Moscow changes Sakhalin 2 operator

Russia is creating a new operator for the Sakhalin 2 LNG and oil project in the far east of the country, which Shell is in the process of exiting.

President Vladimir Putin signed a decree on 30 June stating that the property and "rights and obligations" of Sakhalin 2 operator Sakhalin Energy will be transferred to a new limited liability company. The government will create this company but will not be a shareholder.

Shell, which holds a 27.5pc stake in Sakhalin Energy and was responsible for getting the project off the ground, is pulling out of Russia in response to the invasion of Ukraine. The company took a $1.6bn impairment related to Sakhalin 2 in its first-quarter results as part of $4.2bn of pre-tax charges linked to its Russian exit.

"As a shareholder, Shell has always acted in the best interests of Sakhalin-2 and in accordance with all applicable legal requirements. We are aware of the decree and are assessing its implications," the firm said today. Shell said previously that it lost significant influence over the project from 1 April with the resignation of executive directors and withdrawal of managerial and technical staff.

Russia's state-controlled Gazprom holds 50pc in Sakhalin Energy alongside Japanese Mitsui (12.5pc) and Mitsubishi (10pc). Gazprom will receive a stake in the new company proportional to its Sakhalin Energy share. Other shareholders are required to inform the government within a month whether they also plan to take stakes in the new firm, subject to government approval. Those not taking stakes will have to sell up within four months, with proceeds transferred to a special account.

The change of operatorship is supposed to "defend the Russian Federation's national interests" in the face of "unfriendly and counter to international law actions by the US and allied foreign states and international organisations".

The Sakhalin 2 LNG plant has typically produced above its 9.6mn t/yr nameplate capacity, mostly at 11mn t/yr since at least 2018. Crude exports were 1.86mn t (97,000 b/d) in January-May.

By John Gawthrop