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Forbes/AFX News Limited: Shell CEO says Sakhalin project on track, within budget

 

05.16.2006

 

LONDON (AFX) – Royal Dutch Shell PLC assured that the giant Sakhalin-2 gas project in Russia's Far East remains on course with its revised schedule and budget.

 

The project, in which Shell owns a 55 pct stake, has suffered cost overruns, doubling the cost of the project to 20 bln usd and delaying its start to 2008 from 2007.

 

'The project is over 70 pct complete, with first gas deliveries expected in 2008,' chief executive Jeroen van der Veer told shareholders at Shell's annual meeting in The Hague.

 

'Costs have risen sharply with inflation, and because we underestimated the difficulties of this frontier location,' he added, explaining to investors the factors behind the delay.

 

But he stressed that the mammoth project remains an 'attractive strategic investment' for Shell.

 

'It will open a new, long-term source of gas for fast-growing Asian and North American markets — as well as significant additional oil supplies,' he said.

 

Japan's Mitsui & Co and Mitsubishi Corp hold the remaining 45 pct stake in Sakhalin-2.

 

In Nigeria, Malcolm Brinded, head of Shell's exploration and production business, said he believes the oil and gas output that was shut-in following violent attacks on its major facilities at the Niger Delta should be restored soon.

 

'I can't say when… but I think it will be in the coming weeks,' he said.

 

The attacks by separatist militants have cut oil production at the facilities there by 455,000 barrels per day, basically halving output.

 

At the Gulf of Mexico, the 150,000-barrel per day Mars platform should resume production this month, said Van der Veer.

 

Mars was heavily damaged by the hurricanes that struck the US Gulf last year.

 

Shell is the operator of Mars with a 71.5 pct stake, while BP holds the remaining 28.5 pct.

 

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