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Russia Sells Shell Stake in Sakhalin LNG Project to Gazprom for $1 Billion

The Russian government has decided to sell Shell’s minority stake in the Sakhalin LNG project to state-controlled giant Gazprom for $1 billion, reversing a previous decision to have LNG producer and exporter Novatek have the stake which Shell abandoned after the invasion of Ukraine.

In 2022, a decree from Vladimir 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 was Gazprom.

Shell had 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.  

Last year, 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. 

Reports emerged in April 2023 that Putin had approved the request by Novatek to allow Shell to receive $1 billion (94.8 billion rubles) from the Russian gas producer for its 27.5% stake in the Sakhalin-2 LNG project.

But now the Russian government has ordered, with a decree, that the stake be acquired by Gazprom. Russia voided the previous order for Novatek to buy the stake held by Shell without giving any reasons why.

According to Russian newspaper Vedomosti, Novatek has deemed its participation in the Sakhalin project to have high legal risks.

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Last year, U.S. sanctions were imposed on Novatek’s Arctic 2 LNG export project, which has pushed back the timeline for first LNG shipments.

By Tsvetana Paraskova for Oilprice.com

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