Sakhalin: Putin says reforms will continue

Debra Beachy, Petroleum News

The Associated Press contributed to this sto

Russia President Vladimir Putin told a delegation from the oil giant Royal Dutch Shell that his country values the company’s involvement in the vast Sakhalin-2 oil field project and promised that Russia’s reforms will continue.

“We will lower the VAT by two percentage points over the next year,” Putin told the delegation led by Shell Chairman Philip Watts. “I understand that people do not invest in Russia because people do not trust the judicial system. We should enhance the judicial system.”

In the Sept. 1 meeting near Moscow, Putin called the offshore Sakhalin-2 development “a flagship project.”

Shell spokeswoman Kate Hill told Petroleum News Sept. 4 that the meeting with Putin was “building on the momentum generated by Shell’s 55 percent participation in the $10 billion Sakhalin-2 project. Already, $4 billion of the project has been awarded to Russian joint venture partners in the project, which will open Russian hydrocarbons to Asian markets.” Shell’s Sakhalin project will build the world’s largest liquefied natural gas plant by 2006.

Shell is also trying to pursue the development of Siberia’s Salym oil project, with reserves of up to 880 million barrels, which Putin and Watts also discussed in their meeting.

Another topic on the agenda was bringing international experience in gas to Russia, which has major gas reserves, Hill said.

Shell is interested in renewing its alliance with Gazprom, Russia’s partly state-owned natural gas monopoly, she said. An alliance would involve exploring for gas and collaborating on pipeline projects.

According to the ITAR-Tass news agency, Putin suggested Shell get involved in a proposed gas pipeline that would run under the Baltic Sea from the Russian city of Vyborg to Western Europe.