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UpstreamOnline.com: Collection of articles relating to David Greer

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Sakhalin’s governor confirms LNG delays

Sakhalin Island Governor Aleksandr Khoroshavin has confirmed that the start-up of liquefied natural gas deliveries from the Gazprom-led Sakhalin 2 project could be delayed by at least six months, writes Vladimir Afanasiev.

Khoroshavin said he expects Sakhalin 2 operator Sakhalin Energy to start first shipments of LNG from the project off Russia’s far east in the “spring of 2009”.

The operator was adamant throughout almost the whole of 2007 that first LNG carrier would leave the plant in September 2008.

Khoroshavin explained that the main reason for the delay is the inability of Sakhalin 2 pipeline contractor Starstroi to complete and test oil and gas pipes where they cross 19 tectonic faults on the way from the north of the island to Prigorodnoye in the south, where the terminal is located.

Sakhalin 2 stakeholders Gazprom, Shell and Japan’s Mitsui and Mitsubishi are expected to source LNG shipments from the open market to fulfil their commitments to buyers in Japan, the US and South Korea, according to Khoroshavin.

Gazprom deputy executive chairman Aleksandr Ananenkov was quick to react to Khoroshavin’s comments, reportedly saying in Tokyo that the Russian gas monopoly will do everything possible to ensure the start of LNG shipments in 2008.

The pipeline problems had become evident to outsiders in mid-2007 when Sakhalin 2 project director David Greer was forced to resign after an email to colleagues about the pipeline challenges was leaked to the media.

According to industry observers, Sakhalin Energy agreed to use Starstroi to build about 1600 kilometres of onshore oil and gas pipelines, yielding to demands from the Russian government that it should use more Russian services and supplies.

Starstroi then sub-contracted dozens of Russian pipeline builders to build sections of the pipeline.

However, many of them had no experience of working in the tough and muddy Sakhalin environment while others are understood to have lacked financial stability.

The subsequent problems led to pipeline costs more than doubling to over $2 billion and resluted in the delays, according to observers.
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04 January 2008 00:01 GMT  | last updated: 04 January 2008 00:01 GMT

Shell targets West Siberia LNG riches

VLADIMIR AFANASIEV, Moscow

Anglo-Dutch supermajor Shell is ready to increase its exposure to Russia by investing billions of dollars into liquefied natural gas projects in the remote Yamal-Nenets autonomous region in West Siberia.

Chief executive Jeroen van der Veer was this week quoted by Reuters as saying Shell is considering entering “a huge-scale long-term liquid gas and oil project” with unidentified local companies on the Yamal peninsula.

Van der Veer, who arrived in Moscow as part of a high-level Dutch business delegation led by Prime Minister Jan Peter Balkenende, spoke after a private meeting with Russian President Vladimir Putin on Tuesday.

“It is not like building a house, it is like building a city. It will take a very long time,” Van der Veer said.

“We are wishing at Yamal for a combination between pipeline gas and LNG. We expect huge reserves there. You have to develop huge infrastructure, in this case giving huge commercial opportunities for Russia,” he was quoted as saying. “Experience has taught us that if you are not involved from the start you cannot get it anymore, that is why we have set a first step.”

However, Shell officials in Moscow have been unable to shed any light on which Yamal project Van der Veer was referring to. Shell’s London office failed to respond to queries.

There are suggestions from many industry observers in Moscow that Gazprom may have offered Shell a stake in the project to develop the South Tambey-skoye gas field.

Last year, Gazprom-friendly companies reportedly paid $500 million to buy the field, with estimated recoverable reserves of more than 1.2 trillion cubic metres of gas, from Russian businessman Nikolay Bogachev.

There were further reports that Bogachev was forced to sell the asset after Russian prosecutors opened a criminal investigation against him, charging him with “large-scale fraud”.

Bogachev was reportedly in talks with Petro-Canada, Shell and Spain’s Repsol YPF, attempting to attract them as potential partners to develop the field and build the LNG plant there.

The pronouncements from Van der Veer have come after last year’s humiliation, when Shell was forced to sell the major part of its stake in the Sakhalin 2 oil and gas development project in Russia to Gazprom. Russian authorities have accused Shell of inflicting multi-billion dollar damage to Sakhalin Island in Russia’s far east.

With Russian contractors having failed to stick to Shell’s guidelines in laying oil and gas pipelines from the north to the south of Sakhalin Island, this led to the resignation of Shell veteran and Sakhalin 2 project director David Greer.

Shell now retains a 25% share in Sakhalin 2.

The supermajor also controls the medium-sized Salym oil production project in West Siberia where it has the 50% interest, and has recently signed a memo with Russian regional oil company Tatneft to investigate the development of heavy bitumen oils.
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09 November 2007 11:15 GMT  | last updated: 09 November 2007 11:15 GMT

Shell walks away from Regal deal

By Upstream staff

Anglo-Dutch supermajor Shell has pulled out of a deal – unveiled just last week – to take a 51% stake in the Ukrainian gas assets of UK explorer Regal Petroleum, following Regal’s surprise appointment of a new chief executive.

“Our memorandum of understanding with Regal was agreed with the previous management team. The management change of yesterday at Regal was not expected by Shell,” the Anglo-Dutch oil major said in a statement.

On Thursday last week, Regal said chairman Francesco Scolaro and chief executive Neil Ritson had resigned and that David Greer – until recently a senior Shell employee – would take on both roles.

Since October 2004, Regal has had four chief executives and an executive chairman resign from its board.

A Shell spokeswoman told Reuters the sueprmajor had taken note of an interview Greer gave to the Financial Times, in which he suggested Regal was no longer keen on the sale.

“We see from the new management’s comments that they may have changed their thinking on this transaction. Regal have indicated that they would like to review options. Therefore we have decided not to proceed with the MOU with Regal,” Shell said in a statement.

Greer told the Financial Times in an interview that the Shell deal had to be compared against other ways of funding the development of the Ukrainian fields.

Analysts have questioned whether Regal has enough cash to work at the fields itself. Greer told the newspaper one solution could be for Regal to issue new shares.

No one was available for comment at Regal, Reuters said.

Regal’s Ukrainian assets have been the centre of legal disputes for over two years.

The licences were awarded in 2004. In June 2005, the company was informed by a previously unknown Hong Kong-based company called Peak Resources that Peak had an option to buy the assets.

The option was agreed by former executive chairman Frank Timis without the board’s knowledge.

Timis, who remains Regal’s largest shareholder, was forced out of Regal’s management in 2005 after a Greek oilfield Regal said contained up to 1 billion barrels turned out to be dry.

In May 2006 Regal said the option had been terminated.

However, by this stage the company was in litigation with a former partner over ownership of the fields.

In 2005 a Kiev court ruled Regal’s licence was not valid.

Regal lost two appeals against this ruling before entering into an agreement with British Virgin Islands-registered company Alberry to help have the licences upheld.

In return for this service, Alberry was invited to buy 15% of the company which held Regal’s Ukrainian assets for £100,000 ($206,000). Regal agreed to buy the stake back for $51 million if Alberry’s efforts proved successful.

In December 2006, Regal announced all actions had been dismissed by the Ukrainian supreme court.

In June this year, Regal said it paid Alberry 13,910,623 Regal shares – worth £30 million at the time – to buy back the stake.
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26 November 2007 06:20 GMT  | last updated: 26 November 2007 06:20 GMT

Sakhalin pipeline hit by halt

VLADIMIR AFANASIEV, Moscow

Russia’s watchdog for technical compliance has suspended building work on a section of oil and gas pipelines being built on Sakhalin Island, in Russia’s far east.

The pipelines will carry oil and gas for the Sakhalin 2 project, which has been led by Russian gas monopoly Gazprom since April.

The company at that time finalised its deal to buy a 50% stake in the project from Shell and Japan’s Mitsui and Mitsubishi.

Rostekhnadzorofficial Dmitry Yakovlev said the regulatory agency told Sakhalin’s chief pipeline contractor Starstroi to stop laying pipes on the 800-metre long section because builders had changed the design of the drainage system.

At this section, near the village of Yasnoye in the Tymovsky region, the pipeline crosses a tectonic fault and will be prone to higher stress in case of earthquakes.

The watchdog has accused Starstroi of using drainage pipes of a non-approved design and also of modifying the original pipeline route.

A spokesman for Sakhalin 2 operator Sakhalin Energy said these changes were being reviewed by independent Russian experts.

Their findings will then be forwarded for approval to Rostekhnadzor.

He said that Rostekhnadzor had given the contractor time to seek the approval of these modifications, as the agency suspended construction until 10 August.

The spokesman has said that the suspension is unlikely to affect the construction schedule, which calls for the full commissioning of 1600 kilometres of oil and gas pipelines by the end of this year.

However, some analysts said Rostekhnadzor may also halt construction at other parts of the pipelines as local environmentalists and regional officials have called for fresh inspections.

At the end of June, Sakhalin Energy was shocked by the resignation of project director David Greer, who was responsible for the second phase of the development.

The development includes building onshore and offshore pipelines, a liquefied natural gas plant, oil and LNG export terminals and the instalation of two new offshore platforms.

Earlier in June, Greer sent an email to his colleagues that revealed the pressure Sakhalin Energy was facing to meet the schedule of delivering first LNG shipments by the second half of next year.
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02 August 2007 23:01 GMT  | last updated: 02 August 2007 23:01 GMT

Sakhalin manager quits after memo leak

By Upstream staff

An executive from Anglo-Dutch supermajor Shell has resigned two weeks after a motivational email he wrote to staff on the Sakhalin 2 project in Russia was leaked to newspapers, a company spokesman said today.

“This is true,” a Shell spokesman in Moscow told Reuters, without giving details.

David Greer, deputy chief executive of Sakhalin Energy, the consortium running the $22 billion project, sent an email in which he said he despised cowards and urged staff “lead me, follow me or get out of my way”.

Greer’s memo was criticised for its aggressive tone and for borrowing heavily from George Patton, a US general in World War Two.

The Shell spokesman declined to say whether the memo, first revealed by the Financial Times on 5 June, was the cause of Greer’s departure. A Sakhalin Energy spokesman was unavailable for comment.

During Greer’s tenure at the Sakhalin 2 oil and gas project on Russia’s Pacific island of Sakhalin, Shell sold control of the venture to Russian gas monopoly Gazprom at what most analysts said was a knock-down price.

The other minority shareholders in the project are Japan’s Mitsui and Mitsubishi .
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21 June 2007 16:23 GMT  | last updated: 21 June 2007 17:13 GMT

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