Putin decrees to make Sakhalin-2 operator Russian firm

MOSCOW/TOKYO, Jul 1 (PRIME) -- President Vladimir Putin has signed a decree to replace Sakhalin Energy, the operator of the Sakhalin-2 liquefied natural gas (LNG) project, with a firm that would transfer its assets to Russia’s ownership, as seen by PRIME in the document published on the government’s website for disclosure of legal information late on Thursday.

Putin has signed the decree on special economic measures in the fuel and energy sector in response to unfriendly actions of the U.S., its allies, and international organizations that contradict the international law. The decree was signed to protect the national interests of Russia.

Sakhalin-2 is Russia’s first LNG producing facility with the projected capacity of 9.6 million tonnes per year. Its operator Sakhalin Energy is owned by Gazprom with a 50% plus one share stake, Shell with 27.5% minus one share, Japan’s Mitsui & Co. Ltd with 12.5% and Mitsubishi Corporation with 10%.

As per the decree, the government will create a new limited liability company that would receive all rights and liabilities of Sakhalin Energy. The operator will transfer all of its assets to the government, while the government will later give the assets to the new operator for free use for a term defined by the new agreement.

The decision to change the operator was made as some foreign companies and individuals violated the 1994 production sharing agreements signed for the Piltun-Astokhskoye and Lunskoye oil and gas fields.

Gas giant Gazprom will maintain the same stake it owns in Sakhalin Energy in the new operator, while foreign companies will have to notify the government in a month whether they agree to receive the same stakes in the new operator or not. If the foreign companies decide against obtaining stakes in the new operator, the government will sell their shares to a Russian firm, and give the money to a foreign company after it compensates the financial, environmental, and technological damage they inflicted on all parties.

All employees of Sakhalin Energy will be transferred to the new operator.

Japan’s Deputy Chief Cabinet Secretary Seiji Kihara said in a news conference that Tokyo was studying the new Putin’s decree.

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