BLOOMBERG: Shell Sakhalin Project Cost Soars, Deliveries Late (Update1): “Royal Dutch/Shell Group's oil and gas project in Russia's Far East may cost $20 billion, 67 percent more than originally planned…”: Thursday 14 July 2005

July 14 (Bloomberg) -- Royal Dutch/Shell Group's oil and gas project in Russia's Far East may cost $20 billion, 67 percent more than originally planned, because of soaring metal prices and contractor fees and a declining U.S. dollar.

Deliveries of liquefied natural gas are now expected to start in the summer of 2008, the company said in a statement today, some eight months behind schedule. The project at Sakhalin island is the largest foreign direct investment anywhere in Russia. Shell shares pared gains in London after the statement.

``This is an advance warning to the project shareholders, who will have to approve the cost increase,'' Maxim Schub, vice president of Shell's Moscow-based unit, said today in a telephone interview. This is the largest project Shell is undertaking anywhere in the world.

The cost of the project also rose because of bad weather and a weaker U.S. dollar against the ruble and other currencies that Sakhalin Energy Investment Co., as the venture is known, uses to pay for supplies and services.

Shell owns 55 percent of Sakhalin Energy, Japan's Mitsui & Co. holds 25 percent and Mitsubishi Corp. owns 20 percent. Russia's OAO Gazprom this month agreed with Shell to secure a 25 percent stake in the venture.

Royal Dutch shares traded at 54.10 euros at 2:04 p.m. Amsterdam time, after rising as much as 1.5 percent to 54.55 euros earlier in the day.

To contact the reporter on this story:

Dale Crofts in Amsterdam at dcrofts@bloomberg.net.

http://www.bloomberg.com/apps/news?pid=10000085&sid=aIh8msvaJGPg&refer=europe 

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