Shell Wants Russian Natural Gas Partnership

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article6930649.ece

Royal Dutch Shell is hopeful that it will gain an equity stake in a giant Russian gas field that could supply all of the world’s needs for a decade.

Peter Voser, Shell’s chief executive, said that talks with the Russian government about the Yamal project in the Siberian Arctic were progressing well.

“Our understanding is that this would be based on equity participation,” he said, adding that a development plan for Yamal would be drawn up by the end of March 2010.

“We are preparing ourselves for a potential participation.”

Shell has estimated that development of the province may cost “several hundred billion” dollars and take more than 50 years.

Mr Voser, who visited Moscow last month to discuss the project, said that Shell hoped to be part of a consortium to develop the project, which would be at least 51 per cent controlled by Russian companies including Gazprom.

“Russia has such huge gas reserves we will try to be part of that,” he said.

The conditions in Yamal were so inhospitable that its development would require the development of new technologies, such as a ice-breaking liquefied natural gas tankers, he said.

Mr Voser, who took over as chief executive of the Anglo-Dutch oil giant in July, also said that another giant gas project in Qatar, called Pearl, was going well and would soon add 10 per cent or about 350,000 barrels per day to the company’s total production.

Royal Dutch Shell will gain cashflow of $4 billion a year from 2011 following the opening of the Pearl project, which aims to convert natural gas into a liquid fuel.

Mr Voser also said that a major cost-cutting drive at Shell was now on track for completion by January 1. The group had axed nearly 20 per cent of staff from some business units in a drive to shed a total of 5,000 staff.

A new technology and project management division had been created with 8,200 staff, allowing Shell to let go 1,800 un-needed staff from other divisions because of overlaps. “I am pleased with progress so far," Mr Voser said.

Shell was aggressively cutting costs across other parts of the business and drilling costs were likely to be down 15 per cent this year from $7 billion.

Mr Voser wanted Shell to increasingly focus on gas production, in part because of its lower carbon emissions.

He warned that Europe was losing its leadership in so-called carbon capture and storage (CCS) technology to countries such as Canada and Australia, who he said were pushing harder to commercialise the technology.

“Europe had a leading position for quite a long time but they are losing their CCS leadership. I have conveyed that message to Brussels and the UK government,” he said.