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The Moscow Times: Auditor Says Shell’s Sakhalin-2 May Cost $50Bln

Tuesday, October 10, 2006. Issue 3515. Page 5.

Royal Dutch Shell’s Sakhalin-2 project off Russia’s Pacific coast may cost as much as $50 billion, the Audit Chamber said Monday.

Operator Sakhalin Energy, which doubled expenses for the project’s second phase last year to $20 billion, may raise the cost of Sakhalin-2 once again, auditor Mikhail Beskhmelnitsyn said, Interfax reported.

Ivan Chernyakhovsky, a Moscow-based Sakhalin Energy spokesman, said he could not comment because it was unclear which figures the Audit Chamber was using. Sakhalin Energy has said it will spend $20 billion in the project’s second phase until 2014.

Operating costs over its 40-year lifetime are hard to estimate, it said, because they are dependent on energy prices, inflation and exchange rates.

Meanwhile, a senior Rosneft official said ExxonMobil-led Sakhalin-1 was not holding talks on moving from its current production sharing deal to the national tax regime.

“We are not considering any switch to the national tax regime. We consider our PSA to be a document which has the force of law,” Lev Brodksy, head of state oil firm Rosneft’s Sakhalin projects, said at a news conference.

“If these developments were talking place in 2006, it would probably have been different. But back in 1995, we had no choice. As a specialist and a participant, I simply don’t understand what this talk [of scrapping the PSA] is all about,” Brodksy said.
Rosneft has 20 percent in Sakhalin-1, while Exxon leads the project with 30 percent.

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