The sale of a stake in a Russian gas project that Shell left during the invasion of Ukraine last year might net the company around £1 billion, Entrepreneurng report.
According to reports, the Kremlin has given the go-ahead to sell Russian energy company Novatek Shell’s former 27.5% stake in the Sakhalin-2 project for 94.8 billion roubles (£923 million). The deal takes place a week after the Russian daily newspaper Kommersant claimed that President Vladimir Putin had authorized payment of the amount to Shell directly.
The oil company was one of many foreign energy firms that pledged to quit Russia’s energy sector last year. This included selling its 27.5% stake in the massive Sakhalin-2 gas project in the country’s far east.
At the end of last year, Shell had to write down the value of its assets by $4.2 billion (£3.4 billion) due to its decision to leave Russia, including a $1.6 billion impairment on its investment in Sakhalin-2.
Following the unexpected nationalization of the project by the Kremlin last summer, there were doubts as to whether Shell would be compensated for its investment.
The purported sale, which took place without Shell’s knowledge or involvement, was not addressed by the business. Shell declined to comment.
It was seen that Shell has been kept in the dark since denying any involvement in Sakhalin-2 following the presidential decision that turned it into a new Russian corporation, months after Russia invaded neighboring Ukraine.
The Kremlin allowed Shell and its partners, the Japanese trading firms Mitsui and Mitsubishi, one month to respond regarding their desire to continue holding holdings in the new Russian company that it established in June.
According to its annual report, Shell informed Russia that it “objected” to the project’s transfer to the new Russian firm and reserved all rights to the original partnership in September, ruling out any role in the company.
The choice increased the possibility that Shell would abandon the project for no money, which would be a loss for shareholders. Shell was permitted to accept gas cargoes from the project under the provisions of the original agreement. It has since disallowed the trafficking of Russian hydrocarbons, nevertheless.
In 2020, the gas project, in which Gazprom, the state-owned energy behemoth of Russia, is a shareholder, generated over 11.6 million tonnes of LNG, of which 3.2 million tonnes went to Shell, accounting for about 10% of the company’s global LNG production.
The predicament Shell is in highlights the challenges large energy firms have had in severing connections with Russia to avoid charges that they are supporting the nation’s aggression against Ukraine.
BP committed in February of last year to leave the Russian energy market, but the corporation still owns a 19.75% share in Rosneft, which is worth around $14 billion. Since making that decision, the firm has not received any dividends from Rosneft and has stated that it still plans to sell its investment in the company.
Source: The Guardian
