Page 10 - FSUOGM Week 15

FSUOGM INVESTMENT FSUOGM
Shell quits 8bn barrel Russian oil project
RUSSIA
For Shell, the oil price collapse over the last month was the final straw.
ROYAL Dutch Shell has quit plans to work with Russia’s Gazprom Neft at a group of oilfields in Western Siberia, citing the “challenging external environment.”
The move, which follows the collapse in oil prices over the past month, comes as a blow to Gazprom Neft’s efforts to attract investment and expertise to exploit more challenging projects.
The pair cut a deal last year for Shell to take a 50% stake in Meretoyakhaneftegaz, a Gazprom Neft subsidiary. The aim of the partnership was to exploit the Meretoyakhinskoye, Tazovskoye and North-Samburgskoye oilfields, along with the two West-Yubileisky blocks. Gazprom Neft estimates their combined resources at 1.1bn tonnes (8bn barrels).
“Shell has advised Gazprom Neft that, due to the challenging external environment, it will not pursue the completion of a deal to create a joint venture through Meretoyakhaneftegaz,” Gaz- prom Neft said in a statement on April 14.
Shell repeated these words in an emailed mes- sage to NewsBase.
The Yamal-Nenets region is key for Russian oil and gas production. Its gas output alone accounts for more than 80% of the national total.
Russian producers have had to turn to increas- ingly difficult and costly projects to support their production growth, as easier-to-develop fields reach maturity. Gazprom Neft has relied heavily on Shell’s technical capability and financial clout in Western Siberia over the years. The pair are partnered at Salym Petroleum Development (SPD), which flows 120,000 barrels per day (bpd) of oil from three fields in the Khanty-Mansiysk
province south of Yamalo-Nenets.
Gazprom Neft said it intended to proceed
with the development of the Meretoyakhaneft- egaz fields on its own. Its goal is still to launch commercial production at the Tazovskoye field by the end of this year, it said.
The pair have been discussing a joint project at Tazovskoye – the largest of the fields – for sev- eral years. Gazprom Neft has said before that the field could flow more than 40,000 bpd and also provide gas for export to Europe. However, Shell held back on committing because of weak mar- ket conditions and the risk of possible new US sanctions.
Despite OPEC+’s deal on output cuts, expec- tations are that oil will average less than $40 per barrel in 2020, because of the demand destruc- tion caused by the coronavirus (COVID-19) pandemic and a global recession. Against this backdrop, Shell has opted out of the project.
“This decision by Shell with regard to this transaction will not impact its commitment to developing its business in Russia, including co-operation with Gazprom Neft, on current and potential new opportunities,” the company’s statement read.
In late March the partners closed a deal to add an extra licence block to the area that SPD is developing. Gazprom Neft is eager to bring Shell on board at other projects, but the Anglo- Dutch major has been reluctant. These include the recent Neptune and Triton oil discoveries off the coast of Sakhalin Island, oil extraction at the Yamburgskoye gas field, and exploration work in the Russian Arctic. ™
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w w w . N E W S B A S E . c o m Week 15 15•April•2020