Gazprom takes $1-billion Shell stake in Sakhalin-2 LNG

Gazprom has acquired a 27.5% stake in the Sakhalin-2 LNG project from Shell for around USD 1 billion, the Russian government said on Monday.

The acquisition of the stake in Sakhalin Energy Investment Company was made by government decree, which cancelled last year’s plans for Russian oil and gas major Novatek to take over the stake.

Sakhalin-2 LNG is Russia’s first LNG venture, with Gazprom until now holding 50%, Mitsui holding 12.5% and Mitsubishi holding 10%.

Shell announced in 2022 its phased withdrawal from its Russian hydrocarbons businesses, including oil, gas, LNG and downstream projects.

The company said it planned the removal of Russian oil from its crude supply chains, the closing of its petrol and lubricants businesses, and its gradual exit from oil and gas projects.

In June 2022, Russia decided to nationalise the LNG project’s operating company, inviting foreign partners Shell, Mitsui and Mitsubishi to reapply for their respective stakes. Shell declined the offer.

The asset produced around 11.6 million tonnes of LNG in 2020. Shell’s share of production was around 3.2 million tonnes, which represented around 10% of the UK energy giant’s global LNG production.

In Q1 2022, Shell booked an impairment of USD 1.6 billion related to the development.

According to Sakhalinskaya Energi, the project’s revenues increased by 67% to USD 9.6 billion in 2022.

Photo of the Sakhalin-2 LNG plant in Prigorodnoye courtesy of Sakhalin Energy.