Mitsui says Russia’s Sakhalin-2 gas project can cope without Shell

THE Sakhalin-2 liquefied natural gas (LNG) project in Russia has enough technical expertise to operate even without departed shareholder Shell, Mitsui CEO Kenichi Hori said on Wednesday (Nov 2).

Shell has said it will exit its 27.5 per cent stake in Sakhalin-2, which is one of the world’s largest LNG projects, writing off an investment with a book value of US$1.6 billion. Mitsui still holds 12.5 per cent stake in the project now run by a new Russian operator.

Some investors have voiced concern about the new operator’s ability to deal with any potential equipment problems, especially given the impact of Western sanctions on Russia.

Hori said, however, he believed technical risk had been reduced to “a reasonable level”.

“Shell’s contribution over the years has been significant, but the project has been in operation for many years and its know-how and ability to respond to daily operation has improved,” he told an analyst meeting when asked whether the operation would be sustainable without Shell.

Following Russia’s invasion of Ukraine in February and the imposition of Western sanctions on Moscow, Russian President Vladimir Putin ordered the project be transferred from its Bermuda-based operator to a domestic company and told foreign shareholders they would have to re-apply to maintain their stake in the new entity.

In August, the Kremlin approved applications from the two Japanese trading houses Mitsui and Mitsubishi to transfer their stakes to the new operator.

Russian Deputy Prime Minister Alexander Novak said last month that a new shareholder in Sakhalin-2 will be named by the end of the year to replace Shell, Interfax news agency reported. REUTERS