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4 Apr, 2023 14:22

Putin approves payment to Shell over Russia exit – Kommersant

The British energy company walked away from the Sakhalin-2 LNG project last year
Putin approves payment to Shell over Russia exit – Kommersant

Russian President Vladimir Putin has approved a request by Novatek to transfer 94.8 billion rubles ($1.21 billion) to Shell for its stake in the Sakhalin-2 liquefied natural gas (LNG) project, business daily Kommersant reported on Tuesday, citing sources familiar with the matter.

Novatek, which is Russia’s second-largest natural gas producer, said on Monday that it had applied to acquire the 27.5% stake in the project owned by the UK-based energy giant. Sakhalin-2 is a major oil and gas development in Sakhalin Island in Russia's Far East. It includes Russia's first LNG plant.   

According to the outlet, Novatek CEO Leonid Mikhelson had suggested to Putin that the transfer of the funds to Shell for the stake be allowed in order to “minimize the risks for operating activities and export of hydrocarbons from the project.”   

The Russian president has given his consent to the payout, Kommersant reported, citing people familiar with the matter.  

Last September, Shell, which booked a $1.6 billion impairment related to Sakhalin-2, announced that it would no longer participate in the project after Moscow transferred the venture to a domestic operating company.  

In June, the Russian president signed a decree to transfer the property of Sakhalin Energy, the former operator of Sakhalin-2 registered in Bermuda, to a new Russia-based operator, Sakhalin Energy LLC. The government allowed foreign owners to take a stake in the new operator proportionate to their old one, but Shell, which owned 27.5% minus one share in Sakhalin Energy, gave notice that it would not be taking a stake in the new entity.   

Meanwhile, two Japanese companies, Mitsui and Mitsubishi, decided to retain their stakes in the LNG project and agreed to transfer their respective 12.5% and 10% holdings to the new operator. Russian state energy giant Gazprom owns 50% in Sakhalin Energy LLC.

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