Energy giants cede control
Posted: 21 December 2006
OAO Gazprom, Shell, Mitsui and Mitsubishi have today signed an agreement to bring Gazprom into the Sakhalin Energy Investment Company Ltd (SEIC) as a leading shareholder.
"We welcome Gazprom's entry into SEIC as a leading shareholder," said Shell Chief Executive, Jeroen van der Veer.
"Our first priority is to get Sakhalin II up and running. This agreement is an important step forward, and positions Sakhalin II for further growth opportunities ."
Under the terms of the protocol, Gazprom will acquire a 50 per cent stake plus one share in SEIC for a total cash purchase price of $7.45 billion.
"Gazprom is implementing the strategy of strengthening its positions on LNG markets," said Alexey Miller, Chairman of the Board of Gazprom.
"Entering Sakhalin II project that involves production and marketing of LNG is an important step towards this objective."
The current SEIC partners will each dilute their stakes by 50 per cent to accommodate this transaction, with a proportionate share of the purchase price.
Shell will retain a 27.5 per cent stake, with Mitsui and Mitsubishi holding 12.5 per cent and 10 per cent stakes, respectively.
"This is one of the significant milestones in the Sakhalin 2 project and we, Mitsui as a founder of the project, are confident that this will allow the project to move forward on schedule," said Mitsui President and CEO Shoei Utsuda.
SEIC will remain the operator of the Sakhalin II project. Gazprom will play a leading role as majority shareholder while Shell will continue to significantly contribute to SEIC management and remain as Technical Advisor.
The key focus for SEIC is to complete the project on schedule allowing LNG to be delivered to existing customers in Japan, Korea and the North American West Coast.
All existing LNG sales contracts will remain in force and will be honored.
Gazprom and existing SEIC shareholders will enter into an Area of Mutual Interest arrangement, which will cover both future Sakhalin oil and gas exploration and production opportunities, and building of Sakhalin II into a regional oil and LNG hub.
The shareholders now look forward to implementing the project in line with the current schedule including obtaining all necessary permits and approvals granted in accordance with applicable Russian legislation and the PSA.
"We would like to welcome Gazprom's entry as a new partner," said Mitsubishi President and CEO Yorihiko Kojima.
"We trust that unity and strength of four shareholders will enable Sakhalin Energy to become a highly valued supplier of LNG and crude oil for Asia-Pacific markets."
Posted by Richard Price, Editor, EnergyME.com
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