Agreements from Another Era: Production Sharing Agreements in Putin’s Russia, 2000-2007

Every so often a company signs an agreement so advantageous it becomes part of corporate lore
and is analyzed in business school textbooks for years to come. In 1994, a consortium of foreign
oil companies known as the Sakhalin Energy Investment Corporation (SEIC) believed it had
signed just such a deal with the Russian government for the development rights to the Sakhalin-2
oil and gas fields in the Russian Far East (RFE). SEIC’s former CEO Steven McVeigh claimed
in a Harvard Business School case study that the production sharing agreement (PSA) for
Sakhalin-2 included the ‘best PSA terms that you will ever get in Russia’.1 Twelve years later,
Russian President Vladimir Putin summoned the CEOs of SEIC’s remaining partners—Shell,
Mitsui and Mitsubishi—to the Kremlin and forced them to sell a controlling stake in Sakhalin-2
to Gazprom, Russia’s state-owned gas company.

By: Timothy Fenton Krysiek

Latest Tweets from @OxfordEnergy

  • IMO 2020 and the Brent-Dubai Spread https://t.co/XvgLrGSNWF

    September 20th

  • LNG in marine transport – is it about to become the environmentally-friendly fuel of choice? https://t.co/iN1e4pdLX7

    September 18th

  • OIES presentation quoted on impact of Iranian sanctions: oil market backdrop different with crude stocks below 5-ye… https://t.co/rwJaHHwzbk

    September 15th

Sign up for our Newsletter

Register your email address here and we will send you notification of new publications, comment, articles etc. automatically.