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Financial Times: Shell and Rosneft sign pact

By Ed Crooks in London and Catherine Belton in Moscow
Published: July 10 2007 03:00 | Last updated: July 10 2007 03:00

Royal Dutch Shell said it is still interested in further expansion in Russia as it signed a strategic co-operation deal with Rosneft, the country’s biggest oil company by market value, in spite of its bruising experience last year over the Sakhalin-2 project.

The two companies gave no details of the specific projects they would pursue as part of the deal but said they would co-operate in both oil and gas, upstream and downstream, in Russia and internationally.

Rosneft said that there were several projects under consideration.

Jeroen Van der Veer, Shell’s chief executive, said: “Russia is a strategic growth area for Shell and we are committed to developing our business in co-operation with Russian companies across the entire range of the energy business.”

The deal marks a new departure for Shell, which has previously talked about Gazprom, the state-controlled gas company, as its Russian partner.

It has only worked as a partner of Rosneft through a small stake in the Caspian Pipeline Consortium that built and operates an oil pipeline from Kazakhstan to the Black Sea coast of Russia.

Gazprom agreed a similar strategic co-operation deal with Shell last year, when it took a majority stake in the Sakhalin-2 gas and oil project off the far eastern coast of Russia.

This followed pressure from the government over the project’s alleged breaches of environmental regulations.

Shell had to sell half its stake to Gazprom, taking its holding in the project to 27.5 per cent.

Sergei Bogdanchikov, Rosneft’s president, said the agreement reached yesterday would “allow our companies to seriously widen the scope and geography of our work”.

He added: “There is no doubt that co-operation between Rosneft and Shell will be beneficial not only from a commercial perspective; it is equally important to share experience and technologies.”

Analysts had a range of theories for the areas that Shell and Rosneft might want to exploit.

Artyom Konchin, oil and gas analyst at the Aton brokerage, said Shell would probably be most interested in working with Rosneftin east Siberia or Sakhalin, and could offer tech-nology such as the “smart well” systems it has developed.

Copyright The Financial Times Limited 2007

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