Shell Makes New Offer to Gazprom on Sakhalin-2 Energy Project

Monday, 11 Dec 2006 | 5:48 AM ET

Royal Dutch Shell has made a new offer to Gazprom on terms for the state-controlled Russian natural gas giant to join a Shell-controlled energy project off the Pacific island of Sakhalin, a company official said Monday.

Shell Chief Executive Jeroen van der Veer made proposals to Gazprom CEO Alexei Miller about the massive liquefied natural gas project at a meeting Friday, Shell spokesman Maxim Shoob said.

The talks were "positive, constructive and the content remains confidential," he told The Associated Press.

Gazprom spokesman Sergei Kupriyanov was quoted by the Interfax news agency as confirming the meeting, but he also gave no details.

"We are thinking about them, given that there continues to be a number of objective problems at the project, including ecological problems," Kupriyanov was quoted as saying.

Russian regulators have steadily turned up the pressure on the Shell-run development; last week water protection authorities suspended the licenses of a subcontractor.

Observers contend that the pressure is aimed at securing more favorable terms for Gazprom to join the project. Shell enraged the Kremlin last year when it announced that the cost of the project would double to $22 billion, delaying the point at which the Russian government would see revenues from it.

Much of the liquefied gas from Sakhalin-2 is destined for Japan, which is seeking to reduce its dependence on the Middle East for energy. Japanese companies Mitsui & Co. and Mitsubishi Corp., hold 25 percent and 20 percent stakes, respectively, in the project.


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