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Daily Telegraph: Sakhalin II deal nearly complete

By Edmund Conway
Last Updated: 12:14am GMT 18/12/2006

Oil giant Shell is within days of tying up the disposal of its majority stake in the mammoth Russian oil-and-gas project Sakhalin II, it has emerged. The Anglo-Dutch company expects to complete its talks with the Russian government and Gazprom by the end of the week, it confirmed yesterday.

It has come under intense pressure from Russian authorities to quit the project, which is the only major development in Russia owned entirely by foreigners.

Chief executive Jeroen van der Veer, who has flown to a series of meetings in Moscow with energy minister Viktor Khristenko and his Gazprom counterpart Alexei Miller, is expected to announce what progress has been made in the coming days. A spokesman said: “If progress continues to be made, we would expect talks to conclude by the end of this week.”

Industry sources claim Mr van der Veer has agreed in principle to sell Shell’s controlling stake in the £12bn project to Gazprom, in a deal that would allow Shell to keep a blocking stake of at least a quarter, though others believe Shell could sell its entire stake. Shell owns 55pc of the project, while the remaining 45pc is owned by Japanese groups Mitsui and Mitsubishi.

The owners – and in particular Shell – have come under pressure to sell their stakes, following environmental probes which led the government to threaten to confiscate their permits.

The news may concern Shell’s rival, BP, which has a joint venture with TNK in Russia. BP said it had won a concession to develop two large natural gas fields in central Oman. The Khazzan and Makarem fields are expected to yield large volumes, the Omani energy ministry said.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/12/18/cnshell18.xml

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