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Copy of Shell
Transcript of Copy of Shell
World’s biggest integrated oil and gas project;
Built on Sakhalin island in the Russian Far East
Phase 1 - first oil production from the Piltun-Astokhskoye field (primarily an oil field);
Phase 2 – development of Lunskoe gas field (primarily a gas field )
Outline: Oil and gas industry in Russia
SEIC’s social impact
SEIC in Sakhalin II
Sakhalin II protocol
PSA (June 1994)
Advantages & disadvantages of PSA SEIC’s social impact Newspapers and other support for folk groups;
Environmental education program;
Scholarships and funds;
Other activities to support local Non-governmental organizations
Government’s Perspective Severe and risky times in the beginning of 90s;
Unprofitable terms of the agreement;
Reputation vs. Profit;
Impact on the population of Sakhalin;
Future of the project.
Project Roberta To become the lead partner and operator
Sacrificing interest in other projects
SEIC in Sakhalin II
Largest foreign direct investment in Russia
The first to develop offshore reserves
- 4.6 billion barrels of crude oil
- 24 trillion cubic feet of natural gas
$1.6 billion to complete Phase 1
$10 billion greenfield project
Sakhalin II protocol Gazprom will acquire a 50% stake plus one share in SEIC ($7.45 bn);
Shell – 27,5% stake;
Mitsui – 12,5%;
Mitsubishi – 10%
Russian bureaucracy and corruption
Political forces against PSA
Local government and agencies
Lack of experienced workforce
Extremely harsh conditions
Vibrant fishing industry
Russian legislation changes
PSA (June 1994) 70% Russian labor and goods and services;
Exemption from taxes (VAT, customs and road users, property taxes);
100% recovery for PSA investors;
Royalty of 6% for the federal gov’t;
Fixed profit rate;
Governed by the law of NY, with arbitration in Stockholm.
Protected SEIC from changes in Russia’s tax and regulatory regimes;
Specific details were favorable for SEIC;
Lack of civil infrastructure to implement the terms of PSA;
Politicalization of terms of PSA.
Oil and gas industry in Russia Enormous oil and natural gas reserves;
75% of total Soviet export earnings;
Gas - the most important resource;
30% of the worlds total reserves;
Gazprom – largest gas company in the world;
None of foreign investments;
Legislative problems. THANK YOU FOR ATTENTION!!!