ENERGY COMPASS: Sakhalin costs overshadow Shell’s new start
“Gazprom has already said the new budget will affect the asset swap that it is negotiating with Shell, and analysts estimate it could cost Shell $1 billion in these discussions alone But it has broader implications for Shell, which… is developing an accident-prone reputation…”: “Costs have spiraled on the Athabasca oil sands project in Canada, on Bonga in Nigeria, and most recently on the Pearl GTL project in Qatar — priced at $5 billion at its launch last year, but now already creeping up to around $6 billion.”: “Questions have also been raised about Shell’s management of investor expectations.”
Posted Monday 1 August 2005
Published by www.energyintel.com 22 July 2005
Royal Dutch Shell bosses should have been popping champagne corks this week. Instead, they’re likely to have been drowning their sorrows. The company moved to a single UK stock listing on Jul. 20, ending nearly a century of corporate history and making good on promises to simplify governance structures in the wake of last year’s reserves accounting scandals.
But the historic move has been overshadowed by a new upstream crisis, this time over spiraling costs at the Sakhalin-2 LNG development in Russia. Shell has said it now expects the project to cost $20 billion, up an eye-watering $10 billion from the original 2003 estimate.
Gazprom has already said the new budget will affect the asset swap that it is negotiating with Shell, and analysts estimate it could cost Shell $1 billion in these discussions alone (EC Jul.l5,p9). But it has broader implications for Shell, which despite its global leadership in LNG is developing an accident-prone reputation when it comes to project execution. Sakhalin is the latest in a series of flagship projects where it has failed to stay within budget. Costs have spiraled on the Athabasca oil sands project in Canada, on Bonga in Nigeria, and most recently on the Pearl GTL project in Qatar — priced at $5 billion at its launch last year, but now already creeping up to around $6 billion.
“This type of high-profile project disappointment can do little to help Shell’s case when competing for new opportunities with host governments,” investment bank Citigroup says. “Following 30% cost overruns on Bonga and a 20% increase in cost estimates for Pearl GTL, resource holding governments must be paying attention.”
Questions have also been raised about Shell’s management of investor expectations. It put a new team into Sakhalin last year, but until last week had offered no fresh guidance to shareholders on how costs were escalating. “It seems just absurd to me,” one pension fund analyst tells Energy Compass. “The process and controls and reporting lines obviously aren’t working.”
Shell has acknowledged that good project management is key to winning new business, but has defended its track record. “We’ve executed eight LNG projects in five years on time and on budget,” upstream chief Malcolm Brinded says. “That is what gets you the reputations, the access, the new business development.”
This website and sisters royaldutchshellplc.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.
Royal Dutch Shell conspired directly with Hitler, financed the Nazi Party, was anti-Semitic and sold out its own Dutch Jewish employees to the Nazis. Shell had a close relationship with the Nazis during and after the reign of Sir Henri Deterding, an ardent Nazi, and the founder and decades long leader of the Royal Dutch Shell Group. His burial ceremony, which had all the trappings of a state funeral, was held at his private estate in Mecklenburg, Germany. The spectacle (photographs below) included a funeral procession led by a horse drawn funeral hearse with senior Nazis officials and senior Royal Dutch Shell directors in attendance, Nazi salutes at the graveside, swastika banners on display and wreaths and personal tributes from Adolf Hitler and Reichsmarschall, Hermann Goring. Deterding was an honored associate and supporter of Hitler and a personal friend of Goring.
Deterding was the guest of Hitler during a four day summit meeting at Berchtesgaden. Sir Henri and Hitler both had ambitions on Russian oil fields. Only an honored personal guest would be rewarded with a private four day meeting at Hitler’s mountain top retreat.
IN JULY 2007, MR BILL CAMPBELL (ABOVE, A RETIRED GROUP AUDITOR OF SHELL INTERNATIONAL SENT AN EMAIL TO EVERY UK MP AND MEMBER OF THE HOUSE OF LORDS: 
MORE DETAILS:
A head-cut image of Alfred Donovan (now deceased) appears courtesy of The Wall Street Journal.
