The biggest story was Shell's venture in Sakhalin Island. This project was negotiated in the nineties and, at the time, the Russian government agreed to let Shell produce oil tax free until the initial investment was repayed. Shell told the Russian government that this would take about ten years. A couple of years ago, Shell decided to tell the government that it would take an additional decade to recoup the costs and therefore would be exempt from taxes for another ten years. The government obviously objected to this and forced Shell's hand after the company failed to bargain in good faith on a revision of the contract terms. The license was not 'taken' from Shell, state-run Gazprom paid market value for a controlling stake. The British Petroleum, TNK-BP joint venture is a little different story. TNK-BP was licensed to produce 9bcm of gas annually from its site, but was producing less than 1.5bcm. The problem was that demand for the region could not possibly reach 9bcm, but this is what TNK-BP agreed to do and it did not live up to its agreed contract requirements.
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