Sakhalin
Journey to Sakhalin: Royal Dutch/Shell in Russia
Questions 1 & 2.
The main factor that makes the Sakhalin project attractive for Royal Dutch Shell (RDS) is macroeconomic: the quantity of the estimated reserve of gas and oil around Sakhalin (exhibit 4) combined to Russia’s dominant player position on both markets are likely to provide RDS as a supplier with a strong bargaining power once the reserves can be exploited. Besides, the overwhelming part of energy in the Russian GDP lets suppose that efforts would be made if, for example, additional infrastructures are needed.
The geopolitical situation, to the extent that this project is not located in the Middle-East, could at the first glance be an advantage as well, because the political and social situation of this part of Russia seems to offer much more stability than Middle-East countries. But actually, no peace agreement has been signed with Japan about Sakhalin and this island may be part of an eventual future conflict between both countries (especially as a counterpart of the disputed Kuril Islands), even if Mitsui’s and Mitsubishi’s participation to this project, which must have been organized with the powerful Ministry of Economy Trade or Industry (METI), minimizes this risk. So, all in all, the geopolitical situation may have been an important factor for RDS to decide to take part to this investment.
Another key factor that makes this project attractive especially for RDS is its know-how, not only about the market situation, but also about the non market strategy. First, RDS has the majority (55%) in the SEIC, which allows it to handle this project following its own ways of doing business, backed by its traditional experience in the energy business. If the project has not been given to Rosatom or any other Russian company, it is because RDS was the only one to have the required experience to first explore offshore gas wells and oil deposits and then tap them. So, in some extent, RDS’ old-age
Questions 1 & 2.
The main factor that makes the Sakhalin project attractive for Royal Dutch Shell (RDS) is macroeconomic: the quantity of the estimated reserve of gas and oil around Sakhalin (exhibit 4) combined to Russia’s dominant player position on both markets are likely to provide RDS as a supplier with a strong bargaining power once the reserves can be exploited. Besides, the overwhelming part of energy in the Russian GDP lets suppose that efforts would be made if, for example, additional infrastructures are needed.
The geopolitical situation, to the extent that this project is not located in the Middle-East, could at the first glance be an advantage as well, because the political and social situation of this part of Russia seems to offer much more stability than Middle-East countries. But actually, no peace agreement has been signed with Japan about Sakhalin and this island may be part of an eventual future conflict between both countries (especially as a counterpart of the disputed Kuril Islands), even if Mitsui’s and Mitsubishi’s participation to this project, which must have been organized with the powerful Ministry of Economy Trade or Industry (METI), minimizes this risk. So, all in all, the geopolitical situation may have been an important factor for RDS to decide to take part to this investment.
Another key factor that makes this project attractive especially for RDS is its know-how, not only about the market situation, but also about the non market strategy. First, RDS has the majority (55%) in the SEIC, which allows it to handle this project following its own ways of doing business, backed by its traditional experience in the energy business. If the project has not been given to Rosatom or any other Russian company, it is because RDS was the only one to have the required experience to first explore offshore gas wells and oil deposits and then tap them. So, in some extent, RDS’ old-age