Russian President Vladimir Putin has handed over full control of a major oil and natural 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 the move. Moscow military in Ukraine.
Putin’s decree late Thursday calls for the creation of a new company that would take over ownership of Sakhalin Energy Investment Co., controlled nearly 50% by British energy giant Shell and Japan’s Mitsui and Mitsubishi.
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Putin’s order named “threats to Russia’s national interests and its economic security” as the reason for the move in Sakhalin-2, one of the world’s largest export-oriented oil and natural gas projects.
The presidential order gives foreign companies one month to decide if they want to keep the same shares in the new company.
Russian state-controlled natural gas giant Gazprom had a majority stake in Sakhalin-2, the country’s first offshore gas project that accounts for about 4% of the global 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 is no reason to expect a supply shutdown following Putin’s order.
Shell had a 27.5% stake in the project. After the start of Russian military action in Ukraine, Shell announced its decision to withdraw all its Russian investments, a move it said has 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 is studying Putin’s order, which has cast doubt on its investment in the joint venture.
“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 decree and we are evaluating its implications.”
Seiji Kihara, Japanese chief deputy cabinet secretary, said the government was aware of Putin’s decree and was reviewing its impact. Japan-based Mitsui owns 12.5% of the project and Mitsubishi 10%.
Kihara stressed that the project should not be undermined because “it is relevant to Japan’s energy security,” adding that “anything that harms our resource rights is unacceptable.”
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“We are examining Russia’s intentions and the background behind this,” he told reporters Friday at a twice-daily news conference. “We are looking into the details and 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 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.
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