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Shell, Gazprom will consider adding more LNG units in Sakhalin

Royal Dutch Shell Plc, Europe's largest oil company, will build more liquefied-natural-gas processing units at its Sakhalin-2 project in Russia if it gains access to more reserves with OAO Gazprom, its new state-run partner.

Royal Dutch Shell Plc and its two Japanese partners agreed in December to sell Gazprom half their stakes in the Sakhalin-2 venture, which includes Russia's first LNG export terminal. Shell had anticipated years before the deal with OAO Gazprom it might build more LNG units, called trains, to create an export hub for Sakhalin-area projects. „We have in the design of the present two-train LNG complex enough space to add additional trains,” Shell CEO Jeroen van der Veer said yesterday at a press conference in London.

„There's only a point to add additional trains if you have secured long-term supply of additional resources. To have a Russian partner - because not everything is opened up around Sakhalin island yet - may help.” Shell's proven reserves will drop by about 400 million barrels of oil equivalent when the equity transaction with Gazprom is concluded this year, which will give Gazprom majority control of the project. Van der Veer said Shell's agreement with Gazprom is to „look together for additional resources in the Sakhalin area.”

The LNG site is now 95% complete and long-term gas sales for the second phase of the project have been completed, Shell's head of gas and power, Linda Cook, told analysts yesterday. The Hague-based Shell and Japanese partners Mitsui & Co. and Mitsubishi Corp. will own 27.5%, 12.5% and 10%, respectively, once the equity sale to Gazprom is complete. (Bloomberg)