Putin set to grab control of Shell stake in giant gas field
RUSSIA is poised to seize full control of a massive gas field in which energy giant Shell owns a huge stake.
Vladimir Putin has signed a decree to take charge of the Sakhalin-2 oil and gas project in Russia’s far east, raising the stakes in an economic war with theWest and its allies.
A new firm will take over all rights and obligations of the Sakhalin Energy Investment Co, in which Shell owns 27.5 per cent.
Japanese giants Mitsui and Mitsubishi hold 12.5 and 10 per cent respectively. Russia’s Gazprom controls the rest.
Shell already said it planned to sell its holding in the wake of the invasion of Ukraine.
But the move to take control risks complicating matters.
Putin’s five-page decree – which comes amid Western sanctions on Moscow – indicates the Kremlin will now decide whether the foreign partners can stay.
There had been reports Shell was in early stage talks to sell to Chinese energy companies or a consortium from India.
Sakhalin-2 supplies about four per cent of the world’s liquefied natural gas (LNG). Most of its exports go to Japan, South Korea and China. Japan has previously said it would not give up its interests in the project, even if it was asked to leave.
Shell CEO Ben van Beurden said this week his company was “making good progress” in pulling out.
Lucy Cullen, a principal analyst from the Wood Mackenzie consultancy, said: “Russia’s decree effectively expropriates foreign stakes in the Sakhalin Energy Investment Co, marking a further escalation in ongoing tensions.”
The move also threatens to unsettle a tight LNG market and raises stakes forWestern firms still in Russia.
Shell, which had already written off the value of its Russian assets, said it was assessing the decree.
Putin’s spokesman Dmitry Peskov said Russia saw no grounds for halting LNG deliveries and that the future of other projects or investments would be determined case by case. “There can be no general rule here,” he said.
The decree allows Gazprom to keep its holding but others must ask Moscow for a stake in the new firm within one month.