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Shell inches into a “more open” Russia

27th July 2012

Shell is following a deliberate strategy to bring more choice into the company’s next tranche of investment, its CEO confirmed this week. A large part of the strategy will be Russia which is starting to open its doors to foreign investors

Oil and gas companies, including Shell, are eyeing Russia with interest as Moscow makes clear it has opened the doors to foreign investment

Shell is in serious talks with Gazprom and other major oil and gas competitors as it seeks to expand yet further into the Russian market, its CEO Peter Voser said on Thursday.

Voser made the announcement as he unveiled a 25pc slump in the oil major’s profits, hit by lower energy prices. Much of the investment will concern Liquefied Natural Gas (LNG) projects, he said.

“We have a very successful [LNG] venture with Gazprom and our Japanese partners in Eastern Siberia, in Sakhalin, that goes very well.

“We are the only company operating an LNG plant there in sub-Arctic, Arctic conditions, so our credentials are clear. That has also given us a good relationship with Gazprom. We have a second venture which is on the oil side, which is Salym, which goes very well,” said Voser.

Gazprom was unavailable to comment on the potential partnership. In May the Russian oil giant said there was a "good chance" that all three phases of its Shtokman gas fields will be developed into LNG.

"Our decision to switch to 100 per cent LNG is a reflection of the supply-demand balance in Europe," Alexander Medvedev, deputy chairman of the company's management committee, said at the time.

Voser on Thursday also welcomed Russian president Vladimir Putin’s plans to invest USD 100 billion “every year for the foreseeable future” in developing  Russia’s gas resources for the longer term.

“Over the years to come I see a more open Russia in the sense that foreign investments are as a strategy from the country”, said Voser.

Shell's plans to explore the Arctic this summer were also mentioned. The company has been delayed three weeks due to failing to secure key regulatory approvals and persisting sea ice.

However, the company still plans to spud new wells offshore Alaska this summer, confirmed Voser.

“A great deal of planning has gone into this programme with over 20 vessels to cover the drilling and contingencies. Ice conditions will dictate how long the drilling season will last, with a slower start due to heavy ice conditions at the moment," he said.

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