RUSSIA / FILE: Russia's Gazprom strikes 7.45 billion US dollar Sakhalin-2 deal, retaining Kremlin's grip on energy

Russia's gas monopoly Gazprom clinched a 7.45 billion US dollar deal on Thursday (December 21) to buy half of the Sakhalin-2 project from Shell and its partners, sealing the Kremlin's grip on the huge Russian energy sector. Gazprom will pay cash to Royal Dutch Shell and its Japanese partners Mitsui and Mitsubishi, becoming the leader of the $22 billion project, the firms said in a joint statement after a meeting with President Vladimir Putin. Shell will continue to contribute to management and act as technical adviser on Sakhalin-2, which will honour its existing contracts to sell liquefied natural gas to Japan, South Korea and the United States according to the agreed schedule, with the first shipment due in the summer of 2008. Russian President Vladimir Putin told a meeting of investors at the Kremlin, "As far as Sakhalin-2 project is concerned I know that Shell has invited Gazprom for cooperation several years ago already." He added, "Gazprom has taken a decision today to cooperate in the Sakhalin project." The deal means Shell and Japanese partners will each dilute their stakes by half, leaving them with 27.5 percent, 12.5 percent and 10 percent respectively. But the deal, which follows months of pressure from Russian officials who threatened to delay the project, raises questions about Shell's reserves, since the British-Dutch oil major has one of the worst reserve replacement records among its peers.

ITN Source | November 22, 2006

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