IN A remarkable switch of attitude, Russian Prime Minister Vladimir Putin has surprised the petroleum community by offering Shell phases two and three of the giant Sakhalin project less than three years after being stripped of the leadership of Sakhalin-2.
The offer to Shell comes days after Russia struck major deals with France’s Total.
“These (Sakhalin-3 and 4) require offshore production in difficult deep-sea areas where your experience will be very valuable,” Putin told Shell chief executive Jeroen van der Veer at a meeting in his summer residence outside of Moscow.
Van der Veer accepted the invitation and was reported as saying now is a good time to move ahead with such projects as the financial crisis has brought down construction costs.
“We are ready to work quickly,” he replied.
“It is a good signal that investments start to flow again, a good signal for Russia and, of course, a good signal for Shell.”
In February, gas behemoth Gazprom inaugurated Sakhalin-2, a $22billion liquefied natural gas project in which Shell still has a 27.5% interest.
Sakhalin-3 and Sakhalin-4 have yet to be fully nailed down as projects; moreover, their reserves base is not yet fully known.
Foreign participation in both is limited to 49% at present.
Sakhalin-3 was originally licensed by ExxonMobil and Chevron, but that arrangement was revoked by Moscow.
The reserves estimate for this phase is thought to be more than 28.25trillion cu ft of gas and some 6billion barrels of oil.
The Sakhalin-4 West Schmidt section is reckoned to hold about 9TCF of gas and 2.9billion barrels of oil.
A particular objective of van der Veer’s visit to Moscow, the final one of his career as Shell’s CEO, was to introduce successor Peter Voser.
Over the last couple of years, the road has been rocky, but in the past decade, Putin has, in fact, forged significant links with the heads of many foreign energy giants. However, that both he and van der Veer speak German did not make any difference with Sakhalin-2 when Shell got into difficulties with the project, running up massive increases in project costs.
Putin was reported as saying that Shell had met all its contractual obligations in Russia and was a welcome partner, despite the public controversy with Gazprom over Sakhalin-2.
“We have a dialogue that has not been easy, but we have reached an agreement to meet each other halfway and come to an agreement that has allowed us to build a firm foundation for future co-operation,” Putin said.
Van der Veer added: “Co-operation with Gazprom has been very smooth.”
The offer to Shell was made just days after French major Total emerged as Russia’s favoured energy partner for various gas projects.
Putin invited Total’s participation in future stages of the $25billion Shtokman field, in which the French group is already involved, and indicated that the way was clear for it to invest $1billion in a joint project with another Russian gas firm, Novatek.
Putin’s offer came hot on the heels of a deal with Lukoil, to which it sold a stake in a Dutch refinery, effectively blocking a bid by the largest US refiner, Valero.