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Dow Jones Newswires: Shell Aims To Complete Sakhalin Swap By End ’06

MOSCOW -(Dow Jones)- Royal Dutch Shell PLC (RDSA) aims complete the swap of a stake in its Sakhalin-2 project for assets belonging to Russian natural gas giant OAO Gazprom (GSPBEX.RS) by the end of the year, Shell chief executive Jeroen Van der Veer said in an interview with Russian newspaper Vedomosti published Tuesday.

Shell is negotiating to swap 25.1% of the Sakhalin-2 oil and natural gas project on Russia’s Pacific coast for 50% of Gazprom’s Zapolyarnoye gas field, but the deal has been complicated due to rising costs at Sakhalin-2.

Van der Veer said the exact date when the project is to be approved by the Russian government is not yet known.

“We’re talking about very large amounts of money,” Van der Veer said, “but I hope that by the end of 2008 the exchange can be completed.”

The Sakhalin-2 project is already 75% completed, Van der Veer said. Work on developing Zapolyarnoye has not yet begun, he said.

Shell intends to keep control over the project, he said, rebuffing the suggestion that a Russian company might one day take over. Russia’s Ministry of Natural Resources has called for giving local companies control over Sakhalin-2 and Exxon Mobil Corp. (XOM)-led Sakhalin-1.

The Sakhalin-2 project is facing estimated costs of $20 billion, double the original $10 billion projection. The Russian government has a say in any budget revision as part of the production-sharing agreement it signed with the project’s partners.

Shell owns 55% of Sakhalin Energy Investment Co Ltd., the Sakhalin-2 operator; Japanese companies Mitsui & Co. Ltd. (MITSY) and Mitsubishi Corp. (8058.TO) control 25% and 20% respectively.

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