THE NEW YORK TIMES: Shell Hasn't Seen Russian Audit Report: “The Royal Dutch/Shell Group of Cos. said Thursday it had yet to receive a copy of a report prepared by Russia's financial watchdog, which alleged that a consortium led by the oil giant had cost the state $2.5 billion in lost profits” (ShellNews.net) Posted 11 Feb 05
By THE ASSOCIATED PRESS
MOSCOW (AP) -- The Royal Dutch/Shell Group of Cos. said Thursday it had yet to receive a copy of a report prepared by Russia's financial watchdog, which alleged that a consortium led by the oil giant had cost the state $2.5 billion in lost profits.
The Vedomosti business daily reported Wednesday that the State Audit Chamber claims the Sakhalin Energy consortium, led by Shell, overspent on the initial stages of its Sakhalin-2 project -- established to explore offshore oil and gas fields around Russia's far-eastern Sakhalin island.
By overpaying for equipment and contractors, Shell cost the Russian government some $2.5 billion in lost profits, it quoted the report as saying.
``The investors must reimburse the damages,'' the ITAR-Tass news agency quoted Mikhail Beskhmelnitsyn, an auditor with the Chamber as saying Thursday. ``If necessary, law enforcement bodies may get involved.''
A spokeswoman said Beskhmelnitsyn was unavailable for comment Thursday.
Shell spokesman Ivan Chernikovsky said the oil company had so far only received a list of recommendations from the Chamber, but it did not include a damages figure. He would not elaborate on the substance of the recommendations.
``We are sure that all questions will be resolved through negotiations,'' Chernikovsky said.
The Shakhalin-2 project has reserves of some 150 million tons of oil and 500 billion cubic meters of gas. Assuming an average price of $24 dollars per barrel, the Russian budget would receive $45 billion from the project over its lifetime, Chernikovsky said. On the New York Mercantile Exchange, light sweet crude for March delivery was trading around the $46 mark Thursday.
Zarko Stefanovsky, an oil and gas analyst at the Aton brokerage in Moscow, said it was unlikely that the report would lead to Shell or the other participants in the consortium having to pay up. He noted that while its reports generate considerable public interest, the Audit Chamber is a largely toothless body and none of its investigations have ended up in real claims.
Stefanovsky said the report may have been engineered to pressure the consortium to let the Gazprom state-controlled natural gas giant into the project. Gazprom, the world's biggest natural gas producer, is thought to be interested in joining.
President Vladimir Putin has made it a goal to recapture the state's lost influence in the crucial energy sector. The politically charged sale of the Yukos oil giant's biggest subsidiary to state-owned Rosneft was widely seen as a step toward that goal.
http://www.nytimes.com/aponline/business/AP-Russia-Sakhalin-Audit.html