Russian President Vladimir Putin It has handed full control over a major oil and natural gas project to a new Russian firm, partly owned by Shell and two Japanese companies, in a bold move amid rising tensions with the West over Moscow’s military crackdown in Ukraine.
Putin’s decree late Thursday orders the creation of a new company that will take ownership of Sakhalin Energy Investment Company, which is about 50% controlled by British energy giant Shell and Japan-based Mitsui and Mitsubishi.
Putin’s order named a “threat to Russia’s national interests and its economic security” as the reason for the move to Sakhalin-2, one of the world’s largest export-oriented oil and natural gas projects.
The presidential order gives foreign firms one month to decide whether they want to retain equal shares in the new company.
Russian state-controlled natural gas giant Gazprom had a controlling stake in the country’s first offshore gas project, Sakhalin-2, which accounts for about 4% of the world’s market for liquefied natural gas, or LNG. Japan, South Korea and China are the main customers of the project’s oil and LNG exports.
Kremlin spokesman Dmitry Peskov said on Friday that there is no reason to expect supplies to stop after Putin’s order.
Shell had a 27.5% stake in the project. Following the start of Russian military action in Ukraine, Shell announced its decision to pull out of all its Russian investments, a move that is said to have cost at least $5 billion. The company also has a 50% stake in two other joint ventures with Gazprom to develop oil fields.
Shell said on Friday it was studying Putin’s order, which cast doubt on its investment in the joint venture.
“As a shareholder, Shell has always acted in the best interest of Sakhalin-2 and in accordance with all applicable legal requirements,” the company said in a statement. “We are aware of the decree and are assessing its effects.”
Japanese cabinet deputy chief secretary Seiji Kihara said the government was aware of Putin’s decree and was reviewing its implications. Japan-based Mitsui owns 12.5% of the project, and Mitsubishi owns 10%.
Kihara stressed that the project should not be underestimated because it is “relevant to Japan’s energy security,” adding that “anything that harms our resource rights is unacceptable.”
“We are investigating Russia’s intentions and the background behind it,” he told reporters at a twice-daily news briefing on Friday. “We’re looking into the details, and as for future steps, I don’t have any predictions for you at this time.”
Asked during a conference call with reporters whether Putin’s move with Sakhalin-2 could lead to similar actions against other joint ventures involving foreign shareholders, Peskov said, “There’s no general rule here.” Not possible.” He added that “each case will be considered separately.”
Sakhalin-2 consists of three offshore platforms, an onshore processing facility, 300 km of offshore pipelines, 1,600 km of onshore pipelines, an oil export terminal and an LNG plant.
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