UK energy leading firm reveals specifics of Russian lawsuit
(MENAFN) Russia is pursuing a lawsuit against British energy giant Shell, seeking more than $1.6 billion in damages related to the company's exit from the Sakhalin-2 liquefied natural gas (LNG) project, Shell disclosed in its annual report on Tuesday. The company withdrew from the major oil and gas development project on Sakhalin Island in 2022 due to the escalating Ukraine conflict and the imposition of Western sanctions on Russia.
The legal action was initiated by the Russian Prosecutor General’s Office last October against eight Shell group subsidiaries. However, details of the claim were not disclosed at the time. Other parties named in the lawsuit include Gazprom Export, the Russian Energy Ministry, the Sakhalin Region government, and the companies Sakhalin Energy Investment and Sakhalin Energy.
Shell reported that Russia is seeking a declaration that the company unlawfully abandoned its support for the project. Russia also demands monetary compensation of approximately €1.5 billion from Shell Energy Europe Limited for alleged unpaid gas deliveries to Gazprom Export in 2022, as well as the right for Gazprom Export to claim the 94 billion rubles ($1.1 billion) held in escrow for Shell’s exit from Sakhalin-2.
A new hearing is scheduled in the Moscow Arbitration Court for April 14, and Shell has filed for a postponement. The company stated that it is currently unable to estimate the potential financial impact of the lawsuit, highlighting uncertainty over the outcomes and the effect on its future operations and finances.
In 2022, Russian President Vladimir Putin signed a decree transferring Sakhalin Energy's assets to a new Russia-based operator, Sakhalin Energy LLC. While Japanese companies Mitsui and Mitsubishi decided to retain their stakes, Shell chose not to join the new entity, leading Russia to sell its stake to a Gazprom subsidiary for $1 billion. The funds remain frozen in Russia’s Type C escrow account, introduced to prevent the movement of funds from "unfriendly nations."
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