Russian President Vladimir Putin has handed full control of a major oil and natural gas project partly owned by Shell and two Japanese companies to a newly formed Russian firm, a bold move amid rising tensions with the West over Moscow military action in Ukraine.
Putin’s executive order late Thursday orders the creation of a new company to take over Sakhalin Energy Investment Co., which is almost 50% controlled by British energy giant Shell and Japan-based Mitsui and Mitsubishi.
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Putin’s order cited “threats to Russia’s national interests and economic security” as the reason for moving Sakhalin-2, one of the world’s largest export-oriented oil and gas projects.
The executive order gives the foreign firms one month to decide whether they want to keep the same stake in the new company.
State-controlled Russian natural gas giant Gazprom had a majority stake in Sakhalin-2, the country’s first offshore gas project, which accounts for about 4% of the world’s liquefied natural gas (LNG) market. Japan, South Korea and China are the main buyers for the project’s oil and LNG exports.
Kremlin spokesman Dmitry Peskov said on Friday there was no reason to expect deliveries to stop after Putin’s order.
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Shell held a 27.5% stake in the project. After Russian military action began in Ukraine, Shell announced its decision to withdraw from all Russian investments, a move it says has cost at least $5 billion. The company also has a 50% stake in two other oil field development joint ventures with Gazprom.
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Shell said Friday it was studying Putin’s order, which has called into question 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 are examining its effects.”
Seiji Kihara, deputy chief secretary of Japan’s cabinet, said the government is aware of Putin’s decree and is considering its impact. The Japanese company Mitsui owns 12.5% of the project and Mitsubishi holds 10%.
Kihara stressed that the project should not be undermined as it is “relevant to Japan’s energy security,” adding that “anything that affects our resource rights is unacceptable.”
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“We are examining Russia’s intentions and the background behind them,” he said at a twice-daily news conference on Friday. “We are reviewing the details and as for future moves I have no prediction 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 with foreign shareholders, Peskov said, “There can be no general rule here.” He added that “any 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 facility.
© 2022 The Canadian Press
https://globalnews.ca/news/8961337/russia-seizes-control-foreign-energy-project/ Russia takes control of a major oil and gas project partly owned by foreign companies – National