Shell to cede Sakhalin II LNG to Gazprom

Tuesday, 12 December 2006

According to officials in Moscow, Shell and the other partners, Mitsui & Co. and Mitsubishi Corp., will sell a combined 50 percent to Gazprom.

This would reduce Shell's holding to 25 percent, with Mitsui keeping 15 percent and Mitsubishi 10 percent.

The deal came after talks in Moscow between Shell Chief Executive Jeroen van der Veer and his Gazprom counterpart Alexei Miller.

Official statement have yet to be released about the deal.

Shell and its partners have been subjected to months of pressure from Russia’s Natural Resources Ministry and its environmental regulator, which have accused Shell of ecological violations on the project.

Sakhalkin II has been a source of friction because it is the only major project in Russia wholly run by foreign companies.

Analysts said that when the authorities began pursuing Shell for alleged violations of some of the 10,000 permits required for the project, it was only a matter of time before Gazprom gained a stake.

Gazprom spokesman Sergei Kupriyanov confirmed the meeting of the CEOs but gave no details.

Gazprom had been negotiating since last year for a 25 percent stake in Sakhalin II and will now end up with double that.