Shell suspends Russian shale oil venture with Gazprom Neft –

Royal Dutch Shell has suspended work on its joint venture with Gazprom Neft to develop Russian shale oil, the latest evidence that co-operation between western and Russian oil companies has ground to a halt because of sanctions.

Alexander Dyukov, chief executive of Gazprom Neft, the oil division of state gas giant Gazprom, announced the move on Friday. “They [Shell] have stopped working on this joint venture, but we are continuing to work by ourselves,” he said in comments carried by Russian newswires.



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The move comes after ExxonMobil announced it was suspending all 10 of its joint ventures with Russia’s state oil company Rosneft, and Total told the FT its tie-up with Lukoil had “definitely stopped”.

Europe and the US placed fresh restrictions on the Russian oil sector in mid-September, limiting the ability of western companies to engage in exploration or production of Arctic, deepwater and shale oil resources.

Executives and government officials say western majors are likely to have minimal involvement in Russian shale oil projects while sanctions remain in place.

The impact is likely to be small in the near term, because Russia is yet to enjoy a shale revolution like that in the US. However, the Kremlin had hoped that the development of Russian shale reserves would be a key driver of new production over the next five to 10 years.

The government sought to attract western expertise by offering tax breaks for shale oil projects, which came into effect a year ago. Western majors rushed to take advantage, with Exxon, Shell, BP, Total and Statoil all signing shale joint ventures.

Russian shale deposits, including the Bazhenov, where the Gazprom Neft-Shell joint venture was working, are enormous, estimated by the US Department of Energy as the largest in the world at 75bn barrels.

Analysts believe they are unlikely to be developed extensively without western expertise and equipment. In an earlier statement, Gazprom Neft said it had begun drilling its first horizontal well in the Bazhenov. Surgutneftegaz, another top Russian oil company, is also developing shale oil without a western partner.

Shell said only that there were “implications for some of Shell’s current and envisaged activities in Russia, including Bazhenov” and that it was still determining the exact impact of the sanctions.

Mr Dyukov said a separate Gazprom Neft-Shell joint venture, called Salym Petroleum Development, was “studying the possibility of continuing work . . . with the relevant regulators”. That project is mostly conventional oil, not shale, so is unlikely to be affected by the current sanctions.

via Shell suspends Russian shale oil venture with Gazprom Neft –