British energy major wants out of Russian LNG project

Shell is still debating the fate of the contract for the purchase of liquefied natural gas from Sakhalin 2

UK-based energy giant Shell Plc has announced it will not participate in Russia’s Sakhalin-2 liquefied natural gas (LNG) project after Moscow transferred the venture to a domestic operating company.

According the company’s statement, Shell has notified Moscow that it will not take a stake in the new Sakhalin-2 operator in proportion to its stake in the old one. The company, however, is still debating “options in line with applicable legal requirements and agreements” to keep a contract to receive LNG cargoes from the facility. In the statement, Shell assured customers that its decision regarding Sakhalin-2 will not affect its ability to supply gas to customers in line with existing contracts.

On June 30, Russian President Vladimir Putin signed a decree to transfer the property of Sakhalin Energy, the former operator of Sakhalin-2, to a new operator, Sakhalin Energy LLC. The government noted that foreign owners will be able to take a stake in the new operator in proportion to their equity in the old one. Shell owned 27.5% minus one share in Sakhalin Energy.

READ MORE: Japanese companies to stay with Russian energy project

Earlier, two Japanese companies, Mitsui and Mitsubishi, agreed to transfer their respective stakes of 12.5% and 10% in Sakhalin Energy to the new operator, of which Russia’s state energy giant Gazprom owns 50%. Bloomberg analysts say Shell’s move could “hand even more energy revenue to Russia” if Gazprom absorbs Shell’s abandoned shares.

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