End of an international joint venture: The consortium Sakhalin Energy becomes a Russian GmbH according to the will of the Kremlin boss. Shareholders like Shell or Mitsui are likely to lose their shares.
Kremlin boss Vladimir Putin has ordered the re-registration of the multi-billion dollar oil and gas production consortium Sakhalin Energy. This means that foreign shareholders Shell, Mitsui and Mitsubishi are threatened with the loss of their shares.
“The Russian government is creating a Russian GmbH to which (…) all rights and obligations of the Sakhalin Energy Investment Company are transferred,” says the presidential decree, which was published on Thursday evening.
All ownership rights of the joint venture are thereby transferred to Russia. The existing shareholders – Gazprom (50 percent plus one share), Shell (27.5 percent minus one share), Mitsui (12.5 percent) and Mitsubishi (10 percent) – are likely to participate in the operating company that is still to be formed. The daily newspaper “Kommersant” called this a “loyalty test” in its Friday edition. Putin justified the changes in the ownership structure with Western sanctions, which posed a threat to the continued existence of production.
If the foreign companies refuse to participate in the new scheme, the Russian government wants to sell their shares within four months, but transfer the proceeds to a blocked account that the companies cannot access.
Compensation claims for environmental damage are also possible
In addition, the Russian government should conduct an audit of the foreign companies in order to raise compensation claims for possible environmental damage in Russia. Moscow used this leverage in 2006 to get Gazprom into what was previously a purely foreign consortium. Shares in Japanese companies Mitsui and Mitsubishi fell sharply in early trading on Friday on the news.
Kremlin spokesman Dmitry Peskov on Friday contradicted the thesis that this was a precedent for the expropriation of other foreign companies in favor of the state.
Japan, which currently gets around 9 percent of its gas imports from Russia, reacted cautiously at first. “We have to communicate with the operator and think about how we react,” said Prime Minister Fumio Kishida. From Mitsui and Mitsubishi it was only said to check the facts. Shell said it, as a shareholder, has always acted in the best interests of Sakhalin-2 and in accordance with all legal requirements. One is aware of the order and is examining the effects, the message continues.
Sakhalin Energy produces oil and gas off the Russian Far East island of Sakhalin. The consortium also owns a gas liquefaction plant (LNG). According to its own figures, the company shipped 37.9 million barrels of oil and 11.6 million tons of liquid gas in 2020.
Source: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
