Date
Author
Анна ГОРШКОВА; Алексей ГРИВАЧ
Source
Preserved copy
Translated material
Island of Divided Treasures
Shell made Gazprom an offer that is hard to refuse
The main participant and operator of the Sakhalin-2 project, Royal Dutch Shell, made a knight's move. The Russian environmental authorities' attack on operator Sakhalin Energy and its contracting partners brought swift and unexpected results. As it became known yesterday, last Friday Shell managing director Jeroen van der Veer made a radical proposal to the head of Gazprom, Alexey Miller, to redistribute the shares of participants in the Sakhalin mega-project, in which until now only foreign companies have participated. As Western agencies reported, citing unnamed sources, the head of the Anglo-Dutch corporation informed his Russian colleague of his readiness to cede a controlling stake in Sakhalin-2 to Gazprom. At the same time, it is separately stated that Shell will do this provided that it retains a 25% stake in Sakhalin Energy. Apparently, these proposals should have anticipated the 600-page report of Rosprirodnadzor on flagrant violations committed during the implementation of the project. The "dossier" was planned to be published tomorrow.In addition to Mr. Miller, the Dutchman also discussed the prospects of working in Russia with the Minister of Industry and Energy Viktor Khristenko. The negotiators do not officially confirm the existence of such proposals, but they do not refute this information either.
Shell's Moscow office only confirmed the meeting to Vremya Novostey. “The negotiations between Alexey Miller and Jeroen van der Veer were quite successful, in a progressive manner,” the company’s press service reported. “The cost of resolving this issue is very high, so it is difficult to answer this question now.” According to our interlocutor, representatives of Japanese Mitsui and Mitsubishi (shareholders of Sakhalin-2) did not take part in negotiations with Gazprom. “But we are obliged to inform all shareholders about the state of affairs of the project,” he emphasized. Mitsubishi told Reuters that it knew nothing about the Moscow negotiations. “But we are not going to leave the project,” noted a representative of the Japanese shareholder. The press secretary of the head of Gazprom, Sergei Kupriyanov, was also brief: “On Friday there was a meeting with Jeroen van der Veer, who made a number of proposals regarding the Sakhalin-2 project.” We are thinking about them, given that the project still has a number of objective problems, including environmental ones .”
The business aspect of Shell's offer is simple and clear: Gazprom is being offered a lucrative deal. Moreover, the project turned out to be “burdened down” by the unfavorable results of numerous inspections, so the price of the asset could be “cut down”. But recently, claims against Sakhalin-2 have acquired a new aspect - a political one. Russian officials realized that the PSA regime in the current oil market is unprofitable for the state. The means to develop such projects on our own have appeared, which means it is stupid to refuse future profits.
Obviously, Moscow hoped to force Shell to abandon the PSA regime and transfer the project to the national tax regime. The tempting offer, which, according to Vremya Novostei, was also unexpected for Gazprom, presented the Kremlin with a difficult choice. Maintaining the terms of the PSA in exchange for the sale of a controlling stake to Gazprom would be tantamount to admitting the deliberate seizure of property from large foreign investors. After all, formally the state will not receive its share from the project for many years. In this case, it is hardly appropriate to equate the half-private Gazprom with a spokesman for national interests.
As part of the Sakhalin-2 project, it is planned to develop the Piltun-Astokhskoye and Lunskoye fields on the island's shelf, the recoverable reserves of which amount to 150 million tons of oil and 500 billion cubic meters of gas. Construction of a plant for the production of liquefied natural gas with a capacity of 9.6 million tons per year, of which more than 90% has already been contracted for 20-25 years. The first deliveries were supposed to begin in the summer of 2008. The shareholders of Sakhalin Energy are the British-Dutch Royal Dutch Shell (55%), Japanese Mitsui (25%) and Mitsubishi (20%).
Last summer, Jeroen van der Veer reported that SE did not fit into the previously approved project estimate. According to him, its implementation will require $20 billion (later the amount increased by another $2 billion) instead of the agreed upon 10 billion . The new estimate is still being examined by the Ministry of Industry and Energy, but from the very beginning it was clear that under the terms of the PSA it was “impossible.” The payback period, and therefore the beginning of the Russian state receiving its share of production, shifted beyond the visible perspective
It is characteristic that a few days before the “estimated” news, Jeroen van der Veer signed a memorandum of exchange of assets with Alexey Miller - for a blocking stake in Sakhalin-2, Shell was to receive a 50% stake in the gas production project from the Neocomian deposits of the Zapolyarnoye field . Within a year, companies had to evaluate projects and conclude a deal. However, after a two-fold increase in Sakhalin Energy’s expenses, which Gazprom was not even informed about, the negotiation process never really resumed. And recently Gazprom publicly announced the rupture of the memorandum.
A year of behind-the-scenes consultations with the Ministry of Industry and Energy did not lead to any rapprochement between the parties. In mid-August , Sakhalin-2 became the subject of close attention of the Ministry of Natural Resources and Rosprirodnadzor . In just a couple of weeks, massive inspections of the construction of the pipeline from the fields to the plant were organized and a lot of violations were revealed, to which the authorities had quietly turned a blind eye for the last few years. In September, Yuri Trutnev’s department announced the possibility of canceling the positive environmental impact assessment, which would simply stop the project’s implementation for several years. At first, Shell representatives were brave and even threatened to further increase the costs of the project in connection with the claims of the Russian authorities. However, the fighting spirit did not last long, and the foreigners decided to give the initiative to Gazprom.
Moreover, in October, Vladimir Putin personally suggested that Sakhalin-2 shareholders not aggravate the situation, but seek a compromise at the negotiating table. “Our partners want to double their spending. What does this mean for the Russian side? According to the production sharing agreement, we will not receive income until all expenses are paid off. We are not receiving anything now, although oil has already been produced for several years, and if they increase their expenses, we will not receive anything for another ten years... These are all problems that remain outside the brackets of scandals that those who protect their commercial interests. We don't make any problem out of it. We believe that we need to sit down at the table and come to an agreement. And I’m sure we will find a solution,” the president said.
According to Vremya Novostei, the deal structure may now look like this. Shell is selling 30% minus one share of Sakhalin Energy to Gazprom, and 10% plus one share to Japanese companies. Moreover, Mitsui and Mitsubishi actively pushed the Anglo-Dutch partner to take decisive action to improve relations with the Russian side, since they are interested in the project not only for profit, but also count on gas supplies, without which the country’s energy balance after 2010 could crack. The share price will be determined by an independent appraiser taking into account rising costs and environmental risks of the project. The exchange of assets with Shell (including participation in Zapolyarnoye-Neocom) has been postponed until better times.
True, in order for the deal to take place, Russia still has to figure out how to minimize reputational losses from yet another “successful” campaign to redistribute property, this time with the direct participation of a large foreign corporation.
Now the Sakhalin-2 project is in a difficult situation. Firstly, the construction of the onshore pipeline was frozen until February 5, 2007 due to the decision of the Amur branch of Rosvodresursy to suspend 12 water use licenses. At the same time, Rosvodresursy accused the general contractor of the project, Starstroy, of the collapse of the banks along all drains, the absence of culverts during the passage of rivers, the presence of soil dumps in coastal and water protection zones, and high turbidity of the rivers. If Sakhalin Energy fails to eliminate all violations by the beginning of February, its licenses will be revoked . In addition, the prosecutor's office of the Sakhalin region opened several criminal cases against Sakhalin Energy and its contractors for 100 violations. An investigation is currently underway. In addition, in the coming days, Rosprirodnadzor should announce the results of the November inspection of Sakhalin Energy, as a result of which the list of the Ministry of Natural Resources’ claims against Sakhalin Energy may expand significantly. Previously, the deputy head of Rosprirodnadzor, Oleg Mitvol, promised to publish the results of the inspection at the end of November, but then the deadline was postponed to mid-December. The exact amount of damage caused to nature by the construction of the project will be finally calculated by Rosprirodnadzor employees by the end of summer next year. So far, Mr. Mitvol predicts that it could amount to billions of dollars. And finally, the same Mitvol has repeatedly threatened to file a claim with the Stockholm Arbitration Court against Sakhalin Energy.
The US authorities can collect debts from oil and gas companies as payments for the right to develop subsoil for previous years without any time restrictions. This is the gist of the verdict delivered yesterday unanimously by seven justices of the US Supreme Court. Ten years ago, the Natural Resources Management Service of the US Department of the Interior decided to recover from BP America Production and ARCO a debt of $4.1 million and $780 thousand, respectively, that arose during the development of gas fields in the states of New Mexico and Colorado. At the same time, the authorities demanded to pay the arrears for the previous eight years. The companies responded by arguing that such claims should be limited to six years because of the time limit for bringing claims under federal contracts. The “issue price” for the industry as a whole was estimated by the defendants at hundreds of millions of dollars. Now the US Supreme Court has rejected the industrialists' argument. In justifying the decision, Justice Samuel Alito said these arguments "are not sufficient to overcome the clear meaning" of federal laws requiring the Treasury to pay in full what it is owed. In the American system of executive power, the Ministry of Internal Affairs is not a law enforcement agency, but is responsible for the prudent use of natural resources, including subsoil development. ITAR-TASS