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UpstreamOnline: Shell hopes for quick end to Sakhalin talks

By Upstream staff

Shell expects talks to offer Russian gas monopoly Gazprom a major stake in the Sakhalin 2 oil and gas development to be completed by the end of this week.

Reuters quoted Shell spokesman Alf D’Souza as saying that the talks could be concluded by that time if progress continued to be made.

Shell chief executive officer Jeroen van der Veer flew back to the Netherlands after the talks on Friday, his second meeting with Miller in a week. Reuters added that sources familiar with the matter said both sides were keen to clinch agreement on terms for Gazprom’s entry into the project.

Industry observers in Moscow believe that the ultimate deal will include Shell selling a 30% stake to Gazprom, with Sakhalin 2’s other shareholders, Japan’s Mitsui and Mitsubishi, adding the remaining 20%. That would leave Shell with a blocking stake of 25% in the consortium, with Mitsui and Mitsubishi’s interests falling to 10% and 15% respectively.
If Gazprom opts for the full 50% stake, Shell is likely to be forced to abandon its leading role with operator SakhalinEnergy to the gas giant, analysts said.

Gazprom’s entry may also help the Sakhalin 2 consortium to change the 1993 production sharing agreement, which Russian officials have criticised on numerous occasions as “detrimental to Russian interests”, said an official from Russian state-owned oil company Rosneft.

Russian officials have implied that the approval of the new $20 billion budget may only be granted if the consortium agrees to change the PSA conditions and allow the government a larger share of its future revenues.

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