Russia Tightens Grip on Sakhalin-2 LNG Project -- Update
By Mauro Orru and Jaime Llinares Taboada
Russian President Vladimir Putin on Thursday signed a decree to
transfer all rights and obligations of a consortium behind the
Sakhalin-2 oil and gas project to a new Russian entity, effectively
giving the Kremlin a veto over which foreign investors will be
allowed to keep their stake.
Sakhalin-2, in Russia's far east, is one of the world's largest
oil and gas projects that supplies about 4% of the global liquefied
natural gas market. Shortly after Moscow's invasion of Ukraine,
Shell PLC said it would sell its 27.5% stake in the project as part
of plans to leave Russia altogether. Japan's Mitsubishi Corp. and
Mitsui & Co. own 10% and 12.5% in the project, respectively,
while Russian energy giant Gazprom PJSC owns 50%.
The new decree, justified by Russia as a response to the
"unfriendly actions" of the U.S. and other governments, gives
foreign investors one month to ask the Russian government for a
stake in the new entity. Should there be a refusal, the government
has four months to sell the stake.
A Shell spokesperson said the company is aware of the decree and
is assessing its implications. "As a shareholder, Shell has always
acted in the best interests of Sakhalin-2 and in accordance with
all applicable legal requirements," the spokesperson said.
A Mitsui spokesperson said the company is also looking at the
decree and is in talks with the Japanese government on what steps
Mitsubishi couldn't be immediately reached for comment.
Last month, Reuters reported that Shell was in talks to sell its
investment in Sakhalin-2 to an Indian consortium. In addition, the
U.K. company has sold its downstream business in Russia to Lukoil
PJSC, Russia's second-largest oil producer.
Russia's invasion of Ukraine also forced peer BP PLC to exit its
investments in the country. BP took a $25.5 billion accounting
charge at its first-quarter results, largely driven by a writedown
of its 20% stake in Rosneft Oil Co.
The war has strained international energy cooperation. On May
31, Gazprom PJSC said it was cutting gas supplies to Shell and
Denmark's Oersted AS after they refused to make payments in
Also in May, a Finnish consortium has rescinded a contract to
build a nuclear power plant with Russian state-owned nuclear
enterprise Rosatom, citing its inability to deliver the project
after Moscow's invasion of Ukraine.
Write to Mauro Orru at firstname.lastname@example.org; @MauroOrru94 and
Jaime Llinares Taboada at email@example.com
(END) Dow Jones Newswires
July 01, 2022 06:00 ET (10:00 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.
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