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Times Online: Comment: Pay up

Steve Hawkes

The production sharing agreement for Sakhalin II in 1994 was the first one signed by the Russian Government.

The agreement that will see Shell pay the Kremlin an annual dividend to maintain its already diluted stake in the field shows how far the balance of power has shifted since.

Faced with pressure to find new oil and gas reserves from a smaller number of prospects, Western majors are having to go down on their knees in Russia and pray for the best.

While the “priority dividend” may be embarrassing for a group of Shell’s heritage, it will point to BP’s role in the recent Yukos auction to show that no other company is being treated differently.

For Shell, what is important is being on the playing field at all. Investors may cringe at its treatment, but they will ultimately benefit from that as well.

April 26, 2007

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article1710100.ece

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