Slugcatcher doesn’t know the answer to that question, but he reckons everyone involved in Australia’s next batch of LNG projects will be scurrying back to their spreadsheets and drawing boards to see what’s gone wrong in Russia’s fast east, and asking the critical question of how it affects them.

Apart from the whopping cost blow-out of $US10 billion, what makes the Sakhalin issue so topical is the fact that Shell is the common player in much of what is happening in Australia’s LNG industry, and has been the world’s self-anointed leader in global LNG.

For anyone not familiar with the Russian issue, a quick snapshot. Until a few weeks ago, Shell and its partners were confident that the Sakhalin project would cost about $US10 billion and be delivering LNG by 2007.

Late last week, the cost jumped to $US20 billion and the first delivery date blew out to 2008.

The Slug, like everyone else who follows the petroleum industry, was gob-smacked. How on earth is it possible for a project to double in cost virtually overnight, no matter what blame can be apportioned to currency fluctuations, inflation and higher raw material costs?

Even Shell’s boss, Jeroen van der Veer, expressed his amazement – and he’s the man in charge.

“The present reality is that we do some projects very well, and this large Sakhalin project and some others, we don’t do that very well,” van der Veer told London’s Financial Times newspaper.

Indeed, Jeroen, there are some things you don’t do very well. But even by your standards this is a corker and it is absolutely staggering that an extra $US10 billion was added to the cost seemingly overnight.

Surely there were signs before the July 14 announcement. Surely someone at Shell knew that the project was running off the rails?

It is, of course, possible that everyone at Shell was so busy with the dramatic makeover of the company that not enough senior people were watching. The company has been forced on no less than five occasions to write-down its reserve levels, has lost a few senior people, and paid several fines for erratic bookkeeping.

But, even if all of these issues can be sheeted home to internal factors inside Shell there might be some truth in the claim that mega-projects are devils when it comes to cost control – the point that The Slug wants to make this week, and one which could have an effect in Australia.

Gorgon is a stand-out worry-centre for the industry because it is stretching the boundaries of offshore gas projects. It’s not just the deep water, it’s the carbon dioxide reinjection issue which seems to change every time The Slug looks at it.

Once upon a time, the Gorgon partners (who include Shell) were going the inject all of the CO2. Now they say they might blend gas with a high CO2 content with material from the low-CO2 Jansz field to reduce the volume being put back underground.

This seems to be a good idea, but there also seems to be a touch of making it up as the plan unfolds because Jansz was not part of the original early-stage of Gorgon, but it now seems to be playing a much bigger role if a recent report in a Western Australian Government newsletter is a guide.

According to this latest report the CO2 issue becomes less of an issue because over the life of the project it may only be necessary to inject 2.6 million tonnes of the inert gas a year, rather than 5 million tonnes if only Gorgon gas was being used.

The Slug finds this plan interesting but wonders what it means in dollars and development schedules. Is it, for instance, being proposed that Jansz be developed early to better handle the CO2 issue and, if so, what’s that doing to the Gorgon budget which is still listed at an unchanged $11 billion?

It may be an old-fashioned notion but it seems to this scribbler that you can’t introduce a major change to the basic design of a project, or alter the development schedule, without also affecting the cost.

And, given what’s just happened at Sakhalin 2, there might be a good reason to take a fresh look at Gorgon, especially if this revised CO2 injection plan involving Jansz gas is genuine and not just smooth talking to calm the anti-Gorgon environmental lobby.