Page 4 - GLNG Week 26 2022

GLNG COMMENTARY GLNG

New Putin decree could force

foreign stakeholders out of

Sakhalin-2 gas project

COMMMENTARY
RUSSIAN President Vladimir Putin signed draw off supplies currently going to Europe.
a decree on June 30 that will transfer all rights Gazprom has stoked fears of gas shortages that
and obligations of the Sakhalin-2 oil and gas would lead to a major energy crisis this autumn
project to a new Russian entity, in effect giving after it reduced flows of gas to Europe by 60%
the Kremlin the power to nationalise foreigners’ in the middle of June. Germany has already
stakes in what is one of the largest energy pro- declared an energy crisis “alert”, the second in the
jects in the world, and escalating the ongoing gas EU’s three-stage energy crisis warning system.
wars. Shell said it would sell its 27.5% stake in the
Putin’s decree stipulates that Gazprom will joint venture as part of plans to leave Russia alto-
keep its majority stake, but foreign investors gether after the latter invaded Ukraine at the end
must ask the Russian government for a stake of February.
in the newly created firm within one month or Japan’s Mitsubishi and Mitsui also own 10%
be dispossessed. The government will decide and 12.5% stakes in the project respectively. Rus-
whether to approve any request. sia’s Gazprom is the majority owner with a 50%
Putin’s decree will only unsettle energy mar- plus one share stake.
kets further and put more strain on the LNG Sakhalin-2 in Russia’s Far East supplies circa
market. Europe has imported record amounts 4% of the global LNG market and is a key source
of LNG this year as it races to fill its storage tanks of energy for Asian countries and Japan in par-
ahead of the heating season. This week Europe ticular, which is heavily dependent on LNG
imported more LNG than piped gas from Russia imports.
for the first time ever, but that has put pressure Shell said it was “assessing the implications”
on LNG producers, as current production capac- of Putin’s decree that would allow its govern-
ity is not enough to meet the demand from both ment to take charge of the Sakhalin-2 natural
Asia and Europe simultaneously. gas project. Shell owns a 27.5% stake and has not
In that sense, Putin’s decree can be seen as a yet withdrawn from the project, despite the fact
move to put more pressure on the West by con- that several other international energy majors
currently restricting gas supplies to Europe and are in the process of exiting from their Russian
creating more demand for LNG in Asia that will investments.

P4 www. NEWSBASE .com Week 26 01•July•2022