Reuters: Rare Whales Will Not Stop Shell's Sakhalin Gas: “Fears for the future of rare whales will not halt the Shell-led Sakhalin-2 gas project in Russia's far east, Shell's country manager said on Friday. John Barry told Reuters the $10 billion venture, one of Royal Dutch/Shell's biggest, was on track to deliver its first cargo of Liquefied Natural Gas (LNG) in 2007 as planned. The consortium recognized environmentalists' concerns and was considering measures such as re-routing pipelines to avoid damage to the gray whales' habitat, he said in an interview. "The project is going ahead. I want to be unambiguous about that," Barry said.” (ShellNews.net) Posted 26 Feb 05
By Sujata Rao
MOSCOW (Reuters) - Fears for the future of rare whales will not halt the Shell-led Sakhalin-2 gas project in Russia's far east, Shell's country manager said on Friday.
John Barry told Reuters the $10 billion venture, one of Royal Dutch/Shell's biggest, was on track to deliver its first cargo of Liquefied Natural Gas (LNG) in 2007 as planned.
The consortium recognized environmentalists' concerns and was considering measures such as re-routing pipelines to avoid damage to the gray whales' habitat, he said in an interview.
"The project is going ahead. I want to be unambiguous about that," Barry said.
He said some statements in a report last week by environmentalists, which was requested by Shell, had been taken out of context, in particular a recommendation to halt the project to take stock of its effect on the whales.
"What it said was, the most precautionary approach would be to stop and gather further data," he said. "But it did say that if the project went ahead, mitigation measures were needed.
"That is important because the project is going ahead and there is no question of stopping it. It is an overwhelmingly positive project for Russia, for the shareholders and for the whole Asia-Pacific region," he said.
Sakhalin-2 last week said it had signed up buyers for 70 percent of its planned capacity of 9.6 million tons of LNG and Barry said talks were on to sell the remaining volumes in 2005.
Sakhalin is seen as a key project for Shell, rebuilding investor confidence after admitting last year it had exaggerated oil reserves. The major also sees it as a possible launchpad for further expansion in Russia.
Barry said talks on Russian Gazprom's entry into Sakhalin-2 were in an "advanced stage." Gazprom and Shell are also discussing possible options for joint development of the Shtokman and Zapolyarnoye-Neocomian fields.
"Sakhalin is a very strategic asset for Shell, Mitsubishi and Mitsui. Clearly one doesn't let people in for free," he added.
BARRIERS TO INVESTMENT
Barry said projects like Sakhalin-2 proved foreign capital and expertise were vital for Russia, which has said it will bar foreign companies from "strategic" natural resource projects.
"The Russian government has always been clear that certain assets may be declared as strategic and reserved for Russian or Russian-controlled entities," Barry said.
"The only comment I'd make is that it is best for Russia to use that rather sparingly if it wants to encourage maximum competition and efficient development, and not to declare every asset strategic."
While Russia has said foreign companies will be allowed to operate in certain northern or offshore projects, oil majors fear they will be denied access to large chunks of the sector, especially in new fields in Eastern Siberia.
Analysts have also greeted the reports with dismay, saying foreign capital and expertise may be essential if Russia's crude output growth, faltering in recent months, is to be sustained.
"Russia is not the only state to reserve this right as a sovereign nation. All I'd say is it will be in Russia's own interests not to pull that trigger too often," Barry added.
Investor confidence in Russia has been shaken by the case of YUKOS, the huge oil firm now crushed by a $27 billion backtax claim. Many say tax and regulatory uncertainties are still holding back investments and economic growth.
"It is not about being Russian or foreign, it's about creating an enabling environment for future investment," Barry said. "There has been a lot of progress in recent years but there are still improvements that can be made to the legal framework and in terms of fiscal fine tuning."
This is especially true for huge capital intensive projects with long payback times, he said.
"You would probably get the same answer to that from (Russian firm) Surgut as you would from Shell or ExxonMobil."