Thu Dec 14, 2006 4:53 AM ET
By Dmitry Zhdannikov
MOSCOW, Dec 14 (Reuters) – Royal Dutch Shell
The previous costs revision to $22 billion from $12 billion at Sakhalin in 2005 infuriated the state gas monopoly, which was then prepared to buy 25 percent in the project, and prompted a flurry of investigations by Russian authorities.
As pressure from officials began to threaten the project’s start date for supplying liquefied natural gas (LNG) to customers in Asia and the United States from mid-2008, Shell this month offered Gazprom
On Thursday, The Times newspaper quoted sources close to the Shell-led group as saying overall costs had moved closer to $25 billion.
“We deny this news. Our cost estimates have not changed,” Shell’s spokesman in Moscow, Maxim Shub, told Reuters.
Russia, which has yet to approve the first spending increase, claims that any cost overrun would delay the moment when the country starts getting it share of profits in the production-sharing agreement with the Shell-led group.
But analysts say that Russia’s anger over the higher costs has served as a cover to enable the Kremlin to press for greater control over the country’s energy wealth and limit foreign involvement in strategic industries.
Sources told Reuters this week Shell was ready to sell 30 percent of its 55 percent stake in Sakhalin to Gazprom, while project partners Mitsui <8031.T> and Mitsubishi <8058.T> may reduce their stakes by 10 percent each.
CHANGE OF PSA
But sources said Shell still wanted to remain the project’s operator despite having a smaller stake than Gazprom, partly because the Russian giant has no experience in LNG despite being the world’s largest gas producer.
Russian newswires also reported this week that Gazprom may request to pay for its stake in Sakhalin from the project’s cashflows after the start of commercial production, over 20 months from now.
“No decision has yet been taken as to how and when Gazprom will pay for its stake,” a source close to Shell said on Thursday. Analysts’ estimates for half of Sakhalin-2 have ranged from $4 billion to $10 billion.
Analysts say that Shell would lose a lot if Gazprom managed to structure the deal in such a way that it would pay for its stake with income from LNG production.
“The irony of the situation is that we expect that the purchase price will be set close to the operator’s historical costs and that the historical costs under the PSA agreement were supposed to be recovered anyway,” Alfa-Bank said in a note.
“This means that, if the deal takes place as described, it would de facto change the terms of the PSA for the previous operators,” it said, adding that such as deal would further damage investor sentiment toward Russia.
Deutsche UFG brokerage said it believed Gazprom’s benefits from the project would be limited.
“We view Gazprom’s decision to enter this project as simply a reflection of state nationalism in the energy sector and the unwillingness to have major projects without Russian partners,” it said in written research.
© Reuters 2006. All rights reserved.
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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: 
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A head-cut image of Alfred Donovan (now deceased) appears courtesy of The Wall Street Journal.
