Despite US sanctions, Shell partners up with Russian energy giant

Western sanctions on Russia haven't stopped Royal Dutch Shell from partnering with Russia's Gazprom on several projects, writes Charles Kennedy. Many of the projects will help Russian gas get to Europe.

Laszlo Balogh/Reuters/File
An engineer checks the gas distribution system in Beregdaroc, one of several points where Russian gas crosses into the European Union.

Russian energy giant Gazprom is building up a global portfolio with a western oil major.

Gazprom and Royal Dutch Shell are teaming up on several energy projects that will benefit both. The two energy companies have agreed to build an expansion of the Nord Stream Pipeline, a major natural gas pipeline that travels beneath the Baltic Sea. The pipeline is a priority for Russia, which will allow it to expand its natural gas exports to Europe while also cutting out Ukraine from the mix.

Gazprom, Shell, along with E.ON and OMV – two gas importers in Western Europe – have agreed to build the $11 billion expansion of Nord Stream. (Related: How Driverless Cars Will Upend Energy Markets)

Separately, Gazprom and Shell may expand a massive LNG project on the island of Sakhalin, a $20 billion project. Sakhalin is Russia’s only LNG project, and the two sides have agreed to add a third train. Gazprom’s CEO Alexei Miller toldReuters that the two companies may even go further by agreeing to asset swaps. By expanding their cooperation, Miller says “we will be creating a global strategic partnership” with Shell. (Related: Why The Oil Rally May Well Be Over)

The alliance with Shell helps Gazprom at a time when it has come under fire from the United States government. The standoff in Ukraine has put Russia’s energy sector in American crosshairs, but despite its profits taking a hit over the past year, Gazprom is finding ways to wriggle out beneath U.S. sanctions.

The partnership with Shell is proof of Gazprom’s success. Despite a lot of denunciations from Brussels over Russia’s involvement in Ukraine, Russia’s Gazprom is still doing business with one of Europe’s largest companies. (Related: Why OIL Will Break Out Of Its Range Soon & What To Do About It)

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Moreover, the growing relationship between the two energy giants could also be seen as a victory for Kremlin in its ongoing duel with Brussels over energy dependence. The European Union has sought to reduce its reliance on Russia for energy, but the expansion of Nord Stream will only swell Russian gas imports to Europe.

Gazprom’s Alexei Miller also went out of his way to say that the Nord Stream expansion would not be a replacement for Russia’s proposed Turkish Stream pipeline, which would connect Russian gas to Southern Europe.

By Charles Kennedy Of Oilprice.com

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Original story: http://oilprice.com/Energy/Gas-Prices/Gazprom-Shell-Partnership-Flies-In-The-Face-Of-Sanctions.html

Source: http://oilprice.com/

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