Russia takes control of a major oil and gas project partly owned by foreign companies – National

Russian President Vladimir Putin has handed over full control of a major oil and gas project partly owned by Shell and two Japanese companies to a newly created Russian company, a bold move amid growing tensions with the West over Moscow’s military action in Ukraine.

Putin’s executive order last Thursday orders the creation of a new company that would take over ownership of Sakhalin Energy Investment Co., nearly 50% controlled by British energy giant Shell and Japanese companies Mitsui and Mitsubishi.

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Putin’s order cited « threats to Russia’s national interests and economic security » as the reason for the move to Sakhalin-2, one of the world’s largest export-oriented oil and gas projects.

The presidential order gives foreign companies one month to decide whether they want to keep the same shares in the new company.

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Russia’s state-controlled natural gas giant Gazprom held a majority stake in Sakhalin-2, the country’s first offshore gas project that accounts for about 4% of the world market for liquefied natural gas, or LNG. Japan, South Korea and China are the main customers for the project’s oil and LNG exports.

Kremlin spokesman Dmitry Peskov said on Friday there was no reason to expect a disruption in supplies following Putin’s order.

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Shell held a 27.5% interest in the project. After Russian military action began in Ukraine, Shell announced its decision to withdraw from all Russian investments, a move it said cost at least $5 billion. The company also owns 50% of the shares of two other joint ventures with Gazprom to develop oil fields.

Shell said on Friday it was considering Putin’s order, which cast doubt on its investment in the joint venture.

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« As a shareholder, Shell has always acted in the best interests of Sakhalin-2 and in accordance with all applicable legal requirements, » the company said in a statement. « We are aware of the executive order and are assessing its implications. »

Seiji Kihara, Japan’s deputy chief cabinet secretary, said the government was aware of Putin’s decree and was considering its impact. The Japanese company Mitsui owns 12.5% ​​of the project and Mitsubishi owns 10%.

Kihara stressed that the project should not be undermined as it « is relevant to Japan’s energy security », adding that « anything that infringes on our resource rights is unacceptable ».

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“We are looking at Russia’s intentions and the context behind it,” he told reporters on Friday during a twice-daily briefing. « We are reviewing the details, and for future steps, I have no predictions for you at this stage. »

Asked on a conference call with reporters whether Putin’s move with Sakhalin-2 could herald similar action against other joint ventures involving foreign shareholders, Peskov said: « There can be no general rule here. » He added that “each case will be considered separately”.

Sakhalin-2 includes three offshore platforms, an onshore processing facility, 300 kilometers of offshore pipelines, 1,600 kilometers of onshore pipelines, an oil export terminal and an LNG plant.

© 2022 The Canadian Press


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