| AMSTERDAM, Sept 16 (Reuters) - Royal Dutch/Shell kept
the western
investment bandwagon rolling through oil-rich Russia on Tuesday, approving
a budget of over $1 billion to develop the Salym fields in western Siberia.
The announcement is unlikely to be the last word on the project because
it
comes hard on the heels of threats by local Russian authorities to withdraw
the Salym licence because of the Anglo-Dutch group's failure to meet
exploration targets.
Shell became one of the biggest foreign investors in Russia when it
gave
the green light this year for a $10 billion project on the remote eastern
island of Sakhalin, where it will build the world's largest liquefied
natural gas plant by 2006.
But while the Sakhalin plan is progressing smoothly, the company is
finding
it increasingly difficult to agree on developing Salym, with reserves
of up
to 880 million barrels.
Shell has been waiting for years for a production sharing agreement
for
Salym that would give it tax exemptions, but in the absence of such a
deal
last year the oil major decided to develop the fields on a regular tax
regime.
Shell criticised Russian authorities on Monday for the delay it is facing
in developing Salym, saying in a statement the impediments could hurt
the
country's investment climate.
But on Tuesday the group moved forward with the Siberian project by
giving
the green light to its budget.
"The decision to proceed with the Salym fields is an important
step forward
in the development of Shell's presence in Russia, a country of high
strategic importance for the group," Walter van de Vijver, chief
executive
of Shell Exploration and Production, said in a statement.
Shell has already invested $170 million in Salym.
RUSSIA FEVER
The news follows closely behind a newspaper report on Monday that U.S.
companies Exxon Mobil and Chevron Texaco are poised to make multi-billion
dollar rival offers for a major stake in the nation's biggest oil firm,
Yukos.
YUKOS, which is merging with smaller rival Sibneft, denied on Tuesday
that
a deal had been agreed.
However analysts suspect it will not be long before another big western
investment deal hits one of the world's fastest growing energy economies.
Russia is already the world's second largest oil exporter behind Saudi
Arabia and holder of the world's largest reserves of natural gas.
Earlier this month British-based BP consolidated more than five years
of
activity in Russia by paying over $6 billion to wrap its existing assets
into a new 50-50 joint venture with Russian firm TNK.
Western oil firms are eager to spend three years worth of high oil price
proceeds on relatively cheap assets in Russia, where output growth far
outstrips their own more plodding performance. The political momentum
is
also getting stronger while Middle East supplies look increasingly
uncertain in the aftermath of the Iraq war.
Meanwhile Russian investors are keen to monetise investments made in
post-Soviet privatisation, and Russian oil firms hope a western shareholder
will provide stability and remove the stigma of corporate corruption that
dogged the Russian business scene in the 1990s.
But political barriers to western investment remain significant, especially
where YUKOS is concerned.
YUKOS's head and Russia's wealthiest man Mikhail Khodorkovsky is embroiled
in a row with the Kremlin after the arrest in July of one of his key allies
on charges of theft of state property.
See also:
Production
Sharing Agreements (PSA)
YUKOS Case
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