2 Feb 2023 14:31

Shell announces cessation in LNG supplies from Sakhalinskaya Energia, continues evaluating legal options

MOSCOW. Feb 2 (Interfax) - Shell (SPB: RDS.A) (SPB:RDS.A), which has exited nearly all of its Russian projects, has said that it would end all contracts for purchasing pipeline gas by the end of 2022, though has noted that it still has two long-term contracts with Russian companies for the purchase of LNG.

However, one of Shell's counterparties halted supplies under the said long-term contracts in the third quarter of 2022, according to the company's quarterly report.

As reported, Shell International Trading Middle East has a contract with the European subsidiary of Novatek , Novatek Gas & Power, for the sale of 900,000 tonnes of gas per year from the Yamal LNG project. Shell also has a contract for the supply of LNG from Sakhalin-2 until 2028, where the company remains a shareholder although it also intends to exit the project.

Shell explained that the company has a long-term contract with Sakhalin Energy Investment Company Ltd (Sakhalin Energy Investment Company Ltd, the operator of the Sakhalin-2 project implemented on the basis of the production sharing agreement, was replaced by Russian Sakhalinskaya Energia LLC or Sakhalin Energy LLC in accordance with a decree of Russian President Vladimir Putin).

"As far as we understand, in accordance with the presidential decree all licenses, assets, liabilities and personnel of Sakhalin Energy have been transferred to the new Russian company in terms of Russian legislation, and Shell is not receiving cargoes due under long-term contracts. Shell continues to monitor developments related to this contract and evaluate its options within the legal framework," the company stated.

In its report, Shell recalls that since spring 2022, it has stopped spot purchases of oil, liquefied natural gas (LNG) and oil products in Russia. The company did not extend long-term contracts for purchase of Russian oil and all its contracts expired at the end of 2022, as well as contracts for purchase of oil products and two contracts for purchase of pipeline gas in Russia.