Essay on Shell Case Study

2098 Words Jun 6th, 2012 9 Pages
Title:
JOURNEY TO SAKHALIN: ROYAL DUTCH/SHELL IN RUSSIA (A)
CASE STUDY REPORT

Contents Page 1. Executive Summary……………………………………………………………….…………………..3
2. Introduction…………………………………………………………………………….………..……….3 3. Analysis…………………………………………………………………………………..…………….……3 3.1 Foreign Direct Investment…………………..…………………………………….……………...3 3.2. Sakhalin………..……………………………………………………………………………………….…..4 3.3. Production-Sharing Agreement……………………………………………………………..….4 3.4. Approvals-TOEC…………………………………………………………………………………..…….5 3.5. NGO’s and the Environment………………………………………………………………..…...5 3.6. SEIC’s strategic moves……………………………………………………………………..………..6 4.
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Russian government also had a stake of 38% in Gazprom, the largest gas company in the world. This could mean that Russia’s efforts in funding or approving new companies to exploit other reserves would not be as objective as they should.

3. Analysis

4.1. Foreign Direct Investment:
Russia tried to attract foreign investors in the energy sector as billions of dollars were needed to exploit the massive reserves in Russian territory. One of the main factors that held foreign investors back from investing in Russia, was the substantial political risk. Furthermore the corporate governance scandal of BP, a western energy firm that invested in Russia, further enhanced foreign investor’s decision not to invest in an unstable Russia. In order to attract FDI, the Russian Parliament allowed production-sharing agreements or PSAs. PSAs were commercial contracts between a foreign investor and the host government that replaced the country’s tax and license regimes for the life of the project. The Sakhalin II project was the first to sign a PSA in Russia.

4.2. Sakhalin:
Sakhalin is a beautiful island just north of Japan’s northernmost island Hokkaido. The island has vast gas oil reserves which resulted in a feasibility study for two fields off its coast. The study resulted in the emergence of SEIC, a group of energy firms dedicated to exploit the reserves of Sakhalin.

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