Putin Invites Shell To Participate In Natural Gas Projects

MOSCOW (AFP)--Russian Prime Minister Vladimir Putin on Saturday invited Royal Dutch Shell PLC (RDSA) to participate in two new natural gas projects during a meeting with the Anglo-Dutch company's chief executive.

"I think it is fully possible to pursue cooperation further with Shell in other projects, such as Sakhalin-3 and Sakhalin-4," Putin said.

"Your work is successful and I thank you for that," the premier added. "It is not only successful but also ahead of schedule."

Shell's Jeroen van der Veer welcomed Putin's offer, calling it an "ideal time" to consider future energy projects in Russia.

"We are ready to move quickly," he told Putin.

Shell partnered with Russian gas giant OAO Gazprom (GAZP.RS) to launch Russia's first liquefied natural gas plant in February on the Pacific island in Russia's Far East.

In late 2006, Shell was essentially sidelined from the $22 billion Sakahlin-2 plant, forced to sell its controlling stake in the project under Russian state pressure.

But Putin played down the troubled history of Shell's upstream investment in Russia on Saturday.

"Shell has been working in Russian for over 100 years," he said. "Today, Shell is present in many sectors... The most important contract being Sakhalin in which you have almost a 30% stake."

He said contracts handed out by Shell to Russian companies had amounted to $12 billion, aiding development in the regions.

Shell signed an array of accords to partner with Sovcomflot, which owns Russia's largest shipping fleet, for the future construction of an LNG plant on the Yamal peninsula in northwest Siberia and transport of oil and gas from Russia's Arctic fields.

The Yamal peninsula in northern Russia is estimated to hold gas reserves of 5.9 trillion cubic meters, and Gazprom has set development of the region as a top priority as production at its current Soviet-era fields begins to decline.

Russia has said it wants to develop its LNG capacity to diversify away from pipeline-reliant exports to Europe and place more emphasis on new Asian and U.S. markets.

"These are very serious documents. It allows not only to put use to Sovcomflot's vessels, but to think on the development of our competencies in the construction of tankers, which will be needed in the near future," Putin said.

Shell has owned a 27.5% stake in the Sakhalin Energy project since its sale to Gazprom in 2006 gave the state monopoly a 51% share in the project.

The Gazprom takeover was widely seen as a Kremlin-orchestrated move to regain control over the exploitation of the country's energy resources.

Sakhalin Island, on Russia's Pacific border near Japan, sits atop a massive 45 million barrels in oil and gas reserves, according to estimates.

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(END) Dow Jones Newswires

June 27, 2009 09:36 ET (13:36 GMT)

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