4 May 2023 11:51

Shell has not received funds for stake in Sakhalin-2, retains legal rights - CFO

MOSCOW. May 4 (Interfax) - Shell (SPB: RDS.A) has not received any payments for its stake in the Sakhalin-2 project and retains its legal rights, CFO Sinead Gorman said during a press conference when commenting on information that the stake had been sold to Novatek .

"No payments have been made and we retain our legal rights," Gorman said, stressing that the company is "familiar with publications" in the Russian press.

The media in the first ten days of April cited one of the reasons for the ruble's weakening as being increased demand for foreign currency, because the Russian authorities allowed Shell to withdraw nearly 95 billion rubles in proceeds from the Russian Federation for a share in the Sakhalin-2 project. However, both the Finance Ministry and the Central Bank of Russia (CBR) urged not overestimating the effect of Shell's exit on the dynamics of the ruble exchange rate. Specifically, Deputy Finance Minister Alexei Moiseyev recalled that large foreign exchange transactions on the forex market as part of exit transactions, as agreed by the subcommittee of the government commission on foreign investment control, should be carried out within the fairly strict limits of the CBR.

The CBR also stated that it recommends that the subcommittee set the condition for the uniform conversion of rubles into foreign currency if a transaction exceeds a certain amount when issuing permits for payments to non-residents. The goal of the recommendation is to minimize the effect of transactions on the volatility of the forex market.

As reported, Russian President Vladimir Putin in 2022 signed the decree "On applying special economic measures in the fuel and energy complex in connection with the unfriendly actions of certain foreign states and international organizations". According to the decree, a Russian LLC replaced Bermuda-based Sakhalin Energy Investment Company Ltd as the operator of the Sakhalin-2 project being implemented under the terms and conditions of a production sharing agreement. The new operator, Sakhalin Energy LLC, was registered in August and began operations.

According to the decree, Gazprom Sakhalin Holding LLC was assigned a stake of 50.00000001% upon the establishment of the company of the Gazprom group . The foreign co-owners in the project were required to confirm their respective participation in the new legal entity, with Japan's Mitsui & Co., Ltd (12.5%) and Mitsubishi Corporation (10%) confirming that they would remain in the project, while Shell informed the Russian authorities that it would not be a co-owner with the new Russian operator.

The government determined the terms and conditions for the purchase of Shell's stake, composing them so that only Novatek could participate in the purchase. The price of the asset was set at 94.8 billion rubles, and Novatek submitted an application for the purchase. The Russian government on April 12 approved the sale of the operator's 27.5% stake in the Sakhalin-2 PSA project to Sakhalin Energy LLC to Novatek.

The Piltun-Astokhskoye and Lunskoye fields on the Sakhalin sea shelf are under development as part of Sakhalin-2. The LNG project plant in Prigorodnoye, south of Sakhalin, began operations in February 2009, reaching its full design capacity of 9.6 million tonnes of LNG per year in 2010, with the work optimization program then boosting its productivity 20% to 11.5 million tonnes of LNG per year. The company produced around 11.5 million tonnes of LNG and about 3.7 million tonnes of Sakhalin Blend oil in 2022.