Nervous as Shell

Dr. Bill Belew

Issue II - June 18, 2006

Introduction by Mr. Stolyarov: Dr. Bill Belew writes that Shell has decided to team up with Russia's state-controlled oil and gas firm Gazprom to extract oil off the waters of Sakhalin Island. The deal is dangerous, however, because the Russian government might backstab Shell -- as it has been known to do in the past. Will private enterprise or government bureaucrats ultimately win from this arrangement?

When Shell started shelling out mega bucks to drill for oil off the coast of Sakhalin Island, Russia wasn't one of the global oil suppliers. Russia is now.

It is just plain costing too much for Shell to get the oil out of the icy water in the sea of Oshkosh.

So...Shell has teamed up with Russia's Giant Gazprom.

Gazprom will get a share of whatever they find in the sea of Oshkosh, and Shell gets a 50% stake in a Gazprom field in western Siberia.

The relationship with Gazprom is supposed to give Shell some political protection, but it doesn't always turn out that way when doing business with Russia's big guns. For whatever reason, they sometimes just change their minds.

Executives at Shell are nervous as shell, say some.

But, what choice does Shell have? The aim is to have first-mover advantage once the oil starts coming.

But, is it worth the risk?

What do you think?

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Dr. Bill Belew is a former Intelligence Officer for a Destroyer Squadron. He lived 20 years in Japan, where he started a language school for Japanese ECS. Dr. Belew teaches classes for a vocational school and online for a national university.

See Dr. Belew's blog, PanAsianBiz, for news and discussions about business and current events in Russia and Asia. See ZhongHuaRising for Dr. Belew's reports on business in China, RisingSunofNihon on business in Japan, and TheBizofKnowledge on business education.

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