December 22nd, 2006:

By Tom Stevenson
Last Updated: 12:18am GMT 22/12/2006

By trampling on the property rights of Shell and its Japanese partners in a huge oil and gas project off Russia’s eastern coast, President Putin is playing a dangerous game. He has won this battle but risks losing the economic war.

The deal to sell Gazprom a majority stake in the Sakhalin 2 project rewards a grubby campaign by the Kremlin to wrest back control of its strategic energy reserves. No one believed the environmental grounds on which the Russian government was hounding its foreign partners but, equally, no one dared stand up to Putin’s bully boys. read more

December 22, 2006
Carl Mortished, International Business Editor
 
Gazprom has gained control of Russia’s largest energy project with an agreement to buy from Royal Dutch Shell and its Japanese partners, Mitsui and Mitsubishi, half of the Sakhalin-2 liquefied natural gas project for £3.8 billion.

After 17 months of negotiation in an increasingly hostile political environment, Shell has consented to Gazprom taking control “as a leading shareholder” in Sakhalin Energy, a transaction that will force Shell to make a downward adjustment to its proven gas reserves. 
 
The agreement, which gives Gazprom 50 per cent plus one share in Sakhalin Energy, has the effect of scrapping an asset-swap deal negotiated last year that offered Shell a new opportunity in a half share of Zapolyarnoye, another Siberian gasfield. It also ends a fraught political battle fought by the Kremlin to regain control over a valuable oil and gas asset given to Shell in the early 1990s. read more

Will BP accede to the demands of the Russian bear

By Edmund Conway
Last Updated: 1:14am GMT 22/12/2006

The Kremlin has moved decisively to take back ownership of Russia’s oil-and-gas assets, taking effective control of Royal Dutch Shell’s Sakhalin-2 project and issuing a chilling warning to BP about its future in the country.  

President Putin personally oversaw the signing of a deal in which Shell will hand over control of Sakhalin to Gazprom, while a key Kremlin official warned BP that it has no choice but to accede to Russian demands with its latest project, or face crippling sanctions. Shell and its Japanese partners accepted a $7.45bn (£3.8bn) cash payment for a stake of 50pc plus one share in the project in the far north-east which was until yesterday the biggest single foreign investment in Russia. read more

Published: Dec 21, 2006
Text of report by Russian news agency ITAR-TASS

Moscow, 21 December: Having assured [Minister of Natural Resources] Yuriy Trutnev that all legal requirements will be observed, Shell CEO Jeroen van der Veer asked the former “to release Sakhalin-2’s approval papers and licences in a timely fashion”.

“I would like to assure you that we will fully observe all legal requirements and in the event of any complications, we will do whatever it takes to resolve these problems jointly,” he told the minister of natural resources at a meeting in the evening. read more

Published: Dec 22, 2006

Russia’s state controlled gas company, Gazprom, secured a majority stake in the Sakhalin 2 project for $7.4bn (pounds 3.8bn) yesterday. Shell will continue to hold a 27.5 per cent stake, however, but is believed to have secured 50 per cent of the seats on the board, as well as an assurance that no major decisions will be taken without the backing of more than Gazprom’s 50 per cent stake.

Published: Dec 22, 2006

LAGOS A dozen gunmen attacked living quarters near a Total pumping station in Nigeria yesterday, killing three police guards and closing the facility.

Meanwhile, Royal Dutch Shell evacuated the families of its foreign workers as the security situation worsened. Africa’s biggest oil producer, and the fifth-largest US supplier, has seen its typical production of 2.5 million barrels a day cut by a quarter this year because of attacks and the taking of hostages by militants. Some seek ransoms while others want political influence. read more

AFX CNF
Published: Dec 22, 2006

RNS Number:5344O Mitsubishi Corporation 22 December 2006 Translation of report filed with the Tokyo Stock Exchange on December 22, 2006 Gazprom, Shell, Mitsui, Mitsubishi Sign Sakhalin II Protocol On December 21, 2006 OAO Gazprom (Gazprom), Royal Dutch Shell plc (Shell), Mitsui &Co., Ltd (Mitsui) and Mitsubishi Corporation (Mitsubishi) have signed a protocol to bring Gazprom into the Sakhalin Energy Investment Company Ltd. (SEIC) as a leading shareholder. Under the terms of the protocol, Gazprom will acquire a 50% stake plus one share in SEIC for a total cash purchase price of $7.45 billion. The current SEIC partners will each dilute their stakes by 50% to accommodate this transaction, with a proportionate share of the purchase price. Shell will retain a 27.5% stake, with Mitsui and Mitsubishi holding 12.5% and 10% stakes, respectively. SEIC will remain the operator of the Sakhalin II project. Gazprom will play a leading role as majority shareholder while Shell will continue to significantly contribute to SEIC management and remain as Technical Advisor. The key focus for SEIC is to complete the project on schedule allowing LNG to be delivered to existing customers in Japan, Korea and the North American West Coast. All existing LNG sales contracts will remain in force and will be honored. Gazprom and existing SEIC shareholders will enter into an Area of Mutual Interest arrangement, which will cover both future Sakhalin oil and gas exploration and production opportunities, and building of Sakhalin II into a regional oil and LNG hub. Furthermore, the shareholders and the Ministry of Industry and Energy of Russia as the authorized state body for the supervision of production sharing agreements have agreed to jointly resolve all outstanding issues. The Sakhalin II Amended Development Budget for the phase 2 of the project is expected to be approved by the Supervisory Board (a special committee which consists of the representatives of Russian Federation, Sakhalin Oblast, SEIC and its shareholders). The Production Sharing Agreement (PSA) of the Sakhalin II project will continue. The shareholders now look forward to implementing the project in line with the current schedule including obtaining all necessary permits and approvals granted in accordance with applicable Russian legislation and the PSA. This is one of significant milestone in the Sakhalin II project and Mitsui and Mitsubishi most welcome Gazprom to join as a new member of our team. We trust this will farther strengthen the relationship between Russia and Japan and also give us an opportunity to continue to developing merit of additional energy resources in Sakhalin Island. Furthermore, we believe that SEIC will become a reliable LNG supplier in Asia and Pacific market through the mutual cooperation between 4 shareholders in SEIC. Sakhalin II project Sakhalin is a new world-class oil and gas province, with estimated resources of some 45 billion barrels oil equivalent. Sakhalin II is the largest integrated oil and gas project in the world, with total resources of some 4 billion barrels oil equivalent. Sakhalin II today has production capacity of 80,000 barrels oil equivalent per day. The next phase of the development will take the project capacity to 340,000 barrels oil equivalent per day, including 9.6 million tones per year of LNG production. The second phase of the project is over 80% complete, with some $12 billion invested to end Q3 2006. Over 17,000 people are currently employed in the construction of the project, of which around 70% are Russian nationals. The planned LNG production has been sold under contract to customers across the Asia-Pacific region. Shell is a leader in the global LNG industry, and sets the standard for reliability and cost performance. Sakhalin II is an important component in Shell’s global LNG portfolio. The Sakhalin II project is governed under a PSA, whereby the project partners finance the construction costs of the project, take on the development risk, and recover these costs from sales of oil and gas. So far, some $600 million of royalty, bonuses and taxes have been paid to the Russian government by the end of 2006. Sakhalin II includes the following elements: a Offshore production facilities including the Molikpaq platform (PA-A), the new PA-B and Lun-A platforms and some 300 km of offshore pipelines; a An onshore processing facility to take the gas and crude oil from both fields; a Two 800 km of onshore oil and gas pipelines to the south of the island; a An oil export facility capable of year-round operation; a The first LNG plant and associated export facilities built in Russia; a Island infrastructure upgrades, such as roads, bridges, rail, port, airport, and medical facility upgrades. Forward-Looking Statements The statements included in this release contain forward-looking statements about Mitsubishi Corporations future plans, strategies, beliefs and performance that are not historical facts. Such statements are based on the companys assumptions and beliefs in light of competitive, financial and economic data currently available and are subject to a number of risks, uncertainties and assumptions that, without limitation, relate to world economic conditions, exchange rates and commodity prices. Accordingly, Mitsubishi Corporation wishes to caution readers that actual results may differ materially from those projected in this release. # # # This information is provided by RNS The company news service from the London Stock Exchange END read more

By Dino Mahtani
Published: December 22 2006 02:00 | Last updated: December 22 2006 02:00

Shell, the Anglo-Dutch oil group, yesterday began evacuating families of expatriate staff working in Nigeria’s oil producing delta, following a car bomb explosion set off by militants in one of the company’s residential compounds this week. Agip, the Italian oil major, has also transferred expatriate families after a bomb attack near one of its compounds.

The Shell evacuation began hours after militants stormed an oil facility operated by Total, the French multinational, killing three policemen. Dino Mahtani, Lagos read more

By Arkady Ostrovsky in Moscow
Published: December 22 2006 02:00 | Last updated: December 22 2006 02:00

Gazprom, Russia’s state-backed gas group, yesterday agreed to pay $7.45bn for majority control in Sakhalin-2, the $20bn oil and gas project led by Royal Dutch Shell, cementing the Kremlin’s grip on the country’s energy resources and ending months of pressure on foreign investors.

Shell, which owned 55 per cent of the project, and its two Japanese partners – Mitsui and Mitsubishi – agreed to halve their stakes to put Gazprom in charge and unblock the project, almost stalled by Russian authorities. read more

Published: December 22 2006 02:00 | Last updated: December 22 2006 02:00

Mikhail Khodorkovsky, once Russia’s richest man, faces his fourth Christmas behind bars. His fall, alongside the evisceration of his oil company, Yukos, marked a sea change in the Kremlin’s relationship with the oligarchs – the tycoons who secured control of the country’s biggest enterprises during the Yeltsin era.

Under President Vladimir Putin, the cast has changed somewhat, with many of Russia’s new oligarchs enjoying close ties with the Kremlin. Power and wealth remain concentrated in relatively few hands. The aggregate free float of the country’s top 10 stocks – 79 per cent of the market – is about a third. The free float for the 19 Russian companies that have listed $22bn of equity in London since the start of 2005 is about a fifth. read more