Page 4 - FSUOGM Week 27 2022

FSUOGM COMMENTARY FSUOGM

Russia seizes Sakhalin-1 oil and

gas project. Who may be next?

Despite intentions, Western majors have made limiting progress in offloading

their Russian assets.

RUSSIA RUSSIA moved to seize control of the interna- assuming it can find a buyer. The Anglo-Dutch
tionally-run Sakhalin-2 project in the Far East major played a major role in developing the
WHAT: last week, stoking fears about what other for- project, which first entered production in 1998.
Russia has seized control eign-owned oil and gas assets could be next. Gazprom, by contrast, only joined the project in
of the internationally Russian President Vladimir Putin signed a 2006, and there are concerns that the Russian
run Sakhalin-2 project decree on June 30 that will transfer all rights and company may not have the technical capability
last week, over foreign obligations of the project to a new Russian entity, to keep operations running as previously. Rus-
entities' failure to fulfil effectively giving the Kremlin the power to sia’s seizure also represents a retaliation against
obligations. nationalise foreigners’ stakes in what is one of the the German government’s recent takeover of
largest, oldest and most successful international Gazprom operations in Germany, including
WHY: projects in the Russian oil and gas industry. some of the country’s largest gas storage facilities.
The move is a retaliation The Sakhalin Energy consortium that operates The Kremlin’s action creates a worrying
to Germany's seizure of Sakhalin-2 is just over 50%-owned by Russia’s precedent for other foreign companies still with
Gazprom assets, and Gazprom, whereas Shell has a 27.5% interest, assets in Russia. Whereas all the major Western
a response to Shell's and Japanese companies Mitsui and Mitsubishi players involved in Russia’s oil and gas industry
intention to leave Russia. have stakes of 12.5% and 10% respectively. have signalled their intent to leave the country in
Defending its action, the Kremlin said that response to Moscow’s invasion of Ukraine, save
WHAT NEXT: there was a risk of “natural disasters and man- for France’s TotalEnergies, they have to date only
The move is a worrying made emergency situations endangering the life managed to divest some of their smaller opera-
precedent for the foreign and safety of people and threatening the national tions. Shell, for example, managed to sell its fuel
oil majors that still have interests and economic security of the Russian and lubricants business in Russia to the country’s
assets in the country. Federation,” given that foreign entities had vio- largest private oil producer Lukoil. However, it
lated their rights and obligations at the project. still has its interest in Salym Petroleum, a major
However, the move is also seen as a response to oil-producing joint venture in Western Siberia
Shell’s decision to withdraw from the project, with Gazprom Neft, which could well be next

P4 www. NEWSBASE .com Week 27 07•July•2022