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Russia to Cooperate With Shell on Sakhalin 3 and 4

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By Stephen Bierman and Paul Abelsky

June 27 (Bloomberg) — Russia is prepared to cooperate with Royal Dutch Shell Plc, Europe’s largest oil producer, on oil and gas projects in the Russian Far East known as Sakhalin-3 and Sakhalin-4, Russian Prime Minister Vladimir Putin said.

Putin, speaking at his residence in Novo-Ogaryovo, outside Moscow, met with Shell Chief Executive Officer Jeroen van der Veer, and Peter Voser, who will become the next chief executive.

Now is an “ideal time” to move quickly on Sakhalin-3 and Sakhalin-4 because building costs are low, Van der Veer said today. Shell and Russia’s state-run OAO Gazprom are partners in the Sakhalin-2 project, which loaded Russia’s first commercial shipment of liquefied natural gas for Japan in March. The LNG plant may provide about 7 percent of Japan’s LNG demand.

Gazprom took control of the Sakhalin-2 development from Shell in 2006 after regulators threatened to close the $22 billion project on environmental grounds. Russia’s gas export monopoly, which has traditionally sent gas to Europe via pipelines, is seeking to break into new markets by cooling fuel to a liquid for transport by tanker.

“I think it is a natural progress, having built Sakhalin- 2, we will obviously build on that successful start-up for the next project,” Voser said. The Hague-based Shell was examining plans with Gazprom to expand projects beyond their Sakhalin-2 venture, Voser said in April.

Shell also signed a general cooperation agreement today with OAO Sovcomflot for Russia’s biggest shipper to provide transport for LNG produced on Sakhalin island and the Yamal peninsula. Shell also plans to charter Aframax tankers from Sovcomflot for European trade.

To contact the reporter on this story: Stephen Bierman in Moscow at [email protected]; Paul Abelsky in St. Petersburg at [email protected].

Last Updated: June 27, 2009 08:22 EDT

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