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Russia, Shell Discuss Arctic Shelf, Sakhalin-3

May 25, 2011 12:40 P.M. ET

MOSCOW (Dow Jones)–Royal Dutch Shell PLC’s (RDSB) Chief Executive Peter Voser met Russia’s top energy official Wednesday to discuss joint projects on Russia’s Arctic shelf, the Black Sea and Sakhalin-3, but said the company won’t seek to swap shares with state oil champion OAO Rosneft (ROSN.RS).

The meeting between Voser and Deputy Prime Minister Igor Sechin, who oversees the oil and gas sector, came two days after Russian Energy Minister Sergei Shmatko said he doesn’t expect state-controlled oil giant OAO Rosneft (ROSN.RS) and BP PLC (BP) to revive their strategic alliance after it was blocked by BP’s existing Russian partners, a group of Soviet-born billionaires known as AAR.

“Shell welcomes the constructive talks in Moscow this week regarding potential exploration co-operation with Rosneft in the Arctic, broader strategic co-operation and technology development for the Arctic and other areas as well as opportunities for Rosneft to join Shell in developments outside Russia,” a Shell spokesman said.

BP and Rosneft, whose chief executive, Eduard Khudainatov, was also present at the talks Wednesday, announced in January plans for a $16 billion share swap and joint development of three blocks in Russia’s Arctic Sea. But AAR, arguing the pact violated the terms of its agreement with BP in their TNK-BP Ltd. joint venture, went to court in the U.K. to block the deal.

After months of talks, discussions broke down earlier this month.

While BP said last week it is still discussing the joint exploration of the Russian Arctic with Rosneft, Shell has expressed renewed interest in that region. However, the idea of a share swap with Rosneft isn’t under consideration, the company said.

“These discussions excluded any proposals to use Shell’s shares,” the spokesman said.

At Wednesday’s meeting, Voser and Sechin also “discussed the deepening of the company’s cooperation with its Russian partners,” in particular the Sakhalin-2 and Sakhalin-3 projects, a statement on the government’s website said. Shell already holds a stake in the OAO Gazprom (GAZP.RS)-led Sakalin-2 project off Russia’s Far East coast.

Voser met with Gazprom CEO Alexei Miller in April to discuss potential joint projects in Russia as well as Gazprom’s participating in Shell’s exploration and production projects elsewhere. Shell signed an agreement on strategic cooperation with Rosneft in 2007.

-By Alexander Kolyandr and Jacob Gronholt-Pedersen, Dow Jones Newswires; [email protected]

(Guy Chazan in London contributed to this story.)

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