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Gazprom Reaches Agreement With Shell to Take Part in Sakhalin-2

MosNews (Russia): Gazprom Reaches Agreement With Shell to Take Part in Sakhalin-2: Friday 10 June 2005

Russia’s natural gas monopoly Gazprom said on Friday, June 10, that it has basically reached an agreement with international oil major Shell regarding participation in the oil and gas project Sakhalin-2. Shell leads the international consortium which develops the project off the coast of Sakhalin Island in Russia’s Far East.

Alexander Medvedev, head of Gazprom’s export unit, said the firm was very close to concluding a long-awaited swap deal, under which Gazprom would take 25 percent of the Sakhalin-2 project. Shell would lose its majority holding in Sakhalin Energy, which operates Sakhalin-2, but gain a stake in Gazprom’s West Siberian Zapolyarnoye field, which produces 100 billion cubic meters of gas a year.

“I feel really optimistic that in the nearest future we will be able to work out the key terms (with Shell),” Medvedev, quoted by Reuters, told reporters. “All the key terms have been agreed on. Only technical details remain to be worked out.”

As MosNews has reported several times, Sakhalin-2 has already pre-sold more than 80 percent of its output for 20 years or more, and Shell is thinking of expanding capacity. The other shareholders are Japan’s Mitsui and Mistubishi, which have 25 and 20 percent respectively.

The gas giant is also thinking of bidding for the Sakhalin-3 license and buying out state-owned Rosneft in Sakhalin-1. Rosneft holds a 20 percent stake in the $12 billion project in which ExxonMobil, Japan’s SODECO consortium and India’s ONGC also have stakes. It is due to produce its first oil next year. “I can’t rule out that we may make an offer for Sakhalin-1, which Rosneft won’t be able to refuse on economic grounds,” Medvedev said.

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