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Putin Approves $1.2 Billion Payment To Shell For Sakhalin-2 Exit

Vladimir Putin has approved a request by Novatek to allow Shell to receive $1.2 billion (94.8 billion rubles) from the Russian gas producer for its 27.5% stake in the Sakhalin-2 LNG project, Russian daily Kommersant reported on Tuesday, quoting sources with knowledge of the matter.

Last year, a decree from Putin stipulated that a newly set up state Russian company would take over the rights and obligations of Sakhalin Energy Investment Co., the joint venture running the Sakhalin-2 oil and gas project.

Shell and Japan’s Mitsui and Mitsubishi were minority shareholders in Sakhalin Energy Investment Co, whose biggest shareholder is Gazprom.

Shell has a 27.5% in the project, but it had already announced it would withdraw from Sakhalin-2. After Russia invaded Ukraine, Shell said in early 2022 it would exit its equity partnerships with Gazprom and related entities, including its 27.5% stake in the Sakhalin-2 liquefied natural gas facility, its 50% stake in the Salym Petroleum Development, and the Gydan energy venture.  

After Putin’s decree in July last year, the Russian government gave the Sakhalin-2 minority foreign investors – Shell, Mitsui & Co, and Mitsubishi – one month to claim their stakes in the new entity that replaces the existing project. Shell confirmed it was looking at ways to exit the project, while the Japanese companies kept their stakes.    

Mitsui, which still has 12.5% in Sakhalin-2, said in November that the project had enough technical know-how to run operations without Shell.

On Monday, Russia’s LNG producer and exporter Novatek applied to buy Shell’s stake in the Sakhalin-2 project. The Russian firm has asked the government for consent that the payment be made to Shell and allowed to be received in a foreign account. According to Kommersant’s sources, Putin agreed with Novatek’s request to have the money transferred to Shell to “minimize the risks for operating activities and export of hydrocarbons from the project.”    

By Tsvetana Paraskova for Oilprice.com

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