RusEnergy

14.07.2005 17:05 MSK MosNews - Royal Dutch/Shell said on Thursday it delayed the first shipments of liquefied natural gas from its Russian Far East project. The company warned that Sakhlin-2 project costs would double to $20 billion. Shell's statement, quoted by Reuters, said the project which will feature the world's largest liquefied natural gas plant, would ship its first LNG cargo in mid-2008, later than the original plan for the of 2007. The company did not specify why the project had been delayed but was due to hold a conference call shortly. However, this delay threatens to disrupt the plans of several of the project's customers. Korea Gas, which has signed up to take at least 1.5 million tonnes of LNG annually, expects its first shipment in January 2008. Japan's Hiroshima Gas also expects to start taking 210,000 tonnes a year from 2008, while three other firms are due to get their first delivery as soon as the project comes onstream. They are Tokyo Gas, Tokyo Electric and Shell itself, via Sempra Energy's Mexican terminal. The statement said the $20 billion cost estimates of Phase 2 would cover all planned development activity including drilling activity through to 2014. The company has already spent more than $2 billion on Phase 1, which began in 1999 when the group, which also includes Japan's Mitsui and Mitsubishi, started producing oil from an offshore platform. It initially planned to spend up to $10 billion on Phase 1 and Phase 2, but later revised second phase costs to over $12 billion due to rising metal prices and the weaker U.S. dollar. Shell said the latest estimate for its 2005 total capital investment, across all its business activities, remains in the order of some $15 billion. Shell has faced ecological hurdles in building pipelines to connect offshore gas fields with its LNG terminal and the Russian authorities have repeatedly delayed approval of annual capital expenditure plans. The group recently agreed to cede 25 percent in the project to Gazprom, which analysts said would help it solve its problems with authorities.