By Alison Maitland
Published: November 23 2005 02:00 | Last updated: November 23 2005 02:00

Royal Dutch Shell has admitted to setting overly aggressive targets and miscalculating the challenges of developing its flagship Sakhalin 2 oil and gas project in Russia, which has doubled in cost to $20bn (£11.6bn) and is running about eight months behind schedule.

In an interview, Linda Cook, the group's head of gas and power, said: "We set a very aggressive target in terms of cost and schedule and as it's proven out over the two or three years since we made the decision to move forward, it was much more aggressive than it should have been given the realities of the project that we now understand."

Ms Cook said the energy group, which has a 55 per cent stake in the oil and liquefied natural gas project, had not fully understood the challenges of implementing it in such a difficult and remote region as Sakhalin in Russia's far east.

"The list is quite long of the challenges that you face," she said.

The challenges included limited infrastructure, a very small labour pool and the necessity of building a pipeline hundreds of kilometres long with 1,000 river crossings.

The Anglo-Dutch group has come under pressure from the Russian government, which has to sign off the revised budget. The Kremlin suggested earlier this month that it might not approve Shell's request to double the cost of the project, saying it had questions over "poorly grounded changes in the spending estimates".

Shell would suffer a big setback if the government failed to approve the budget and could find its other plans in Russia further complicated.

Ms Cook, who sits on the group executive committee, said negotiations with the Russian government were expected to take some time. "We are engaged with them. It is going to be a process that won't be over quickly."

She said her role had been largely to explore markets for the gas from the project. "The revenue side has gone well," she said.

"We have sold more than three-quarters of the gas now under long-term contract to customers in Japan, South Korea and North America."

Ms Cook, known in some quarters as "Sakha-Linda" because of her efforts to secure long-term contracts, said: "It will enable gas from Russia, the largest natural gas resource holder in the world, to access markets in Japan, South Korea, Mexico and the US for the first time."