UK energy giant reveals specifics of Russian lawsuit
Moscow is pursuing $1.
TroibNews 
Moscow is pursuing $1.6 billion in damages from Shell over the Sakhalin-2 LNG joint venture that the British energy giant exited in 2022. This information was disclosed in Shell's annual report released on Tuesday.
Shell exited the Sakhalin-2 liquefied natural gas project—an important oil and gas venture located on Sakhalin Island in Russia's Far East—in 2022, following heightened tensions from the Ukraine conflict and subsequent Western sanctions on Moscow.
The Russian Prosecutor General’s Office initiated legal action against eight Shell group units last October, but specifics of the claim were not made public initially. Also named in the claim were Gazprom Export, the Russian Energy Ministry, the Sakhalin Region government, along with companies Sakhalin Energy Investment and Sakhalin Energy.
According to Shell, Russia is seeking a declaration that the company unlawfully abandoned its support for the Sakhalin-2 project. Additionally, it is pursuing “monetary relief” of approximately €1.5 billion from Shell Energy Europe Limited to Gazprom Export for “alleged unpaid gas deliveries in 2022,” as well as a declaration that Gazprom Export can access the 94 billion rubles held in escrow for Shell as compensation for its withdrawal from the Sakhalin-2 project.
In the report, Shell mentioned that it filed a postponement notice in January and noted that a new hearing in the Moscow Arbitration Court is set for April 14. The company further stated it is currently impossible to gauge "the magnitude and timing" of any potential obligations stemming from the lawsuit.
“There remains a high degree of uncertainty regarding the ultimate outcomes, as well as the potential effect on future operations, earnings, cash flows and Shell’s financial condition,” it added.
In 2022, Russian President Vladimir Putin issued a decree transferring the assets of Sakhalin Energy, the previous operator of Sakhalin-2, to a new Russia-based entity, Sakhalin Energy LLC. The government permitted foreign owners, including Japanese companies Mitsui and Mitsubishi, to retain a stake in the new operator proportionate to their prior holdings.
While the Japanese firms opted to keep their stakes, Shell, which possessed a 27.5% minus one share interest in Sakhalin Energy, declined to participate in the new entity. This decision led Moscow to sell its stake to a Gazprom subsidiary for around $1 billion.
Currently, those funds remain frozen in Russia within a distinct type of escrow account, known as Type C, which was established in response to Western sanctions. These accounts are designed primarily to inhibit the outflow of funds from the country by entities linked to “unfriendly nations.”
Navid Kalantari contributed to this article for TROIB News
Shell exited the Sakhalin-2 liquefied natural gas project—an important oil and gas venture located on Sakhalin Island in Russia's Far East—in 2022, following heightened tensions from the Ukraine conflict and subsequent Western sanctions on Moscow.
The Russian Prosecutor General’s Office initiated legal action against eight Shell group units last October, but specifics of the claim were not made public initially. Also named in the claim were Gazprom Export, the Russian Energy Ministry, the Sakhalin Region government, along with companies Sakhalin Energy Investment and Sakhalin Energy.
According to Shell, Russia is seeking a declaration that the company unlawfully abandoned its support for the Sakhalin-2 project. Additionally, it is pursuing “monetary relief” of approximately €1.5 billion from Shell Energy Europe Limited to Gazprom Export for “alleged unpaid gas deliveries in 2022,” as well as a declaration that Gazprom Export can access the 94 billion rubles held in escrow for Shell as compensation for its withdrawal from the Sakhalin-2 project.
In the report, Shell mentioned that it filed a postponement notice in January and noted that a new hearing in the Moscow Arbitration Court is set for April 14. The company further stated it is currently impossible to gauge "the magnitude and timing" of any potential obligations stemming from the lawsuit.
“There remains a high degree of uncertainty regarding the ultimate outcomes, as well as the potential effect on future operations, earnings, cash flows and Shell’s financial condition,” it added.
In 2022, Russian President Vladimir Putin issued a decree transferring the assets of Sakhalin Energy, the previous operator of Sakhalin-2, to a new Russia-based entity, Sakhalin Energy LLC. The government permitted foreign owners, including Japanese companies Mitsui and Mitsubishi, to retain a stake in the new operator proportionate to their prior holdings.
While the Japanese firms opted to keep their stakes, Shell, which possessed a 27.5% minus one share interest in Sakhalin Energy, declined to participate in the new entity. This decision led Moscow to sell its stake to a Gazprom subsidiary for around $1 billion.
Currently, those funds remain frozen in Russia within a distinct type of escrow account, known as Type C, which was established in response to Western sanctions. These accounts are designed primarily to inhibit the outflow of funds from the country by entities linked to “unfriendly nations.”
Navid Kalantari contributed to this article for TROIB News
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