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December 22nd, 2006:

Daily Telegraph: F&C hoists red flag on Russian firms listing in UK

By Russell Hotten
Last Updated: 12:07am GMT 23/12/2006

One of the City’s leading shareholder groups has warned about the “inhospitable” and “difficult” climate facing investors and companies wanting to do business in Russia. F&C Asset Management also questioned the wisdom of allowing so many Russian companies to list in London when their standards of corporate governance were below those in the UK.  

The comments, by Karina Litvack, F&C’s head of governance and sustainable investment, come after Royal Dutch Shell’s bruising encounter with the Kremlin over the company’s huge Sakhalin-2 oilfield. Ms Litvack said: “We take into account the extent to which a government creates an inhospitable climate for investors and is prepared to enforce the rule of law. What’s happened makes it a very dodgy place [for investors].” read more

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Financial Times: BP under pressure on Kovykta

By Arkady Ostrovsky in Moscow
Published: December 22 2006 21:00 | Last updated: December 22 2006 21:00

TNK-BP, the Anglo-Russian oil joint venture, is bracing itself for a full investigation within weeks into its licence agreement for a giant Siberian gasfield as the Kremlin tightens its grip on the country’s energy resources.

Russia has used environmental audits and regulatory threats to restore state dominance over oil and gas supplies. This week saw Gazprom take a controlling stake in Royal Dutch Shell’s Sakhalin-2 project after months of pressure. read more

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Daily Mail: Blackmail fear after Russia doubles the price of its gas

President Putin

President Putin: Supply threats

By MAIL FOREIGN SERVICE
Last updated at 22:00pm on 22nd December 2006
 
Fears that Russia is using energy supplies as a political weapon increased last night after Moscow forced Georgia to accept a doubling of gas prices.

The deal came within hours of a threat by Gazprom, Russia’s statecontrolled energy giant, to cut off supplies to the former Soviet republic from January 1.

Georgia had called the price increase ‘unacceptable’ and ‘politically motivated’. read more

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MosNews: Investor Confidence Shaken by Actions of Russia’s Environmental Watchdog

Rosprirodnadzor Flag

(Rosprirodnadzor’s flag)

Created: 22.12.2006 15:57 MSK (GMT +3), Updated: 17:14 MSK

Peter Hambro, executive chairman of Peter Hambro Mining, which develops gold deposits in Russia, said that a recent spat with Russia’s environmental watchdog Rosprirodnadzor had greatly damaged investor confidence in the country and set the company back.

MosNews has reported that the Russian environmental watchdog raised doubts over gold miner’s licenses about three weeks ago. But several days ago, just as he was being attacked by his direct superior, deputy head of Rosprirodnadzor Oleg Mitvol said that all of Peter Hambro’s license issues were resolved and that the company could continue its operations. read more

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The Yomiuri Shimbun (Japan): Sakhalin-2 deal sells Mitsubishi, Mitsui short: ‘Mitsui, Mitsubishi and Royal Dutch Shell were all betrayed…’

Hiroshi Ikematsuand Tamaki Aikyo Yomiuri Shimbun Staff Writers
(Saturday Dec. 23, 2006)

Mitsui & Co. and Mitsubishi Corp. have bowed to pressure from the Russian government by agreeing to hand over control of the Sakhalin-2 project to Russia’s state-owned gas monopoly Gazprom.

Mitsui and Mitsubishi, along with the Royal Dutch Shell group, sought an early conclusion to the negotiations by holding a summit meeting of company heads in Moscow on Thursday, less than a week after the last meeting. read more

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Bloomberg: Sullenger of Gaia Says Sakhalin Pact `Great News for Gazprom’

Dec. 22 (Bloomberg) — Coast Sullenger, a fund manager at Gaia Resources, talks with Bloomberg’s Jeremy Naylor and Guy Collins from Geneva about Royal Dutch Shell Plc’s decision to sell 50 percent plus one share in its Sakhalin-2 oil and gas project to OAO Gazprom for $7.45 billion. They also talk about the risks of investing in Russia and emerging markets. Shell, Mitsui Co. and Mitsubishi Corp. will each sell half of their stakes in the Sakhalin-2 project to Gazprom. (Source: Bloomberg) read more

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The Capital Spectator: ANOTHER KREMLIN VICTORY IN ENERGY

December 22, 2006

If you’re looking for one more reason to worry about the future of global oil production, take a gander at the news on Royal Dutch Shell’s coerced sale of a majority stake in its Sakhalin-2 oil and gas project in Russia to the state-controlled Gazprom.

On the surface, it all looks quite innocent. Shell sells 50 percent plus one share of the project to Gazprom. The deal comes after a 12-month effort by the Kremlin of running interference on the project, reportedly because of environmental concerns. Shell and its partners read the writing on the wall and threw in the towel. The result: another victory for the Russian government’s not-so-subtle strategy of nationalizing the lion’s share of its energy business. read more

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AFX News Limited: Royal Dutch Shell ratings unaffected by Sakhalin deal – S&P

EXTRACT: S&P said it estimates that the transaction reduces Shell’s year-end 2005 proved reserves by some 9 pct or 1 bln barrels of oil equivalent, and reduced proved reserve life of 9.2 years by about 0.8 years

THE ARTICLE

12.22.06, 8:31 AM ET

PARIS (AFX) – Standard & Poor’s Ratings Services said its outlook on Royal Dutch Shell PLC Shell, (‘AA/Stable/A-1+’) is unchanged, following a signed agreement between the company, two Japanese co-shareholders and OAO Gazprom to give Gazprom majority control of Sakhalin Energy Investment Company Ltd (SEIC). read more

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London Evening Standard: Market report: Friday close

Mickey Clark,
22 December 2006

Oil giant BP shrugged off early selling pressure to post a rise of 4½p at 571½p despite City concerns that it may be next in the Kremlin’s firing line as it moves to reclaim Russia’s extensive oil and gas assets. 

The fears follow news that the Russians are paying rival oil explorer Royal Dutch Shell and its Japanese partners $7.5bn (£4.3bn) to buy out the Sakhalin-2 project in Siberia and hand control to Gazprom.

The deal was personally signed by President Putin as if to underline the country’s determination. The message will have been taken on board by BP management, which has ploughedbns of pounds into its TNK-BP joint venture. read more

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Daily Mail: Shell ousted as Putin tightens grip

Sam Fleming,
22 December 2006

Vladimir Putin strengthened his iron grip on Russia’s energy industry by wresting control of the world’s biggest oil and gas project from Royal Dutch Shell.

State-run gas giant Gazprom bought a controlling stake in the vast Sakhalin-2 scheme for £3.8bn after Shell became hopelessly bogged down in environmental disputes and cost over-runs.

Shell’s stake will drop from 55% to 27.5%, while Gazprom will secure 50% of the project plus one share. Shell’s Japanese partner Mitsubishi’s holding will fall to 12.5%, while Mitsui’s drops to 10%. read more

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AFX News Limited: London shares open lower as Shell’s Russian woes add to weak Wall St

EXTRACT: In a note to clients, the broker said the deal is not financially favourable to Shell — Gazprom is not paying the current net present value for its stake in Sakhalin-2.

THE ARTICLE

12.22.06, 3:36 AM ET

LONDON (AFX) – Leading share edged lower at open, mirroring a a weak close on Wall Street, with oil heavyweights under the cosh on news Royal Dutch Shell has cut its stake in Russia’s Sakhalin-2 project, dealers said.

At 8.15 am, the FTSE 100 was down 7.7 points at 6,176.0, with the broader indices mixed. read more

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Globe & Mail (Canada): Shell gets go-ahead on oil sands expansion

Panel reviewing $12.8-billion project hints future projects will face tougher hurdles

DAVID EBNER

CALGARY — Shell Canada Ltd.’s $12.8-billion oil sands expansion in northeastern Alberta was approved yesterday, but the panel that reviewed the project said governments don’t have “sustainable long-term solutions” to properly manage the region’s rapid growth.

The decision suggested future projects will face more difficult hurdles for approval as environmental and community challenges mount in and around Fort McMurray, 435 kilometres northeast of Edmonton, where about $100-billion of work is predicted over the next decade. read more

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The Wall Street Journal: Shell Cedes Control Of Pivotal Russian Oil Project

The Wall Street Journal Sakhalin Map

Deal With Gazprom Dims
Output, Reserves Prospects
But Eases Kremlin Pressure
By CHIP CUMMINS in London and GUY CHAZAN in Moscow
December 22, 2006; Page A3

Royal Dutch Shell PLC’s decision to relinquish control of a massive oil and natural-gas project on the far eastern Russian island of Sakhalin significantly crimps the Anglo-Dutch oil giant’s prospects for future production and replacing its reserves.

But it solidifies Kremlin support for the project, removing short-term questions over its timing and improving Shell’s longer-term chances of remaining a big player in Russia. read more

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THE WALL STREET JOURNAL ONLINE: Oil News Roundup: December 21, 2006 4:47 p.m.

Crude-oil futures fell from a three-month high to less than $63 a barrel on the New York Mercantile Exchange as forecasts for warmer-than-average weather in the U.S. Northeast threatened heating-oil demand and as traffic in Texas shipping lanes started to return to normal after a week of heavy fog.

Here is Thursday’s roundup of oil and energy news:

* * *
SHELL DEALS WITH RUSSIA: Royal Dutch Shell and its partners agreed to hand over 50%, plus one share of the Sakhalin-2 oil project to OAO Gazprom, the state-controlled Russian giant, for $7.45 billion in cash. By most estimates, the deal provides Gazprom with extremely attractive terms, essentially allowing it to buy into the project late in its development stages with little project risk and at a price that would be similar to one it could have paid as a ground-floor investor. But it does greatly improve Shell’s longer-term chances of remaining a big player in Russia. read more

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.

The Guardian: Sakhalin issues ‘settled’ – as Russia takes 50% stake

Environmental problems vanish with handover Putin gives backing minutes after deal

Simon Bowers
Friday December 22, 2006

Vladimir Putin has declared that the environmental questions surrounding the Sakhalin-2 oil and gas project have been settled – just minutes after state-controlled Gazprom took control of the $22bn (£11bn) operation from Shell in a deal mired in controversy.

“As far as I’ve been informed, the fundamental issues can be considered resolved,” the president was quoted as saying by the Interfax news agency. “Russia is satisfied by a serious and businesslike approach of the partners.” His comments came after he met officials from Gazprom and Sakhalin-2’s shareholders, Shell, Mitsui and Mitsubishi. He played down the Kremlin’s role in negotiations, insisting Gazprom’s “decision to participate … was a corporate decision”. read more

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.

The Guardian: Trust hit by environment watchdog, says mining boss

Marianne Barriaux
Friday December 22, 2006

Peter Hambro Mining yesterday got a clean bill of health from Russia’s natural resources ministry after doubts were raised over the gold miner’s licences three weeks ago. But Peter Hambro, executive chairman at the Aim-listed group, said the spat with Russia’s environmental agency had greatly damaged investor confidence in the country and set the company back.

“Slowly but surely since we have listed [in April 2002], we have built up trust. And at a stroke, by one press conference, all that has collapsed. No amount of press releases saying ‘you’re good’ or ‘we’re not stealing’ will affect it. It’s a question of going back and rebuilding investor trust again. It will take a very long time.” read more

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.

Daily Telegraph: Business comment: Putin’s power play will make Russia economic pariah

By Tom Stevenson
Last Updated: 12:18am GMT 22/12/2006

By trampling on the property rights of Shell and its Japanese partners in a huge oil and gas project off Russia’s eastern coast, President Putin is playing a dangerous game. He has won this battle but risks losing the economic war.

The deal to sell Gazprom a majority stake in the Sakhalin 2 project rewards a grubby campaign by the Kremlin to wrest back control of its strategic energy reserves. No one believed the environmental grounds on which the Russian government was hounding its foreign partners but, equally, no one dared stand up to Putin’s bully boys. read more

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.

The Times: Gazprom secures Sakhalin control in £3.8bn deal

December 22, 2006
Carl Mortished, International Business Editor
 
Gazprom has gained control of Russia’s largest energy project with an agreement to buy from Royal Dutch Shell and its Japanese partners, Mitsui and Mitsubishi, half of the Sakhalin-2 liquefied natural gas project for £3.8 billion.

After 17 months of negotiation in an increasingly hostile political environment, Shell has consented to Gazprom taking control “as a leading shareholder” in Sakhalin Energy, a transaction that will force Shell to make a downward adjustment to its proven gas reserves. 
 
The agreement, which gives Gazprom 50 per cent plus one share in Sakhalin Energy, has the effect of scrapping an asset-swap deal negotiated last year that offered Shell a new opportunity in a half share of Zapolyarnoye, another Siberian gasfield. It also ends a fraught political battle fought by the Kremlin to regain control over a valuable oil and gas asset given to Shell in the early 1990s. read more

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.

Daily Telegraph: After Shell, Russia now turns on BP

Bear Shell

Will BP accede to the demands of the Russian bear

By Edmund Conway
Last Updated: 1:14am GMT 22/12/2006

The Kremlin has moved decisively to take back ownership of Russia’s oil-and-gas assets, taking effective control of Royal Dutch Shell’s Sakhalin-2 project and issuing a chilling warning to BP about its future in the country.  

President Putin personally oversaw the signing of a deal in which Shell will hand over control of Sakhalin to Gazprom, while a key Kremlin official warned BP that it has no choice but to accede to Russian demands with its latest project, or face crippling sanctions. Shell and its Japanese partners accepted a $7.45bn (£3.8bn) cash payment for a stake of 50pc plus one share in the project in the far north-east which was until yesterday the biggest single foreign investment in Russia. read more

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BBC Monitoring Service: Shell CEO urges minister to issue Sakhalin licence, vows to observe Russian law

Published: Dec 21, 2006
Text of report by Russian news agency ITAR-TASS

Moscow, 21 December: Having assured [Minister of Natural Resources] Yuriy Trutnev that all legal requirements will be observed, Shell CEO Jeroen van der Veer asked the former “to release Sakhalin-2’s approval papers and licences in a timely fashion”.

“I would like to assure you that we will fully observe all legal requirements and in the event of any complications, we will do whatever it takes to resolve these problems jointly,” he told the minister of natural resources at a meeting in the evening. read more

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The Independent (UK): Gazprom takes control of Sakhalin 2

Published: Dec 22, 2006

Russia’s state controlled gas company, Gazprom, secured a majority stake in the Sakhalin 2 project for $7.4bn (pounds 3.8bn) yesterday. Shell will continue to hold a 27.5 per cent stake, however, but is believed to have secured 50 per cent of the seats on the board, as well as an assurance that no major decisions will be taken without the backing of more than Gazprom’s 50 per cent stake.

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.

The Independent (UK): Attack closes oil depot in Nigeria

Published: Dec 22, 2006

LAGOS A dozen gunmen attacked living quarters near a Total pumping station in Nigeria yesterday, killing three police guards and closing the facility.

Meanwhile, Royal Dutch Shell evacuated the families of its foreign workers as the security situation worsened. Africa’s biggest oil producer, and the fifth-largest US supplier, has seen its typical production of 2.5 million barrels a day cut by a quarter this year because of attacks and the taking of hostages by militants. Some seek ransoms while others want political influence. read more

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AFX News: Mitsubishi Corp. – Sakhalin II Protocol Signing

AFX CNF
Published: Dec 22, 2006

RNS Number:5344O Mitsubishi Corporation 22 December 2006 Translation of report filed with the Tokyo Stock Exchange on December 22, 2006 Gazprom, Shell, Mitsui, Mitsubishi Sign Sakhalin II Protocol On December 21, 2006 OAO Gazprom (Gazprom), Royal Dutch Shell plc (Shell), Mitsui &Co., Ltd (Mitsui) and Mitsubishi Corporation (Mitsubishi) have signed a protocol to bring Gazprom into the Sakhalin Energy Investment Company Ltd. (SEIC) as a leading shareholder. Under the terms of the protocol, Gazprom will acquire a 50% stake plus one share in SEIC for a total cash purchase price of $7.45 billion. The current SEIC partners will each dilute their stakes by 50% to accommodate this transaction, with a proportionate share of the purchase price. Shell will retain a 27.5% stake, with Mitsui and Mitsubishi holding 12.5% and 10% stakes, respectively. SEIC will remain the operator of the Sakhalin II project. Gazprom will play a leading role as majority shareholder while Shell will continue to significantly contribute to SEIC management and remain as Technical Advisor. The key focus for SEIC is to complete the project on schedule allowing LNG to be delivered to existing customers in Japan, Korea and the North American West Coast. All existing LNG sales contracts will remain in force and will be honored. Gazprom and existing SEIC shareholders will enter into an Area of Mutual Interest arrangement, which will cover both future Sakhalin oil and gas exploration and production opportunities, and building of Sakhalin II into a regional oil and LNG hub. Furthermore, the shareholders and the Ministry of Industry and Energy of Russia as the authorized state body for the supervision of production sharing agreements have agreed to jointly resolve all outstanding issues. The Sakhalin II Amended Development Budget for the phase 2 of the project is expected to be approved by the Supervisory Board (a special committee which consists of the representatives of Russian Federation, Sakhalin Oblast, SEIC and its shareholders). The Production Sharing Agreement (PSA) of the Sakhalin II project will continue. The shareholders now look forward to implementing the project in line with the current schedule including obtaining all necessary permits and approvals granted in accordance with applicable Russian legislation and the PSA. This is one of significant milestone in the Sakhalin II project and Mitsui and Mitsubishi most welcome Gazprom to join as a new member of our team. We trust this will farther strengthen the relationship between Russia and Japan and also give us an opportunity to continue to developing merit of additional energy resources in Sakhalin Island. Furthermore, we believe that SEIC will become a reliable LNG supplier in Asia and Pacific market through the mutual cooperation between 4 shareholders in SEIC. Sakhalin II project Sakhalin is a new world-class oil and gas province, with estimated resources of some 45 billion barrels oil equivalent. Sakhalin II is the largest integrated oil and gas project in the world, with total resources of some 4 billion barrels oil equivalent. Sakhalin II today has production capacity of 80,000 barrels oil equivalent per day. The next phase of the development will take the project capacity to 340,000 barrels oil equivalent per day, including 9.6 million tones per year of LNG production. The second phase of the project is over 80% complete, with some $12 billion invested to end Q3 2006. Over 17,000 people are currently employed in the construction of the project, of which around 70% are Russian nationals. The planned LNG production has been sold under contract to customers across the Asia-Pacific region. Shell is a leader in the global LNG industry, and sets the standard for reliability and cost performance. Sakhalin II is an important component in Shell’s global LNG portfolio. The Sakhalin II project is governed under a PSA, whereby the project partners finance the construction costs of the project, take on the development risk, and recover these costs from sales of oil and gas. So far, some $600 million of royalty, bonuses and taxes have been paid to the Russian government by the end of 2006. Sakhalin II includes the following elements: a Offshore production facilities including the Molikpaq platform (PA-A), the new PA-B and Lun-A platforms and some 300 km of offshore pipelines; a An onshore processing facility to take the gas and crude oil from both fields; a Two 800 km of onshore oil and gas pipelines to the south of the island; a An oil export facility capable of year-round operation; a The first LNG plant and associated export facilities built in Russia; a Island infrastructure upgrades, such as roads, bridges, rail, port, airport, and medical facility upgrades. Forward-Looking Statements The statements included in this release contain forward-looking statements about Mitsubishi Corporations future plans, strategies, beliefs and performance that are not historical facts. Such statements are based on the companys assumptions and beliefs in light of competitive, financial and economic data currently available and are subject to a number of risks, uncertainties and assumptions that, without limitation, relate to world economic conditions, exchange rates and commodity prices. Accordingly, Mitsubishi Corporation wishes to caution readers that actual results may differ materially from those projected in this release. # # # This information is provided by RNS The company news service from the London Stock Exchange END read more

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Financial Times: Shell evacuates families in Nigeria

By Dino Mahtani
Published: December 22 2006 02:00 | Last updated: December 22 2006 02:00

Shell, the Anglo-Dutch oil group, yesterday began evacuating families of expatriate staff working in Nigeria’s oil producing delta, following a car bomb explosion set off by militants in one of the company’s residential compounds this week. Agip, the Italian oil major, has also transferred expatriate families after a bomb attack near one of its compounds.

The Shell evacuation began hours after militants stormed an oil facility operated by Total, the French multinational, killing three policemen. Dino Mahtani, Lagos read more

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Financial Times: Gazprom to pay $7.45bn to control Sakhalin-2

By Arkady Ostrovsky in Moscow
Published: December 22 2006 02:00 | Last updated: December 22 2006 02:00

Gazprom, Russia’s state-backed gas group, yesterday agreed to pay $7.45bn for majority control in Sakhalin-2, the $20bn oil and gas project led by Royal Dutch Shell, cementing the Kremlin’s grip on the country’s energy resources and ending months of pressure on foreign investors.

Shell, which owned 55 per cent of the project, and its two Japanese partners – Mitsui and Mitsubishi – agreed to halve their stakes to put Gazprom in charge and unblock the project, almost stalled by Russian authorities. read more

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Financial Times: Rushin’ for the exit

Published: December 22 2006 02:00 | Last updated: December 22 2006 02:00

Mikhail Khodorkovsky, once Russia’s richest man, faces his fourth Christmas behind bars. His fall, alongside the evisceration of his oil company, Yukos, marked a sea change in the Kremlin’s relationship with the oligarchs – the tycoons who secured control of the country’s biggest enterprises during the Yeltsin era.

Under President Vladimir Putin, the cast has changed somewhat, with many of Russia’s new oligarchs enjoying close ties with the Kremlin. Power and wealth remain concentrated in relatively few hands. The aggregate free float of the country’s top 10 stocks – 79 per cent of the market – is about a third. The free float for the 19 Russian companies that have listed $22bn of equity in London since the start of 2005 is about a fifth. read more

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