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Mitsui & Co. expects conclusion on Gazprom talks

The talks include the portion of the €16.7 billion ($22 billion) project cost to be borne by Gazprom and existing investors, Utsuda said in an interview in Tokyo.

Mitsui & Co. President Shoei Utsuda said talks by partner Royal Dutch Shell Plc to resolve environmental concerns at Sakhalin-2 and to include OAO Gazprom in the Russian gas project „will not take a long time.” Shell owns 55% of the venture, Mitsui, Japan's second-largest trading company, owns 25% and Mitsubishi Corp., Japan's largest trading company, owns 20%.

The Russian government has threatened to halt work at the project on the island in the Pacific Ocean because it alleged Shell has violated environmental rules. Shell wants to begin exporting LNG from Sakhalin-2 in 2008.”Even if there are delays because of environmental concerns, we don't expect a wait of more than one to two months for LNG shipments,” Utsuda said. „We believe a conclusion will be reached that will be acceptable to all parties.” Gazprom and Shell agreed in July 2005 that Shell would swap 25% of Sakhalin-2 for 50% of Gazprom's Zapolyarnoye field in northern Russia.

Less than two weeks later, Shell said the cost of stage two of Sakhalin-2 had doubled, causing Gazprom to halt talks. Mitsubishi Corp. may sell part of its 20% interest to Shell, Ichiro Mizuno, the Japanese company's finance head, said on January 31. Sakhalin-2 is Russia's only major energy asset fully owned by foreign companies. „In the Middle East, there have been cases where countries have raised objections to foreign participation mid-way through projects,” Utsuda said. „It's only natural that the rise in crude oil prices would prompt Russia to ask for a stake.” Crude oil prices in New York rose to a record of $78.40 a barrel in New York on July 14. (Bloomberg)