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Reuters: Shell agrees to pay Russia more of Sakhalin income

Thu Apr 26, 2007 8:12 AM BST

LONDON, April 26 (Reuters) – Royal Dutch Shell (RDSa.L: Quote, Profile , Research) and its partners have agreed to pay an annual dividend to the Russian government as part of a deal to salvage its Sakhalin-2 project, the Wall Street Journal said on Thursday.

The dividend will be paid from 2010 onward and linked to the price of oil, the newspaper quoted an unidentified person familiar with the situation as saying.

“It’s going to be something under a billion dollars every year,” the person was quoted as saying.

Shell declined comment. Shell’s Japanese partners, Mitsui (8031.T: Quote, NEWS , Research) and Mitsubishi Corp (8058.T: Quote, NEWS , Research), were unavailable for comment.

Shell and the partners this month ceded control in the $22 billion venture to state-controlled Gazprom, at what analysts considered a knock-down price, after more than a year of pressure on the project from the Kremlin.

Analysts said the production sharing agreement (PSA) that Shell had negotiated in the 1990s offered the world’s second-largest, non-state controlled oil company more favourable terms than most other nations had agreed in the past decade.

A renegotiation of the PSA would have been a complex legal matter and the newspaper said the dividend allowed the terms to be changed without such complications.

However, the payments “won’t have a material impact on the economies of the project,” another person familiar with the terms was quoted in the newspaper as saying.

© Reuters 2007. All Rights Reserved.

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