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Most of the exports
from Sakhalin-2 go to
China, Japan and South
Korea.

Shell in talks with Chinese

state firms for Sakhalin stake

INVESTMENT CHINA’S three largest state oil companies are Gazprom Neft at the Salym Petroleum oil devel-
reportedly in talks to acquire Shell’s position at opment in Western Siberia. But first it must find
the Sakhalin-2 oil and LNG project in the Rus- a buyer, and there is scepticism about how West-
sian Far East. ern majors can realistically leave the country
According to the UK Telegraph newspaper, without divesting their shares at a discounted
Shell is discussing the sale of its 27.5% holding rate to Russian companies. Mitsui and
in the project to China’s state-run CNOOC, Sakhalin-2 satisfies about 4% of the global
CNPC and Sinopec. The project is operated by LNG market, fed with feedstock from the Pil- Mitsubishi
Gazprom, while other investors include Japan’s tun-Asokhskoye and Lunskoye fields off the east
Mitsui and Mitsubishi. coast of Sakhalin Island. Most of its exports go to have ruled out
Shell is still open to talks with buyers outside China, Japan and South Korea.
China, however, and a source told Reuters that Mitsui and Mitsubishi have ruled out divest- divesting from
Chinese energy firms were following Beijing’s ing from Sakhalin-2, arguing that such a move Sakhalin-2,
instruction to be cautious when making new would only result in Chinese investors taking
investments in Russia because of sanctions and their place. The reported talks between Shell and arguing that such
the general political fallout from Moscow’s inva- Chinese firms have sparked concerns in Japan
sion of Ukraine. about whether the LNG supplies it gets from the a move would
“The communication between Chinese com- plant might be jeopardised if China becomes a
panies and Russia at this point only focuses on key shareholder and diverts shipments to its own only result in
trade and development of new projects,” the market. Chinese investors
source said, claiming that the takeover of pro- There is also speculation that the reliable
jects abandoned by Western firms was not on operation of Sakhalin-2 might be at risk if Shell taking their
Beijing’s agenda. A source at CNPC also said that departs. It was the Anglo-Dutch major that led
Chinese companies were unlikely to target Shell’s the development of the project, with Gazprom place.
position at Sakhalin 2. only taking its place as operator when the plant
Shell declared on February 28 that it was was nearly complete. Gazprom does not oper-
leaving Russia, including Sakhalin LNG and its ate any other liquefaction facilities, and has had
other joint ventures in Russia, including with difficulty developing such projects on its own.™

Week 17 29•April•2022 www. NEWSBASE .com P9