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LISA NAPOLI: Royal Dutch Shell’s power is on the wane — at least its power supply is. The company’s gonna sell half its stake in a major oil and natural gas project to the Russian monopoly Gazprom. The deal could cut Shell’s oil and gas reserves by an estimated four to 10 percent. Here’s Marketplace’s Amy Scott on why that’s a problem.
AMY SCOTT: Oil companies are having a harder time replacing the oil and gas they produce every year with new discoveries.
American companies can’t do business in places like Iran or Sudan. It’s expensive to explore remote regions like Siberia, and now Russia is discouraging foreign investment.
Bob Ebel with the Center for Strategic and International Studies says the world’s starting to look pretty small.
BOB EBEL: It all brings you back to the Persian Gulf. That’s where the oil is. We know where to look. It’s just getting the right deal to make it worthwhile.
An increasingly popular deal is the so-called production sharing agreement. The government owns the oil, but the foreign investor gets to share the profits.
Then again, Shell had such a deal with the Russian government. The Kremlin decided it wanted more control and changed the terms.
Analysts say Shell had no choice but to play along.
In New York, I’m Amy Scott for Marketplace.