28 Jul 2022 10:54

Shell withdraws from management of Salym JV with Gazprom Neft, reduces assets value to zero

MOSCOW. July 28 (Interfax) - Representatives of Shell (SPB: RDS.A) have left the board of directors of the Anglo-Dutch major's joint venture with Russian oil company Gazprom Neft , Salym Petroleum Development N.V., and Shell has stepped back from the management of this venture, downgraded this asset's value to zero and does not rule out losing licenses.

The Shell directors resigned from Salym Petroleum Development's board in July, Shell said in a report. "Following recent events, joint control was lost early in the third quarter 2022 and as of that date Salym will be accounted for as a financial asset at fair value, with a carrying value of zero," the company said.

All Shell representatives have been recalled from work at Salym, and Shell is working on an agreement that would make it possible to exit the venture in compliance with legal requirements.

Shell also said that new Russian legislation might require Salym to transfer its licenses to a company registered in Russia. Salym Petroleum Development N.V. is currently registered in the Netherlands.

As reported, the Federal Law "On Amendments to the Law 'On Subsoil Use', which prohibits issuing licenses for subsoil development to foreign companies without Russian subsidiaries - in order to operate foreign companies must create legal entities in Russia and transfer them the right to use subsoil areas. As the Natural Resources Ministry explained earlier, the new law is designed to ensure the uninterrupted operation of subsoil user companies in the event of forced termination of business activities by foreign partners in joint projects. The law applies to new licenses as well as to those already issued.

Salym Petroleum Development is a large production and exploration project in the Khanty-Mansiysk Autonomous District, owned on a parity basis by Gazprom Neft and Shell. The joint venture develops the Salym group of oil fields (includes the Zapadno-Salymskoye Verkhnesalymskoye, Vadelypskoye and fields Yuzhno-Yamskoye, Vostochno-Shapkinskoye and Salymskoye-2 fields). The Salym fields contained recoverable C1+C2 category oil reserves approved by the State Reserves Committee on Reserves totaling 140 million tonnes.

Earlier Shell plc announced its intention to gradually withdraw from all Russian hydrocarbon projects, including oil, petroleum products, gas and liquefied natural gas (LNG).

Shell has already withdrawn from Gydan Energy, another joint venture with Gazprom Neft which operates the Yenisei project in Gydan (northern Krasnoyarsk Territory). According to the Unified State Register of Legal Entities, Gazprom Neft owns 100% of the share capital of Gydan Energy. Previously Shell owned 50% of this LLC.

Shell also sold to Lukoil 100% of its stake in Shell Neft LLC, whose assets include 411 filling stations located primarily in the Central and Northwestern Federal Districts of Russia, as well as a plant for production of lubricants in the Tver Region.