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Financial Times: Gazprom close to deal with Shell on Sakhalin-2

“It is understood that after its troubles in Russia, Shell’s appetite for accumulating further assets in the country has weakened.”

By Arkady Ostrovsky and Neil Buckley in Moscow
Published: December 13 2006 02:00 | Last updated: December 13 2006 02:00

Dmitry Medvedev, Russia’s first deputy prime minister and the chairman of Gazprom, yesterday said the company was “close to reaching agreement” with Shell on entry into the Sakhalin-2 project.

Mr Medvedev said: “The talks are going quickly and we can hope to reach a deal soon.”

He said that Gazprom would gain about a 50 per cent stake in the project but hinted that it might accept a less than majority control.

Shell and its two Japanese partners have offered tocede control over the$20bn (£10.2bn) oil andgas project to Gazpromafter months of heavyand sustained pressure from the Russian government.

Tony Blair yesterday said that Shell’s travails in Russia highlighted the need to secure a diverse energy supply for Britain.

Without commenting specifically on Shell’s deal with Gazprom, Mr Blair said: “When we, as the European Union, met the Russian president [Vladimir Putin] in Finland, we made it very clear what our concerns and worries were.”

Sources close to both companies said Shell offered to reduce its 55 per cent stake to just 25 per cent and Mitsui and Mitsubishi, which own 45 per cent between them will sell 10 per cent each to Gazprom, giving it a 50 per cent share.

Mr Medvedev said yesterday: “As far as the stake is concerned, this is an important question, but it’s not critically important.”

He added that Gazprom was used to having controlling stakes in its other businesses in Russia.

“But we could deviate from that rule. It could be 50 per cent, it could be a smaller stake,” he said.

A person familiar with the situation said the main component of the deal would have to be cash, rather than Gazprom’s assets. This is in contrast to the deal Shell and Gazprom discussed a year ago but which collapsed when the cost of the project doubled to $20bn.

It is understood that after its troubles in Russia, Shell’s appetite for accumulating further assets in the country has weakened.

Copyright The Financial Times Limited 2006

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