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Gazprom and Shell to develop energy projects together

The Telegraph: Gazprom and Shell to develop energy projects together

A new “special relationship” between Royal Dutch Shell and Russian state gas giant Gazprom will see the two companies develop more energy projects together.

Shell has agreed to let Gazprom share some of its projects abroad if it is allowed to help develop the third and fourth stages of the Sakhalin project
Rowena Mason
By Rowena Mason 8:31PM GMT 30 Nov 2010

Four years after Russia forced Shell to cede control of its $22bn (£14bn) Siberian field, Sakhalin-2, to Gazprom, it appears that cordial relations have been re-established.

As part of the deal Shell has agreed to let Gazprom share some of its projects abroad if it is allowed to help develop the third and fourth stages of the Sakhalin project.

Deals could even take the form of asset swaps, as Gazprom seeks to increase its presence on the international stage.

The agreement appears to continue a remarkable turnaround in historically strained relations between Shell and Russia.

The Anglo-Dutch oil giant was forced to sell down its 55pc stake in Sakhalin-2 to Gazprom in 2006 – in a powerful display of Russian resource nationalism.

Shell was hounded by the environmental authorities and threatened with a $50bn lawsuit until it agreed to give up most of its stake, leaving it with 27.5pc. Along with the other foreign partners forced to sell, it also agreed to absorb $3.6bn in cost over-runs.

However, lacking funds to develop its giant Siberian gas fields alone, Russia signalled in July 2009 that Shell might be allowed to increase its involvement at Sakhalin.

It is understood that the new agreement is a further confirmation that Gazprom wants to work with Shell on Sakhalin-3, which contains 1.4 trillion cubic meters of gas.

Co-operation could also extend to other parts of the world. In an interview on Russian state television, Alexander Medvedev, Gazprom’s head of exports, said: “We are happy to invite foreign partners to develop our fields if, in exchange, we get access to our partners’ high-profile projects abroad, We know that Shell possesses good assets, which could interest us. If we find an acceptable decision for both parties, such co-operation could be expanded and include co-operation in Sakhalin.”

The agreement explicitly commits to “further development of bilateral co-operation in exploration and production of hydrocarbons in western Siberia and the far east of Russia”. It also mentions “co-operation in the downstream oil products business in Russia and Europe, as well as Gazprom participation in Shell upstream projects outside of Russia”.

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