Russian entity assumes control of Sakhalin-2

A Russian entity backed by the state has assumed control over the Sakhalin-2 LNG and oil project in the Russian Far East, replacing the international consortium Sakhalin Energy Investment as operator.

The rights, obligations and personnel at the project have been transferred to Sakhalinskaya Energia, the project's website stated on August 19. Sakhalinskaya Energia was incorporated under a Kremlin decree earlier this month as a limited liability company. Its priority will be "ensuring sustainable and reliable production."

"The Sakhalin-2 project infrastructure facilities maintain steady oil and gas production," the website stated. "Hydrocarbon production and export are running smoothly in line with the schedule approved for 2022."

Operated by Gazprom, Sakhalin-2 also involves Shell, which announced earlier it would leave Russia in response to Moscow's invasion of Ukraine, and Japanese firms Mitsui and Mitsubishi, whom the Japanese government is urging to remain at the project to ensure the security of Japanese LNG supply.

Russia's government had previously accused the foreign partners at Sakhalin-2 of violating their shareholder obligations. Gazprom has already assumed just over a 50% stake in the new operator, as it did in Sakhalin Energy Investment. The foreign partners have until early September to assume interests. Shell held 27.5% of the equity in Sakhalin Energy Investment, while Mitsui and Mitsubishi controlled a combined 22.5%.

With a liquefaction capacity of 10mn metric tons/year, Sakhalin-2 was the first LNG plant to be built in Russia, commissioned in 2009. Japan's Asahi Shimbun newspaper has reported that the new operator has entered talks with Japanese LNG buyers on proposed new long-term supply deals. Japan is the biggest buyer of the facility's gas.