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AFX News Limited: Shell Sakhalin-2 consortium demands supply, cooperation guarantees – report

Forbes/AFX News: 12.18.06, 1:53 AM ET
TOKYO (AFX) – A Shell-led consortium is demanding supply guarantees and the promise of future cooperation with Gazprom as conditions for giving up control of the huge Sakhalin-2 project to the Russian gas giant, the Nihon Keizai Shimbun reported.

Royal Dutch Shell Plc (nyse: RDSA – news – people ) holds 55 pct of the project, while Mitsui and Co (nasdaq: MITSY – news – people ) and Mitsubishi Corp (other-otc: MSBHY.PK – news – people ) hold 25 pct and 20 pct respectively.

Shell is widely expected to hand over 30 pct of the project to Gazprom, with the Japanese trading houses ceding 10 pct each.

The chiefs of the three foreign companies met Friday in Moscow with Russian Energy Minister Viktor Khristenko and agreed to give their majority stake to Gazprom on three conditions, on which they are hoping to reach a basic agreement by the end of the year, the newspaper said.

The conditions include ensuring supply to customers that have already signed contracts, including Japan’s Tokyo Electric Power Co and Tokyo Gas Co, it said without specifying its sources.

The other conditions were finding ‘a transfer price acceptable to all parties’ and assurances that the companies can work with Gazprom on future projects.

Japan, which has few natural resources of its own, is the primary market for the gas from Sakhalin-2, which was to be the world’s biggest privately financed energy project.

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