Journey to Sakhalin A+B+C Debrief
International Business Strategy
Journey to Sakhalin A+B+C
Debrief
Workshop delivered by Dr. Eva Alfoldi
Dubai, 24-26 September 2013
Q1) How are the markets for oil and gas different? •
Oil
– Oil markets are well‐integrated and increasingly global
– World’s available oil reserves are relatively spread out (Middle East, Nigeria,
Venezuela, Russia etc...)
– In Russia, several players operate in the oil sector – making it relatively competitive
– Sakhalin II phase 1 (focused on oil) costs $1.6 billion
– Volatility of price and possibly supply (Middle East, Nigeria, Venezuela)
•
Gas
– Gas markets relatively disparate and local – proximity is key
– Transportation is a major issue – delivery of output is heavily reliant on pipeline distribution networks and/or LNG plant (expensive to build) – hence, location of sales is constrained
– Russia controls largest concentrated supply anywhere (30% of world’s total reserves), hence there is vast international reliance on Russia (25% of EU’s needs)
– At the same time, Russia itself is strategically dependent on its gas reserves
– Given the strategic importance of gas, it is no wonder that Gazprom is partially state‐ owned and holds a monopoly
– Sakhalin II phase 2 (focused on gas) slated to cost $10 billion
2
Do these differences matter? Why?
•
•
•
The limitations associated with gas means that Russia cannot easily capitalise on its most critical and plentiful natural resource
Weak links with Asian countries are a major issue for Russia: due to transport constraints, the list of potential customers for gas exports is limited, therefore
China, Japan and Korea represent major ‘missed opportunities’
For Shell, it means the project will be costly and risky, but potentially a steady income stream with less competition
3
Q2) Identify the various stakeholders and their motives
•
Shell/Royal Dutch
– Choice of Russia over the ‘volatile’ Middle East, access to attractive
Journey to Sakhalin A+B+C
Debrief
Workshop delivered by Dr. Eva Alfoldi
Dubai, 24-26 September 2013
Q1) How are the markets for oil and gas different? •
Oil
– Oil markets are well‐integrated and increasingly global
– World’s available oil reserves are relatively spread out (Middle East, Nigeria,
Venezuela, Russia etc...)
– In Russia, several players operate in the oil sector – making it relatively competitive
– Sakhalin II phase 1 (focused on oil) costs $1.6 billion
– Volatility of price and possibly supply (Middle East, Nigeria, Venezuela)
•
Gas
– Gas markets relatively disparate and local – proximity is key
– Transportation is a major issue – delivery of output is heavily reliant on pipeline distribution networks and/or LNG plant (expensive to build) – hence, location of sales is constrained
– Russia controls largest concentrated supply anywhere (30% of world’s total reserves), hence there is vast international reliance on Russia (25% of EU’s needs)
– At the same time, Russia itself is strategically dependent on its gas reserves
– Given the strategic importance of gas, it is no wonder that Gazprom is partially state‐ owned and holds a monopoly
– Sakhalin II phase 2 (focused on gas) slated to cost $10 billion
2
Do these differences matter? Why?
•
•
•
The limitations associated with gas means that Russia cannot easily capitalise on its most critical and plentiful natural resource
Weak links with Asian countries are a major issue for Russia: due to transport constraints, the list of potential customers for gas exports is limited, therefore
China, Japan and Korea represent major ‘missed opportunities’
For Shell, it means the project will be costly and risky, but potentially a steady income stream with less competition
3
Q2) Identify the various stakeholders and their motives
•
Shell/Royal Dutch
– Choice of Russia over the ‘volatile’ Middle East, access to attractive