World
 
|
Russia angry at Sakhalin-2 cost overruns
AFP
MOSCOW
Petroleumworld.com 09 13 06
Russia's Natural Resources Minister Yury Trutnev on Tuesday criticized cost overruns at the vast Sakhalin-2 oil and gas project in the Russian Far East led by the British group Shell.
Under the production-sharing agreement that governs the project, the state receives a share of revenues once the initial investment has been paid off.
However, Shell announced in July 2005 that the investment required to develop the project had doubled from 10 billion to 20 billion dollars, meaning that the Russian government will have to wait much longer for its share of revenues.
"If these intentions are carried out, the Russian Federation will lose 10 billion dollars," Trutnev said in a statement released by his ministry on Tuesday.
Trutnev said that he did not want to call into question the agreement, which ensures stable tax conditions for the investors, but he stressed that respect for the conditions of the agreement were "obligatory for both sides."
"The Russian Federation is required to defend its interests," Trutnev said.
Last week Russia's state environmental agency launched a legal challenge that could block work at Sakhalin-2, a move analysts linked to a breakdown in talks between operator Sakhalin Energy and state gas monopoly Gazprom, which is seeking a 25-percent stake in the project.
The two companies agreed in 2005 to a swap in which Gazprom would receive 25 percent of Sakhalin-2 in exchange for 50 percent of Gazprom's Zapolyarnoye natural gas field in Siberia.
Just weeks after reaching an agreement, however, Sakhalin Energy revised its cost estimates to 20 billion dollars, leading Gazprom to call the swap unfair and demand better terms.
The project is currently 55-percent owned by Shell, with the remaining stake split by Japanese companies Mitsui (25 percent) and Mitsubishi (20 percent).
AFP 12 2232 GMT 09 06
Copyright ©2006 AFP. All Rights Reserved.
Your
feedback is important to us!
We invite all our readers to share with us
their views and comments about this article.
Write to editor@petroleumworld.com
Any
question or suggestions, please write to:
editor@petroleumworld.com
Best
Viewed with IE
5.01+
Windows
NT 4.0, '95, '98 and ME +/ 800x600 pixels