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International Herald Tribune: Movers: Russia stops Shell project; state may be seeking stake

By Lyubov Pronina
Published: August 4, 2006
 
MOSCOW Royal Dutch Shell was told Thursday by the Russian government to suspend construction of a pipeline on Sakhalin Island, threatening to delay a project whose costs doubled last year to $20 billion.

 
The Natural Resources Ministry said that Shell should halt construction of the link until it can complete environmental and safety studies at the end of the month. The government plans to sue the company to enforce the demand, said Oleg Mitvol, deputy head of the ministry’s environmental monitoring agency.
 
A delay risks raising the cost of the project, the biggest foreign investment in the country, and might strengthen the hand of Gazprom, Russia’s state- run energy company, as it seeks to obtain a stake in the venture. President Vladimir Putin has used Gazprom and Rosneft to tighten his control over the country’s energy resources.
 
“Shell is talking to Gazprom about allowing Gazprom into the project and this could easily be, in Russian style, part of the negotiation tactics,” said Craig Pennington, global leader of energy research at Schroders in London.
 
Shares of Shell in London fell 38 pence to £18.61, or $35.14. Gazprom and the ministry denied any link between the demand Thursday and the Russian gas company’s bid for a stake in the Sakhalin project.
 
The venture includes the first liquefied natural gas export plant in Russia at the southern end of Sakhalin Island. The plant needs the pipeline to bring in gas from fields further north, where ice floes make shipping difficult in the winter.
 
“We are waiting for the end of August,” Mitvol said by telephone from Moscow. “We need to get some more documents. After that we’ll prepare a lawsuit for the arbitration court in Sakhalin demanding to suspend construction.”
 
Environmental groups seeking to protect whales and salmon have already forced Shell to redesign and reroute onshore and offshore pipelines as part of the second phase of the Shell- led Sakhalin-II project.
 
Shell has struggled to increase its production and reserves amid cost overruns or delays at several major projects, including the Bonga deepwater oil field in Nigeria, which started in November, two years behind schedule.
 
Ivan Chernyakhovsky, a spokesman for Sakhalin Energy Investments, the operator of the project for Shell, said earlier by telephone from the site that he could not comment until he had a chance to review the ministry’s statement. A Shell spokesman in London made a similar statement.
 
“By way of measures to lower the risk, we suggest to suspend construction of the pipeline until state environmental expertise of the pipeline project in landslide prone parts is complete,” the ministry’s statement said. A ministry study began July 25 and will be completed Aug. 25.
 
Equity firms consider bid for jewelry stores
 
DUBLIN: Apax Partners Worldwide and Kohlberg Kravis Roberts said Thursday that they were considering making an offer for Signet Group to acquire 1,847 jewelry stores, including the Kay and Jared chains in the United States. Shares of Signet surged.
 
The buyout firms jointly undertook a “preliminary analysis” of Signet, the world’s largest specialty jewelry retailer, that included “the consideration of a possible offer,” Apax said. Signet, which also owns Ernest Jones and H. Samuel stores in Britain, said that it had not been approached.
 
Shares of Signet gained 15.25 pence, or 15 percent, to 116.75 pence, or $2.21, in London. [email protected]
 
As claims decline, Munich Re profits
 
MUNICH: Munich Re, one of the world’s largest reinsurers, said Thursday that profit jumped more than sixfold in the second quarter, beating analysts’ estimates, after it paid less for claims and made more money from investments.
 
Net income rose to €1.13 billion, or $1.44 billion, from €167 million a year earlier.
 
Nikolaus von Bomhard, the chief executive, has raised premiums in storm- affected areas and canceled some policies after last year’s record hurricane season prompted Munich Re to sell assets to settle claims. The company said Thursday that it might beat a forecast for full-year net income of as much as €2.8 billion if there are no unusual claims in the second half.
 
[email protected] – Oliver Suess
 
Tire maker’s net falls on cost to close plants
 
BERLIN: Continental, the tire maker, said Thursday that second-quarter profit fell 18 percent as the company spent money to eliminate jobs and halt production at unprofitable U.S. tire operations.
 
Net income fell to €201.7 million, or $258 million, from €244.6 million.
 
Manfred Wennemer, the chief executive, who expects 2006 global vehicle production to rise, has cut spending by about 5 percent a year to cope with higher raw material costs and demands from carmakers like Volkswagen to cut prices. Excluding charges for the U.S. reorganization, among them next month’s closure of a North Carolina plant, earnings before interest and taxes would have risen 17 percent, the company [email protected] – Jeremy van Loon
 
 MOSCOW Royal Dutch Shell was told Thursday by the Russian government to suspend construction of a pipeline on Sakhalin Island, threatening to delay a project whose costs doubled last year to $20 billion.
 
The Natural Resources Ministry said that Shell should halt construction of the link until it can complete environmental and safety studies at the end of the month. The government plans to sue the company to enforce the demand, said Oleg Mitvol, deputy head of the ministry’s environmental monitoring agency.
 
A delay risks raising the cost of the project, the biggest foreign investment in the country, and might strengthen the hand of Gazprom, Russia’s state- run energy company, as it seeks to obtain a stake in the venture. President Vladimir Putin has used Gazprom and Rosneft to tighten his control over the country’s energy resources.
 
“Shell is talking to Gazprom about allowing Gazprom into the project and this could easily be, in Russian style, part of the negotiation tactics,” said Craig Pennington, global leader of energy research at Schroders in London.
 
Shares of Shell in London fell 38 pence to £18.61, or $35.14. Gazprom and the ministry denied any link between the demand Thursday and the Russian gas company’s bid for a stake in the Sakhalin project.
 
The venture includes the first liquefied natural gas export plant in Russia at the southern end of Sakhalin Island. The plant needs the pipeline to bring in gas from fields further north, where ice floes make shipping difficult in the winter.
 
“We are waiting for the end of August,” Mitvol said by telephone from Moscow. “We need to get some more documents. After that we’ll prepare a lawsuit for the arbitration court in Sakhalin demanding to suspend construction.”
 
Environmental groups seeking to protect whales and salmon have already forced Shell to redesign and reroute onshore and offshore pipelines as part of the second phase of the Shell- led Sakhalin-II project.
 
Shell has struggled to increase its production and reserves amid cost overruns or delays at several major projects, including the Bonga deepwater oil field in Nigeria, which started in November, two years behind schedule.
 
Ivan Chernyakhovsky, a spokesman for Sakhalin Energy Investments, the operator of the project for Shell, said earlier by telephone from the site that he could not comment until he had a chance to review the ministry’s statement. A Shell spokesman in London made a similar statement.
 
“By way of measures to lower the risk, we suggest to suspend construction of the pipeline until state environmental expertise of the pipeline project in landslide prone parts is complete,” the ministry’s statement said. A ministry study began July 25 and will be completed Aug. 25.

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