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UPI: Russia busting Sakahlin contracts: virtual takeover of a Royal Dutch Shell PLC project

MOSCOW, Sept. 19 (UPI) — The Kremlin has begun what observers say is a virtual takeover of a Royal Dutch Shell PLC oil and natural gas project in Russia’s far eastern region.

The government’s environmental agency annulled the company’s approval to operate the Sakhalin-2 venture, one of the world’s largest, MosNews said.

The move comes after months of Moscow’s objection to the production-sharing agreement it signed with RDS, as well as ExxonMobil and Total, to ensure development of the huge petroleum reserves off the Pacific Ocean island of Sakhalin.

The Kremlin has been seeking to replace the production sharing agreement with a contract that gives state-run OAO Gazprom a 25 percent plus one share interest in the Sakhalin project in exchange for a 50-percent stake in the West Siberian Zapolyarnoye Neocomian project. RDS has not been interested in such a swap.

Global economic leaders are warning that the drive to unilaterally abrogate international contracts will hurt the Russian economy.

We have been very cautious with our supply projections for Russia. We see this kind of policy is not conducive for foreign investment, said Claude Mandil, executive director of the International Energy Agency.

Copyright 2006 by United Press International

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