore blocks to supply the plant.

The talks follow an agreement in November to expand cooperation between Europe’s largest oil company and Russia’s gas export monopoly. Shell Chief Executive Officer Peter Voser and Gazprom’s Alexei Miller have set deadlines for the negotiations, one person said, without elaborating.

Shell, Exxon Mobil Corp. and BP Plc are teaming up with state-run companies to gain access to resources in Russia, the world’s biggest producer of oil and gas. For their part, Russian producers are looking to expand overseas and maintain output at home using foreign expertise. Last month, BP agreed with OAO Rosneft to swap shares, explore three blocks in Russia’s Arctic waters and possibly work abroad.

In addition to the talks on Sakhalin, the two companies are exchanging data on oil fields in west Siberia, where they run the Salym Petroleum venture, two people said. The November accord covered possible oil and gas projects in west Siberia, Russia’s Far East and abroad, as well as European refining and retail.

Government Pressure

Shell, which agreed to cede control of Sakhalin-2 to Gazprom in 2006 under government pressure, is pushing to expand the plant and win markets in China and India. Gazprom has held back on agreeing to expand Sakhalin-2 while it examines a rival plant near Vladivostok.

Gazprom will target areas of “strategic interest,” which may include the Asia-Pacific region and LNG projects, one person said. The list of possible assets in exchange for Sakhalin expansions hasn’t been finalized, the people said.

Shell is spending about $50 billion in Australia over the next decade to develop gas export projects. The company is also drilling for unconventional gas in China.

“As Gazprom wants to be a major player in the LNG markets, then I think Australia equity participation would be most obvious” as a candidate for the Russian company, said Oswald Clint, a senior analyst at Bernstein Research.

Prime Minister Vladimir Putin invited the explorer to participate in the nearby Sakhalin-3 and Sakhalin-4 oil and gas projects during a June 2009 meeting with Voser and then CEO Jeroen van der Veer.

Full Capacity

The Sakhlin-2 plant started production in 2009, reaching reached full capacity last year and accounting for 5 percent of global production of the fuel, according to Shell. Gas may account for more than half of Shell’s total production by 2012.

Vera Surzhenko, a spokeswoman at Shell in Moscow, said the companies are “considering opportunities” and declined to name any assets outside Russia that they may consider. Within Russia, Shell and Gazprom are looking at new projects on the basis of existing assets, she said, declining to elaborate. Sergei Kupriyanov, a Gazprom spokesman, and Denis Rebrov, a Gazprom Neft spokesman, declined to comment.

Gazprom owns 50 percent of Sakhalin Energy, the Sakhalin-2 operator. Shell holds 27.5 percent and Mitsubishi Corp. and Mitsui & Co. also have stakes.

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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