Russia approves Shell’s disputed exit from Sakhalin-2

MOSCOW, April 13, 2023 – The Russian government has approved the sale of Shell’s stake in the Sakhalin-2 LNG project to Russian independent Novatek for USD 1.16 billion, Reuters reported on Wednesday.

Under the ruling, Shell will be paid directly for its 27.5% shares in the project without funds remaining in Russia as was formerly decreed.

In June 2022, Russia decided to nationalise the LNG project’s operating company, transferring the project to new operating entity Sakhalinskaya Energia.

In doing so, the government invited foreign partners Shell and Japanese trading entities Mitsui and Mitsubishi to reapply for their respective stakes, to which the two latter agreed.

However, Shell declined the offer, holding to a decision made in February 2022 to exit the Russian market.

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.

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