By Torrey Clark
Dec. 20 (Bloomberg) — OAO Gazprom, Russia’s gas-export monopoly, will pay cash for a stake in Royal Dutch Shell Plc’s $22 billion Sakhalin-2 project, allowing the state-run company to enter the liquefied natural gas business while depriving Shell of reserves.
Gazprom will pay for the stake with cash rather than assets, an Energy Ministry spokesman said in Moscow today, citing Deputy Minister Andrei Dementiev and declining to elaborate. Gazprom Chairman Dmitry Medvedev, who is also first deputy prime minister, said last week that Gazprom may buy half of Sakhalin-2.
“Gazprom paying cash to Shell is good for everybody but Shell,” said James Beadle, head of research at Moscow based Pilgrim Asset Management. “Shell really needed to get new assets in return for those it surrenders.”
Sakhalin-2, the country’s last major foreign-owned energy project, has been hounded by regulators throughout Shell’s talks with Gazprom. A Sakhalin-2 stake will allow Gazprom, the world’s biggest gas company, to start LNG production with existing contracts to supply the supercooled fuel to Asian customers.
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Shell Vice President Alf D’Souza declined to comment on the form of payment or the size of the stake. Executives of Shell have said they expect to reach an agreement with Gazprom by the end of this week.
Shell owns 55 percent of Sakhalin-2 and Mitsui & Co. and Mitsubishi Corp. of Japan own the rest. If Shell’s stake declines to 25 percent it could keep the company from achieving its reserve-replacement goal, Fitch Ratings Ltd. said yesterday.
The Anglo-Dutch company lost its top tier rating in 2004 after admitting it had overstated its reserves for years. Shell’s rating also depends on the price Gazprom pays for the stake and whether Shell keeps operational control of the project, including Russia’s first LNG plant, Fitch said.
An agreement with Gazprom could help end months of scrutiny by Russian authorities over environmental violations by Sakhlin- 2’s operator and contractors, said analysts including Valery Nesterov of Troika Dialogue in Moscow.
Mitsui and Mitsubishi have said they may each sell a 10 percent stake to Gazprom, reducing their holdings to 15 percent and 10 percent, respectively.
Shell and Gazprom last year reached a preliminary agreement for Gazprom to acquire 25 percent of Sakhalin-2 for half of Gazprom’s Zapolyarnoye field in the Arctic. Gazprom suspended those talks after Shell announced it was doubling its project costs for the current phase of the project to $22 billion.
To contact the reporter on this story: Torrey Clark in Moscow at [email protected] .
Last Updated: December 20, 2006 05:13 EST
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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.
