Royal Dutch Shell Plc  .com Rotating Header Image

RussianNewswire: Gazprom, Shell, Mitsui and Mitsubishi Sign Protocol on Sakhalin-2 Project

Headquarters: Moscow 
Date: 25/12/2006
MOSCOW (RNWire) – OAO Gazprom, Royal Dutch Shell plc (Shell), Mitsui &Co., Ltd. (Mitsui) and Mitsubishi Corporation (Mitsubishi) have signed a Protocol on Gazprom’s joining Sakhalin Energy Investment Company Ltd. (Sakhalin Energy) as the main shareholder. In accordance with the Protocol terms, Gazprom will purchase a 50 per cent stake plus 1 share in Sakhalin Energy for US$ 7.45 bln. To execute the deal each of Sakhalin Energy’s shareholders will decrease its stake by 50 per cent with recompense to be allocated on a proportional basis. As a result, Shell will own a 27.5 per cent stake, and Mitsui and Mitsubishi – 12.5 per cent and 10 per cent of shares, respectively.

Sakhalin Energy will continue being operator of the Sakhalin-2 project. Gazprom will play the leading role in the project as a majority shareholder and Shell will go on making a crucial contribution in the Sakhalin Energy operational management and will remain as technical adviser. Sakhalin Energy will still be focused on implementing the project according to schedule, which will enable to provide timely supply of LNG to Japan, Korea and the US Western coast. All of the previously sealed LNG supply contracts will remain in full force.

Gazprom and the current shareholders of Sakhalin Energy will achieve an accord in relation to an Area of Mutual Interest that would embrace opportunities to further explore and develop Sakhalin’s oil and gas with the view of converting the Sakhalin-2 project into a regional LNG production center.

The shareholders are intent on further executing the project according to the schedule approved, including receiving statutory permissions and approvals as set out in the existing Russian legislation and the Production Sharing Agreement.

“It is a crucial milestone of the Sakhalin-2 project. As the project pioneer, Mitsui is positive that the move will enable to implement the project according to schedule,” said Shoei Utsuda, President and CEO of Mitsui.

“We are happy to have Gazprom as a new partner in the project. We are confident that joint efforts of the four shareholders will contribute to transforming Sakhalin Energy into a key supplier of LNG and oil to Asia Pacific,” specified Yorihiko Kojima, President and CEO of Mitsubishi.

“I would like to express my deep satisfaction with the accords on Gazprom’s joining Sakhalin Energy as the main shareholder. Our main task is to execute the project in accordance with the activity schedule. This Agreement is an important step predetermining further growth opportunities for the Sakhalin-2 project,” said Jeroen van der Veer, CEO of Royal Dutch Shell.

“Gazprom has consistently implemented its strategy of reinforcing the Company’s standing on the LNG market. Joining the Sakhalin-2 LNG production & marketing project is another significant step towards achieving the preset goals,” underlined Alexey Miller, Chairman of the Gazprom Management Committee.


Sakhalin is a new world-class oil & gas province with the reserves valued at 45 bln barrels of oil equivalent. The Sakhalin-2 project is the world’s largest comprehensive oil & gas project with the licensed reserves averaging 4 bln barrels of oil equivalent.

The present-day production potential of Sakhalin-2 is 80 thousand barrels of oil equivalent per day. Thanks to Development Phase 2, the project production potential will grow to 340 thousand barrels of oil equivalent per day, taking account of 9.6 mln tons of LNG to be produced per annum.

The work scheduled for Phase 2 has been completed by nearly 80 per cent, with some US$ 12 bln so far invested. At present 17 thousand people are involved in the construction work, with 70 per cent being the Russian Federation citizens. Under the contracts with customers from Asia Pacific, the project partners have so far sold the amount of LNG equal to the projected capacity of an LNG plant.

The Sakhalin-2 project is regulated by a Production Sharing Agreement (PSA); the project shareholders finance construction expenses, undertake the project related risks and offset these expenses by oil and gas sales. As of today, the total project revenues of the Russian Federation in the form of royalties, bonuses and taxes have accounted for almost US$ 600 mln.

The Sakhalin-2 project covers:

• Three marine production platforms: Molikpak (Piltun-Astokhskaya – A), Piltun-Astokhskaya – B and Lunskaya as well as an offshore pipeline system with a total length of 300 km;
• An integrated coastal technology compound designed for the receipt and treatment of gas and oil produced in both fields;
• Onshore 800-km-long oil and gas pipelines running to the South of the Island;
• An oil exporting terminal with the all-the-year-round operating capacity;
• Russia’s first LNG plant and LNG exporting installations;
• Upgrading activities for onshore infrastructure: motor and rail roads, bridges, sea ports and airports, health care facilities.

This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Comment Rules

  • Please show respect to the opinions of others no matter how seemingly far-fetched.
  • Abusive, foul language, and/or divisive comments may be deleted without notice.
  • Each blog member is allowed limited comments, as displayed above the comment box.
  • Comments must be limited to the number of words displayed above the comment box.
  • Please limit one comment after any comment posted per post.