Russia's A Cuddly Bear In The Energy War

Lisa Buckingham, the Financial Mail editor writes that the challenges that Shell is facing in the Sakhalin-2 project are great, but nothing new. Muddling through with hostile political regimes is day-to-day stuff for oil giants. The expropriation of assets is, historically, par for the course. Remember, for example, that BP had a goodly part of its business swiped by Iran.

As BP's chief executive, Lord Browne, remarked when discussing the difficulties of doing business in Russia, if not there then the alternative was violent, war-ravaged Africa. Looked at from this perspective, Russia appears eminently hospitable.
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Gazprom Says Shell Makes Offer on Russia's Sakhalin-2

Gazprom said Royal Dutch Shell Plc made new proposals for the Russian company to join its $22 billion Sakhalin-2 oil and gas venture, as President Vladimir Putin expands his control of the world's biggest energy industry.

Reuters earlier reported that Shell agreed to cede state-run Gazprom a majority stake in Sakhalin-2. Moscow-based Gazprom spokesman Sergei Kupriyanov and Shell Russia Vice President Maxim Shoob declined to confirm or deny the Reuters report, which cited unidentified industry people.
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Royal Dutch Shell’s decision to hand over control of the $22 billion energy project in Sakhalin to Russia’s state monopoly Gazprom is a victory for Russia’s new hardline policy on energy. It is also a warning to Western business that investment in Putin’s Russia still carries real risks, writes Michael Binyon of The Times.

Watchdog’s Bark Worse than Its Bite

Shell’s weblog reprinted a commentary by Ben Aris, the editor of Business New Europe in which he discusses the recent wave of spats between Rosprirodnadzor, the Russian environmental watchdog, and some high-profile industrial groups. The most illustrious example is the recent finding of environmental negligence in the Sakhalin II project. Russian companies are targeted as well as shows the case of Lukoil whose environmental licenses Rosprirodnadzor questioned in October. As we discussed in an earlier post, “the Sakhalin case has done more than anything to popularize the idea that assaults on companies using environmental laws as a weapon represent a new phenomenon in Russia, but the threat has been present since the Kremlin began its more aggressive industrial policy in 2004.” However, despite the rhetoric, Rosprirodnadzor has not yet followed through on any of its threats. But the memory of Yukos (which did not collapse on environmental grounds but because of Kremlin’s crusade against the socalled tax-optimization schemes) is sure to keep the investors on their toes.

Russia Ups Pressure On Sakhalin

A day after announcing the finding of more than 100 violations, Russia has suspended vital permits for Royal Dutch Shell's Sakhalin-2 oil and gas venture, in a move that may further delay the $22bn (£11bn) project, BBC reports.