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Sakhalin-Shell JV submits new budget to Russian government

FROM OUR SEPT 2005 SHELL NEWS ARCHIVE

MarketWatch: Sakhalin-Shell JV submits new budget to Russian government

“In July, Anglo-Dutch oil giant Royal Dutch Shell PLC announced that the Sakhalin joint venture, in which it owns 55%, would see its costs double to $20 billion and would delay the delivery of liquefied gas by half a year.”

Thursday 15 Sept 2005

LONDON (MarketWatch) — A proposed fresh budget for the Sakhalin-Shell joint venture will be submitted to the Russian government later Thursday, a spokesman for the Russian oil and natural gas project said.

In July, Anglo-Dutch oil giant Royal Dutch Shell PLC (RDSB.LN) announced that the Sakhalin joint venture, in which it owns 55%, would see its costs double to $20 billion and would delay the delivery of liquefied gas by half a year.

Shell, along with other shareholders in the venture – Mitsui & Co. (8031.TO) with a 25% stake and Mitsubishi Corp. (8058.TO) with a 20% stake – approved the initial version of the budget in 2003.

Sakhalin Energy’s Chief Executive Ian Craig previously said the revised budget would be submitted for shareholder approval by early September before being examined by the Russian government.

According to a report in Nihon Keizai Shimbun, Mitsui and Mitsubishi have approved the new costs and schedule estimates. The spokesman for Sakhalin Energy declined to comment. Mitsui and Mitsubishi couldn’t be reached.

The revised budget must now be approved by the Russian government as part of the production sharing agreement, or PSA, signed with Sakhalin Energy.

The PSA generally implies that the operating company recoups its costs before increasing the share of revenue paid to the government, which grants the license to extract hydrocarbons. As a result, the state generally has a say in any change in spending.

The spokesman said any time frame for the approval was in the hands of the Russian government.

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