Government to get its share under Sakhalin-2 project in liquefied gas?

Russia's Economic Development and Trade Ministry is drafting proposals on receiving a share in the Sakhalin-2 project under the production sharing agreement. Deputy Economic Development Minister Vitaly Savelyev made a statement to this effect on Friday.

"We are studying the issue. I would not like to comment on the situation as this may affect decision-making that is in progress, including at the Economic Development Ministry. I believe relevant decisions will be disclosed shortly," Mr. Savelyev told reporters.

Gazprom, Russia's natural gas giant, earlier announced an intention to act on the government's behalf with respect to the Sakhalin-2 production sharing agreement.

The agreement does not stipulate whether the government's share should be paid in money or products. The parties are discussing the possibility for the state to receive its share in liquefied gas that will be exported by Gazprom.

The Sakhalin-2 production sharing agreement was signed on June 22, 1994. This is a project for the development of the Piltun-Astokh oil field and the Lunskoye gas field off Sakhalin's coast. The agreement came into force on June 15, 1996.

Russia's central government and the Sakhalin regional administration act on behalf of the Russian Federation under the agreement.

The project is worth $10 billion.

Sakhalin-2 is being sponsored by a consortium of foreign companies in which 55% of shares belong to Shell Sakhalin Holding (the Shell British-Dutch corporation's affiliate) and 25% is owned by Mitsui Sakhalin Development (an affiliate of Mitsui, Japan's largest financial-industrial group), while Diamond Gas Sakhalin owns 20% of shares.

Shell reported earlier that it was negotiating with Gazprom the possibility of the latter's participation in the project. Shell Vice-President Hans Van Lamoen said the company was considering a possibility of Gazprom's engagement in Sakhalin-2, but it was unclear at whatphase the Russian company might join it.

Gazprom Deputy Board Chairman Yury Komarov spoke in favor of the project. "We expect to join the Sakhalin-2 project," he said.