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Financial Times: Shell in fresh talks with Gazprom over Sakhalin-2

By Rebecca Bream
Published: December 11 2006 10:13 | Last updated: December 11 2006 10:13

Royal Dutch Shell confirmed on Monday that it has held fresh talks with Gazprom about the status of its $20bn Sakhalin-2 liquefied natural gas project off the far east coast of Russia, amid reports that Shell is under pressure to give up control of the project.

Sakhalin Energy, the joint venture running Sakhalin-2, is 55 per cent-owned by Shell and the rest by Mitsui and Mitsubishi, the Japanese trading companies. However, Gazprom, the Russian gas monopoly, is interested in taking a stake in the huge project, which is currently Russia’s biggest single foreign investment.

It was reported on Monday by Reuters that Shell had agreed in principle to reduce its stake in Sakhalin-2 to allow Gazprom to take control. The reports said Shell would keep a blocking stake of at least a quarter in the scheme, the world’s largest liquefied natural gas (LNG) project.

Shell confirmed that chief executive Jeroen van der Veer met Gazprom head Alexei Miller in Moscow on Friday to discuss “Sakhalin-2-related issues”.

It added: “The discussions were positive but their contents remain confidential.”

It is understood that the talks are continuing and that no deal has yet been reached by Shell and Gazprom on the ownership of Sakhalin-2.

The Russian government is unhappy that the cost of the Sakhalin-2 project has risen from an original budget of $10bn to more than $20bn, delaying the point at which the Kremlin starts to receive revenues.

Copyright The Financial Times Limited 2006

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