RoyalDutchShellPlc, Europe’s largest oil company by market value, will produce 2.5 per cent fewer barrels of oil equivalent by 2010 than forecast by UBS after handing over half of its stake in Russia’s Sakhalin-2 venture to OAOGazprom, the investment bank said.
Shell’s production in 2010 is estimated to be 3.93 million barrels of oil equivalent a day, down from a previous forecast of 4.03 million barrels, UBS said in a note Friday. The impact in later years is even more material, UBS said.
Shell and Japanese partners Mitsui& Co. and MitsubishiCorp. agreed Dec. 21 to sell half of their stakes in Sakhalin-2 to state- run Gazprom in return for $7.45 billion in cash. The agreement gives Gazprom a 50 per cent stake, while the holdings of Shell, Mitsui and Mitsubishi drop to 27.5 per cent, 12.5 per cent and 10 per cent, respectively.
“Production growth will be impacted,” UBS analysts Jon Rigby and Iain Reid said in the note. “It dilutes Shell ownership in a worldclass project, which are increasingly few and far between,” the report said.
Shell remains the technical operator, and that may come at a cost for the company as well, UBS said.
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