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Shell Offers to Sell Stake in Oil and Gas Platform to Russia...s Gazprom

By Andrew E. Kramer
THE NEW YORK TIMES


MOSCOW

Royal Dutch Shell offered on Monday to sell a stake in its $20 billion Sakhalin Island project to Gazprom, in a capitulation to the Kremlin’s campaign to tighten control over the oil industry.

Shell’s chief executive, Jeroen van der Veer, made the offer after months of pressure by Russia’s environmental regulators, who threatened to freeze work on Sakhalin 2 by revoking critical operating permits.

Gazprom said in a statement on Monday that it would study Shell’s new offer. Analysts said a deal could come as early as the end of the month.

Sakhalin 2, owned 55 percent by Shell, 25 percent by Mitsubishi and 20 percent by Mitsui, has several large components: two offshore platforms, pipelines, and the world’s largest liquefied natural gas plant.

Asian nations on the hunt for energy supplies are seeking liquefied gas from the project. Gas from the Sakhalin 2 operation has already been sold through future supply contracts to Japan, South Korea, and China.

Gazprom already has a monopoly on Russian gas supplies to Europe and wants the same in Asia and it refuses to be undercut by any independent operator of Sakhalin 2.

A Shell spokesman, Maxim Shoob, confirmed that van der Veer met on Friday with Gazprom’s chief executive, Alexei B. Miller. He said the talks were “quite positive and very constructive” but offered no details.

Gazprom characterized the meeting as van der Veer’s making a “series of offers concerning Sakhalin 2.”

Gazprom and Shell have been in talks since July 2005 over the sale of a stake worth 25 percent plus one share of Sakhalin 2. But talks stalled after Shell doubled its cost estimates for Sakhalin 2 to $20 billion, citing higher prices for steel and an appreciation of the ruble.