Sakhalin-2 costs to rise

Costs on the politically sensitive Royal Dutch Shell-led Sakhalin-2 gas project in Russia could rise to USD 28 billion, the Observer reported citing a leaked Russian government report. The report by the mineral services division of the Russian Ministry of Natural Resources states that operational costs will rise from a predicted USD 15 billion in 2003 to USD 28 billion. The Observer also reported, citing unnamed Russian sources, that a deal could be struck soon to give Russian state energy firm Gazprom a stake of about 25% in the Sakhalin project’s LNG plant which intended to supply gas to eastern Asia and America. This would mean that Shell’s majority share evaporates. On 4 October, the Kremlin gave an ultimatum to Shell and ExxonMobil over their multibillion-dollar cost overruns on the USD 20 billion Sakhalin-2 oil and gasfield project. Russia is demanding that Shell and Exxon either stick to original cost agreements, return to the Kremlin and renegotiate the deal’s terms, or sell up and go.
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