Upstream Online reports of a new development in the Russian oil and gas sector under the headline “Putin offers surprise deal to Shell”:
Russian Prime Minister Vladimir Putin moved again to ease his government’s clasp over the energy sector at the week-end, capping off a week of foreign energy deals with a surprise offer for Anglo-Dutch supermajor Shell.
Weaker oil prices, now half of what they were a year ago, have persuaded Russia to scale back its resource nationalism. Moscow now looks to be balancing the dogged protection of its energy wealth with the need to have foreigners invest in it.
The offer to Shell, which comes days after Russia struck major deals with France’s Total, is emblematic of the renewed openness, because Shell was the victim of Russia’s most aggressive drive to re-take control of its natural resources.
In 2006, under intense government pressure, it ceded control of the vast Sakhalin-2 project to Russia’s Gazprom. But on Saturday, Putin invited Shell to help develop the giant Sakhalin-3 and Sakhalin-4 projects off Russia’s Pacific coast.
This should come as a surprise to nobody. Last November I suggested that the supermajors’ Russian prospects had improved as a result of the global economic crisis taking its toll on the ability of Gazprom and Rosneft to finance their development plans, and concluded the post with:
But the fact remains that somebody needs to fund Russia’s development plans, and western oil companies are not only well suited to do this, but also – despite all – eager to gain greater access to Russia’s gigantic reserves. Might we see the Kremlin once again warm to BP, Shell, and Exxon as the financial crisis takes hold?
It appears that we are seeing just that. The major question outstanding, with the Sakhalin 2 debacle fresh in their memories, is what form of guarantees will the likes of Shell be asking from the Russian government before investing billions into a new oil and gas development? Expect to see either the western majors asking for internationally-held bank guarantees, or prepare for another round of blubbering and hurt feelings in five years time.