THE SHELL LEAKS FILES — 2 NOVEMBER 2026
SLF-2007-106
The Sakhalin Papers XCVI: The India Option — Shell’s Attempted Sakhalin II Sale and the Buyers Who Never Took Control
By John Donovan — 2 November 2026
On 26 May 2022, Reuters revealed that Shell was discussing the sale of its 27.5% stake in the Sakhalin II oil and liquefied natural gas project with a consortium of Indian energy companies. ONGC Videsh and GAIL were among those identified. Separate negotiations reportedly concerned valuable long-term LNG and crude-oil supply arrangements. For Shell, the talks offered a possible commercial route out of Russia following the invasion of Ukraine. But five weeks later, Vladimir Putin signed a presidential decree transferring Sakhalin II’s operations to a new Russian company. The Indian discussions never produced a completed acquisition. By March 2024, Russia had approved the transfer of the disputed 27.5% interest to a Gazprom subsidiary for 94.8 billion roubles. The money subsequently became entangled in a Russian lawsuit against Shell. Authenticated corporate filings, contemporaneous Reuters reporting and official Russian measures reveal how a proposed commercial exit became a struggle over ownership, compensation and legal rights.
Archive reference: SLF-2007-106
Publication date: 2 November 2026
Collection: The Sakhalin Papers — Shell, Gazprom and Russia
Previous instalment: The Shell Leaks Files — 1 November 2026: The Molecule Problem
Principal authenticated records: Shell’s announcement of 28 February 2022; Reuters investigation of 26 May 2022; Shell’s first-quarter and interim financial disclosures; Russian Presidential Decree No. 416 of 30 June 2022; Shell’s 2022 Annual Report and Form 20-F; Russian government decisions concerning Sakhalin II in 2023 and 2024; Shell’s 2025 Form 20-F, filed with the US Securities and Exchange Commission on 12 March 2026.
Evidential classification: Authenticated corporate announcements, SEC filings, contemporaneous reporting, official Russian government measures, statements by the Japanese shareholders and separately identified editorial commentary.
Important qualification: The Indian negotiations were reported by Reuters on the basis of three sources. Shell declined to comment at the time, and the Indian companies did not publicly confirm a binding purchase agreement. No completed Indian acquisition has been established. The subsequent Gazprom transaction was conducted under Russia’s restructured ownership arrangements and must not be confused with a voluntary sale by Shell.
Introduction: The buyers who might have provided Shell with an exit
On Thursday, 26 May 2022, Reuters published an exclusive investigation by Ron Bousso and Nidhi Verma.
The report disclosed that Shell was in discussions with a consortium of Indian energy companies concerning its interest in Sakhalin II.
The companies identified included ONGC Videsh and GAIL.
The discussions concerned one of the most valuable and politically sensitive energy developments in Russia’s Far East.
Sakhalin II was not a speculative exploration venture.
It was an operating oil and liquefied natural gas project with established production facilities, international customers and long-term commercial relationships.
Shell had been involved for decades.
It had originally played a leading role in developing the project before Gazprom acquired control through the controversial transaction negotiated in December 2006.
Following that restructuring, Shell retained a 27.5% interest.
It remained a major shareholder and technical participant until its withdrawal following Russia’s full-scale invasion of Ukraine.
The reported Indian negotiations therefore represented a potentially significant development.
Shell had announced that it intended to leave Russia.
Indian companies were reportedly considering acquiring its interest.
A negotiated sale could have offered Shell a means of disposing of its investment while providing another international energy group with access to an established LNG producer.
But there was an obstacle.
Any transaction would require Russian approval.
And the Russian government was about to introduce measures that fundamentally changed the position of the project’s foreign shareholders.
The central documentary question is whether Shell ever had a realistic opportunity to complete a conventional commercial sale before Moscow intervened.
The surviving evidence establishes the reported discussions and subsequent Russian actions.
It does not establish that Shell had secured a binding agreement with the Indian consortium.
That distinction is essential to understanding what followed. The Times of India
1. The original Reuters exclusive: 26 May 2022
The Reuters investigation was published on 26 May 2022.
It cited three sources familiar with the discussions.
According to those sources, Shell had entered talks with a group of Indian energy companies concerning the acquisition of its 27.5% interest in Sakhalin II.
ONGC Videsh and GAIL were identified among the companies involved.
The report also contained an important additional detail.
Two sources said that Shell was seeking separate bids concerning long-term agreements under which it obtained LNG cargoes and crude oil from Sakhalin II.
This meant that the discussions potentially involved more than one commercial asset.
The reported negotiations concerned both Shell’s equity interest and associated supply arrangements.
But these were distinct categories of rights.
An equity interest gives its owner a stake in the relevant company.
An LNG or crude-oil offtake agreement establishes contractual rights and obligations concerning the supply of products.
A purchaser of an equity stake does not automatically acquire every separate supply contract held by the seller.
Similarly, a company may acquire contractual supply rights without purchasing equity in the producing project.
This distinction matters because Shell’s subsequent financial disclosures demonstrated that its commercial relationships with Sakhalin Energy continued to generate difficulties even after it withdrew from management.
The Reuters report did not disclose an agreed purchase price.
It did not identify a signed sale agreement.
It did not establish that regulatory approvals had been requested.
And it explicitly acknowledged that the negotiations might not result in a transaction.
Shell declined to comment.
ONGC, GAIL and other Indian state-controlled companies did not provide substantive responses to Reuters’ enquiries.
The appropriate documentary conclusion is therefore precise.
On 26 May 2022, Reuters reported negotiations concerning a possible acquisition of Shell’s Sakhalin II interest by Indian companies. A completed transaction was not established.
The report is particularly valuable because RoyalDutchShellPlc.com preserved it on 28 May 2022.
This contemporary archive entry establishes that the proposed Indian sale was being publicly discussed before President Putin’s subsequent decree. Royal Dutch Shell Plc .com
2. Why India was interested in Russian energy
India’s possible interest in Sakhalin II was commercially understandable.
The country was one of the world’s largest energy consumers and importers.
It had longstanding ambitions to increase natural gas consumption and strengthen its access to international energy supplies.
Indian state-controlled companies also possessed experience of investing in overseas oil and gas developments.
ONGC Videsh was established to pursue international exploration, production and energy investments.
GAIL was a major participant in India’s natural gas infrastructure, trading and LNG activities.
The companies therefore had relevant commercial experience.
The timing was also significant.
Russia’s invasion of Ukraine had prompted Western energy companies to reconsider their Russian investments.
Shell, BP, ExxonMobil and other international businesses were announcing withdrawals or reductions in their Russian activities.
This created uncertainty over the ownership of substantial energy assets.
At the same time, Russian crude was becoming available to some international buyers at significant discounts.
Reuters reported that India’s purchases of Russian oil had increased sharply.
According to the International Energy Agency figures cited in the May investigation, India’s share of Russian oil exports had risen to approximately 10% from negligible levels earlier in the year.
The Indian government defended its energy-purchasing decisions by emphasising domestic energy needs and the interests of consumers.
India had not adopted the same comprehensive approach to Russian energy sanctions as several Western governments.
That difference created the possibility that Indian companies might acquire assets Western shareholders wished to leave.
But commercial interest should not be confused with a commitment to purchase.
An established LNG development can have significant value.
It can also carry substantial political, contractual, financing and sanctions-related risks.
A buyer would need to assess those risks before concluding a transaction.
The Reuters report does not disclose the Indian companies’ complete assessment.
It therefore cannot establish why the discussions ultimately failed to produce a completed acquisition. The Times of India
3. What exactly was Shell offering?
The Reuters report identified two potential commercial components.
The first was Shell’s 27.5% interest in Sakhalin Energy Investment Company Ltd.
The second concerned the company’s contractual arrangements for receiving LNG and crude oil.
These should be examined separately.
The equity interest
Shell’s interest was held through the Bermuda-incorporated Sakhalin Energy Investment Company.
The other shareholders were Gazprom, Mitsui and Mitsubishi.
The ownership structure was approximately:
Gazprom: 50% plus one share.
Shell: 27.5% minus one share.
Mitsui: 12.5%.
Mitsubishi: 10%.
Sakhalin II operated under a production-sharing agreement with the Russian state.
The project included offshore oil and gas fields, pipelines, processing facilities, an LNG plant and export terminals.
The LNG plant at Prigorodnoye began operations in 2009.
By 2022, Sakhalin II was an established supplier to Asian markets.
A purchaser of Shell’s interest would therefore be acquiring exposure to an operating project.
But the existing corporate structure and Russian regulatory environment imposed substantial limitations on the ability to transfer ownership.
The supply arrangements
Shell also had commercial interests in the project’s production.
Reuters reported that it was seeking separate bids relating to long-term supply agreements involving LNG and crude oil.
These arrangements were potentially significant.
For an international energy trader, access to contracted LNG cargoes can provide commercial value independently of equity ownership.
The ability to receive cargoes, transport them and sell them into international markets depends upon the terms of the relevant agreements.
However, the Reuters report did not publish the contracts.
It did not establish whether assignment or novation would have required the consent of Sakhalin Energy or other parties.
Nor did it establish the financial value of the proposed transfer.
Those details remain important gaps in the public documentary record.
The proposed transaction should therefore not be described simply as a sale of Shell’s LNG plant interest. It reportedly involved discussions about equity and separate contractual supply rights. The Economic Times
4. The financial position: A $1.614 billion impairment
The negotiations followed substantial financial charges recorded by Shell.
On 5 May 2022, the company published its first-quarter financial results.
They included a charge of:
$1.614 billion
This related specifically to the impairment of Shell’s Sakhalin II investment.
Shell also recognised other charges arising from its withdrawal from Russian activities.
The overall Russia-related charge for the first quarter was approximately $3.9 billion after tax.
The distinction is important.
The $3.9 billion figure represented charges associated with multiple Russian interests. It was not the value of Shell’s Sakhalin II stake.
The Sakhalin-specific impairment reflected the company’s reassessment of its ability to recover value from the investment.
Shell’s accounts explained that the recoverable amount had been estimated using risk-adjusted dividends declared in relation to Sakhalin Energy’s 2021 results.
The first part of those dividends was received in April 2022.
The company also reported that it had lost significant influence over Sakhalin Energy from 1 April.
This followed the resignation of Shell’s executive directors and the withdrawal of managerial and technical personnel.
Consequently, Shell changed the accounting treatment of the investment.
It was no longer accounted for as an associate using the equity method.
Instead, it became a financial asset measured at fair value.
This accounting change did not itself amount to a disposal.
Shell continued to hold its interest in the original company.
But its financial statements reflected the fact that it was no longer participating in the venture in the same way.
For any prospective purchaser, that distinction would have been relevant.
The asset being discussed was no longer part of a normal operating relationship between Shell and its Russian partners.
It was an investment from which Shell had already begun to withdraw. SEC
5. The May negotiations were not inherently impossible
There is an important contrast between Shell’s reported Sakhalin II negotiations and another Russian divestment completed during the same month.
On 12 May 2022, Shell announced an agreement to sell its Russian retail and lubricants business to LUKOIL.
The transaction concerned Shell Neft.
Its assets included 411 retail stations and a lubricants-blending plant in the Tver region.
More than 350 employees were expected to transfer to the new owner.
On 25 May, Shell confirmed that the sale had been completed following receipt of the necessary regulatory approvals.
The date is significant.
The completion occurred one day before Reuters reported the Indian Sakhalin II negotiations.
The contrast demonstrates that at least some conventional divestments of Shell’s Russian assets were still possible.
But it would be misleading to assume that the Sakhalin II investment could therefore be sold on equivalent terms.
Shell Neft was a downstream business.
Sakhalin II was a strategic upstream and LNG development operating under a production-sharing agreement and involving major Russian and Japanese shareholders.
Its importance to Russian energy exports and Asian customers was considerably greater.
The two transactions therefore faced different commercial and political circumstances.
Nevertheless, the Shell Neft sale provides an important documentary reference.
It confirms that Shell was pursuing actual asset disposals in May 2022.
The reported Indian discussions took place during a period when Shell had already demonstrated that a negotiated sale of some Russian operations could be completed.
That does not prove that the proposed Sakhalin transaction would have succeeded.
It establishes the relevant commercial context.
Authenticated primary source: Shell — Completion of Russian Retail and Lubricants Business Sale, 25 May 2022.
6. Moscow’s approval was always going to be decisive
Reuters explicitly warned that any Sakhalin II sale would require Russian government approval.
This was not a minor administrative issue.
The project operated under a Russian production-sharing agreement.
Gazprom was its controlling shareholder.
The proposed transaction involved a substantial interest in strategic Russian oil and gas infrastructure.
Following the invasion of Ukraine, the Russian government had introduced measures restricting certain transactions involving foreign investors.
The possibility of selling the stake to Indian companies therefore depended upon more than commercial agreement between buyer and seller.
The transaction would have required a legally effective mechanism recognised by the relevant Russian authorities.
This gave Moscow considerable influence over the proposed exit.
Shell could seek a purchaser.
The Indian companies could evaluate the investment.
The parties might negotiate a price.
But they could not assume that a transaction would be completed merely because they reached commercial agreement.
The precise legal consequences would depend upon the rules applicable at the time and the terms of any proposed deal.
No authenticated sale agreement with the Indian consortium has been identified.
Nor has a completed Russian approval process for such a sale been established.
The evidential record therefore supports the conclusion that Russian approval was a major condition.
It does not establish that the Russian government formally rejected a specific, completed Indian purchase application.
That distinction matters because the legal situation changed dramatically on 30 June. ETEnergyworld.com
7. Thirty-five days later: President Putin intervenes
On 30 June 2022, President Vladimir Putin signed Decree No. 416.
The decree concerned the ownership and operation of Sakhalin II.
It introduced a new structure under Russian law.
The rights and obligations associated with the existing operator, Sakhalin Energy Investment Company Ltd, were to be transferred to a newly established Russian company.
The decree also addressed the treatment of the original foreign shareholders.
They would be given an opportunity to apply for corresponding interests in the replacement entity.
The Russian government would determine whether their participation was approved.
The measure also contemplated the sale of interests that foreign shareholders did not obtain.
The proceeds could be subject to arrangements involving special accounts and potential claims for damages.
The implications for Shell were substantial.
Before the decree, the company was reportedly discussing a sale of its interest in the existing Sakhalin Energy structure.
After the decree, Russia established a different mechanism governing participation in the project.
A private negotiation over the original equity interest could no longer be considered independently of the new Russian arrangements.
The decree did not itself establish that Shell had entered into a binding sale agreement with the Indian consortium.
Nor did it establish that the Indian companies had submitted an approved purchase application.
But it fundamentally altered the legal and commercial circumstances surrounding any attempted transaction.
Reuters reported the decree on the day it was issued.
The report referred directly to the earlier Indian consortium discussions.
It also explained that foreign shareholders would have to seek Russian approval to retain interests in the new operating company.
The timing is unmistakable: Reuters reported the Indian negotiations on 26 May; President Putin signed Decree No. 416 on 30 June. Yahoo Finance
8. The distinction between Shell’s original shares and the new Russian company
One of the most important features of the subsequent dispute is that two different corporate structures became involved.
Shell’s original shares were in Sakhalin Energy Investment Company Ltd.
That company was incorporated in Bermuda.
The Russian decree established a replacement operating structure under Russian law.
The new company was Sakhalin Energy LLC.
These entities should not be treated as legally identical merely because they were associated with the same energy development.
Shell’s 2022 annual report carefully distinguished them.
The company stated that the Russian authorities had purportedly transferred the licences, assets, rights and obligations of the original operator to the replacement company.
Shell identified 17 August 2022 as the date on which those transfers were understood to have occurred.
The word purportedly is important.
It reflects Shell’s position concerning the legal effect of the Russian measures.
The company was not simply acknowledging an ordinary agreed corporate restructuring.
It was describing actions taken under Russian law while disputing their consequences.
This distinction helps explain why later references to the sale of Shell’s former 27.5% interest require particular care.
The Russian government arranged for the corresponding interest in the replacement company to be sold.
That was not the same as Shell voluntarily transferring its original Bermuda-company shares under a negotiated agreement.
The asset that Russia subsequently arranged to sell arose under the replacement Russian structure. It must not automatically be treated as the same transaction contemplated in the May 2022 Indian discussions. The Times of India
9. September 2022: Shell formally refuses the new arrangement
Shell’s 2022 annual report provides the decisive corporate record.
On 1 September 2022, Shell formally informed the Russian government that it would not apply for shares in the replacement company.
It also objected to the purported transfer of the original company’s assets and rights.
Shell reserved its legal rights and remedies.
This was an explicit corporate decision.
The company declined to participate in the new structure established by the Russian decree.
It also maintained its objections to the restructuring.
The consequences extended beyond the question of whether Shell would remain involved in Sakhalin II operations.
The Russian authorities were now able to pursue the process established for interests that foreign shareholders did not claim.
Shell’s refusal also demonstrated that the company was not simply seeking a different means of continuing its participation.
It intended to leave.
But it disputed the legal consequences of the measures imposed by Russia.
The company’s accounts subsequently recorded the carrying value of its Sakhalin II investment as zero at 31 December 2022.
This accounting figure should not be confused with a completed sale for zero consideration.
It reflected Shell’s accounting assessment.
The company continued to assert legal rights arising from the original investment.
The distinction would become increasingly important when Russian authorities subsequently assigned a substantial monetary value to the unclaimed interest.
Authenticated record: Shell’s 2022 Form 20-F — Note 6, Withdrawal From Russian Oil and Gas Activities.
10. Japan takes a different course
The conduct of Sakhalin II’s Japanese shareholders provides a revealing comparison.
Mitsui and Mitsubishi also faced the consequences of President Putin’s decree.
But unlike Shell, the Japanese companies sought to retain their interests through the new Russian structure.
On 25 August 2022, Mitsui submitted its consent to acquire an interest in the replacement company.
On 30 August, the Russian government approved its participation.
Mitsui announced the approval on 31 August.
The company stated that it would continue discussing the arrangements with relevant parties, taking account of Japan’s energy-supply needs and international sanctions.
Mitsubishi followed a similar course.
On 1 September 2022, it confirmed that the Russian government had approved its application.
The Japanese companies retained their respective percentage interests in the restructured project.
The contrast with Shell is significant.
All three foreign shareholders had been affected by the Russian decree.
But their subsequent responses differed.
Shell declined to seek shares in the replacement entity.
Mitsui and Mitsubishi applied to continue participating.
This difference reflected distinct corporate decisions made in different commercial circumstances.
Japan depended upon Sakhalin II as an important source of LNG.
Its government had emphasised the significance of maintaining energy supplies.
For the Japanese shareholders, continuing participation offered a possible means of protecting existing investments and supply arrangements.
Shell had already announced its intention to withdraw.
Its management and technical personnel had left the project.
The company also disputed the Russian restructuring.
The decisions therefore should not be presented as proof that one group of companies acted lawfully while another acted unlawfully.
They were different responses to the same Russian intervention.
The original announcements from Mitsui and Mitsubishi provide unusually strong primary evidence of this distinction. MITSUI & CO., LTD.
11. The Indian consortium disappears from the ownership outcome
What became of the Indian negotiations reported in May?
The subsequent ownership record provides the clearest answer.
The Sakhalin II interest corresponding to Shell’s former 27.5% participation did not pass to the Indian consortium.
The Russian government subsequently pursued alternative arrangements.
In April 2023, Russia approved Novatek as the proposed purchaser of the unclaimed interest.
The approved valuation was approximately 94.8 billion roubles.
Novatek was already a significant Russian natural gas producer.
Its proposed acquisition would have kept the disputed interest within Russian energy-industry ownership.
However, that arrangement did not proceed as initially envisaged.
In March 2024, the Russian government replaced Novatek with a Gazprom-controlled company.
The new approved purchaser was Sakhalin Project LLC.
The price remained approximately 94.8 billion roubles.
Reuters and Interfax reported the decision.
The March 2024 measure was issued under Russian government Order No. 701-r, dated 23 March.
It superseded the earlier approval concerning Novatek.
The sequence is important.
In May 2022, Indian companies were reportedly considering purchasing Shell’s interest.
In April 2023, the Russian authorities approved Novatek as the proposed buyer under the replacement arrangements.
In March 2024, the Russian authorities approved a Gazprom-controlled company instead.
The Indian companies named in the May 2022 Reuters investigation did not become the purchasers of the disputed Sakhalin II interest.
However, the available documents do not establish precisely when the Indian negotiations ended.
They do not establish whether a final commercial proposal was submitted.
Nor do they establish that the Indian consortium was formally rejected by Russia.
The documented conclusion is that the negotiations did not produce the eventual ownership outcome. Interfax
12. The 94.8 billion rouble question
The Russian government’s valuation introduced another complication.
The approved price for the corresponding 27.5% interest was:
94.8 billion roubles
At the exchange rates reported when the 2024 transaction was announced, this was approximately US$1 billion.
But that figure should not be compared mechanically with Shell’s original investment cost or its 2022 impairment charge.
They represent different financial measures.
Shell’s $1.614 billion impairment concerned the accounting value of its Sakhalin II investment following the withdrawal decision.
The 94.8 billion rouble figure was the price approved by Russia for the corresponding interest in the new operating company.
The two values arose under different circumstances.
There were also significant questions concerning the proceeds.
Would Shell receive the money?
Would it be held in a restricted account?
Could Russian authorities apply deductions?
Would compensation claims affect the amount ultimately available?
These questions were not merely theoretical.
In May 2023, Shell’s chief financial officer, Sinead Gorman, addressed reports concerning the proposed Novatek transaction.
She stated that Shell had not received payment and continued to retain its legal rights.
That was a contemporaneous statement about the company’s position at the time.
It did not establish that no subsequent payment or transfer could ever occur.
But it demonstrated that approval of a proposed Russian sale was not equivalent to Shell receiving unrestricted proceeds.
The later Russian litigation would bring the issue back into focus. Interfax
13. The legal aftermath: From an Indian sale proposal to a Moscow lawsuit
The consequences extended well beyond the negotiations of May 2022.
On 2 October 2024, Russia’s Prosecutor General initiated proceedings against eight Shell-group entities in Moscow.
Shell’s 2025 Form 20-F, filed with the US Securities and Exchange Commission on 12 March 2026, contains the company’s subsequent disclosure concerning the litigation.
The proceedings include allegations relating to Shell’s withdrawal from Sakhalin Energy Investment Company.
The prosecutor also seeks approximately:
€1.5 billion
The monetary claim concerns alleged unpaid gas deliveries in 2022 involving Shell Energy Europe Limited and Gazprom Export.
A further element concerns the approximately 94 billion roubles said to have been set aside as compensation associated with Shell’s former Sakhalin interest.
The Russian prosecutor seeks to have those funds applied against part of the alleged gas debt.
This introduces a particularly important distinction.
The compensation associated with Sakhalin II equity and the alleged debt under gas-supply arrangements are separate matters.
They arise from different commercial relationships.
The Russian proceedings seek to connect them through the proposed application of funds held in a restricted account.
Shell’s 2025 Form 20-F stated that the proceedings remained ongoing.
The company also said it could not reliably estimate the magnitude or timing of any eventual payment obligation.
The litigation therefore forms part of the continuing financial consequences of Shell’s withdrawal.
But the Russian prosecutor’s allegations are contested.
The existence of proceedings does not establish that Shell unlawfully abandoned the project.
Nor does it establish that Gazprom Export is entitled to the claimed amount.
The available primary corporate record is Shell’s disclosure of the proceedings.
This instalment does not claim to have independently examined the complete Russian court pleadings or all subsequent procedural orders.
That limitation should be understood when assessing the legal position.
The important historical development is that a prospective commercial disposal discussed in May 2022 was followed by a Russian restructuring, a state-approved transfer and litigation concerning the associated financial rights. SEC
14. The significance of the original Donovan–Shell archive
RoyalDutchShellPlc.com preserved the Reuters investigation on 28 May 2022.
That contemporary publication deserves particular attention.
It was created more than a month before President Putin’s decree.
It therefore records the Indian sale discussions without the benefit of knowing what Moscow would subsequently do.
This is important because retrospective reporting can unintentionally make earlier events appear more predictable than they were.
A historian examining the entire sequence in 2026 knows that the Indian consortium did not ultimately acquire Shell’s stake.
A journalist writing on 26 May 2022 did not know that outcome.
Reuters reported negotiations.
It identified possible purchasers.
It explained the potential importance of the associated supply contracts.
It warned that Russian approval would be necessary.
And it acknowledged that the discussions might not result in a transaction.
The report was appropriately cautious.
That caution remains justified.
The later Russian restructuring does not prove that the original negotiations were insincere.
It does not prove that Shell had already agreed a price.
It does not prove that Russia had secretly decided to block an Indian acquisition.
Those propositions would require additional contemporaneous evidence.
The original archive entry should therefore be retained as evidence of what was publicly known at the time.
It also provides a useful starting point for further research.
The original Reuters sources were anonymous.
The complete commercial negotiations remain largely undocumented in the public record.
Any surviving correspondence involving Shell, the Indian companies or relevant government authorities could materially improve understanding of the episode.
The value of the archive lies partly in preserving the original question.
Did Shell have a genuine opportunity to sell its Sakhalin II interest before the Russian government changed the rules?
The existing documents establish that discussions were reported.
They do not establish how close those discussions came to completion. Royal Dutch Shell Plc .com
DOCUMENTARY FINDINGS
Established facts
Shell announced its intention to withdraw from Sakhalin II on 28 February 2022.
The company held a 27.5% minus one share interest in Sakhalin Energy Investment Company Ltd.
On 26 May 2022, Reuters reported that Shell was discussing the possible sale of its interest with a consortium of Indian energy companies.
ONGC Videsh and GAIL were among the companies identified.
Reuters also reported that Shell was seeking separate bids concerning long-term LNG and crude-oil supply arrangements.
Shell declined to comment on the reported negotiations.
The Indian companies did not publicly confirm a completed transaction.
Any conventional sale would have required Russian approval.
Shell had already recognised a $1.614 billion impairment relating to Sakhalin II in the first quarter of 2022.
On 30 June 2022, President Putin signed Decree No. 416, providing for the replacement of Sakhalin II’s operating structure.
Shell subsequently stated that the project’s rights and obligations had purportedly been transferred to the new Russian company on 17 August 2022.
On 1 September, Shell informed the Russian government that it would not apply for shares in the replacement company.
Shell also objected to the purported transfers and reserved its rights and remedies.
Mitsui and Mitsubishi applied to participate in the replacement company and received Russian government approval.
In April 2023, Russia approved Novatek as the proposed purchaser of the unclaimed 27.5% interest.
In March 2024, Russia replaced Novatek with a Gazprom-controlled company.
The approved valuation remained approximately 94.8 billion roubles.
The Indian consortium did not acquire the interest through the subsequent Russian arrangements.
Shell’s 2025 Form 20-F disclosed continuing Russian litigation concerning its withdrawal and associated gas-supply obligations.
Financial distinctions
The $1.614 billion Sakhalin II impairment was an accounting charge.
It was not a payment received by Shell.
The overall Russia-related first-quarter 2022 charge of approximately $3.9 billion after tax concerned multiple investments and obligations.
It was not the valuation of the Sakhalin II interest alone.
The 94.8 billion rouble figure represented a price approved under the Russian restructuring arrangements.
It was not evidence that Shell had received unrestricted proceeds.
The alleged €1.5 billion gas debt concerns a separate commercial relationship and remains contested.
Legal distinctions
Shell’s original investment was held through a Bermuda-incorporated company.
The subsequent Russian operating company was a different legal entity.
The transfer of the project’s operating rights was imposed under Russian measures rather than completed through a conventional voluntary disposal by Shell.
Shell expressly objected to the purported transfers.
The subsequent Russian lawsuit is evidence of a legal dispute.
The allegations made in that lawsuit are not treated as established findings.
Matters not established
The available evidence does not establish that Shell signed a binding sale agreement with ONGC Videsh, GAIL or the reported Indian consortium.
It does not establish an agreed purchase price.
It does not establish that Russian authorities formally rejected a completed Indian purchase application.
It does not establish whether the negotiations ended before or after the presidential decree.
It does not establish that Shell or the Indian companies acted improperly during the discussions.
It does not establish that Russia’s subsequent restructuring was undertaken specifically to prevent the Indian companies from acquiring the asset.
It does not establish that Shell has received unrestricted payment of the 94.8 billion rouble amount.
Nor does it establish the outcome of the ongoing Russian claims described in Shell’s latest available annual filing.
EDITORIAL COMMENTARY
The commercial exit that became a political decision
The Indian discussions provide an unusually revealing example of the difficulties faced by multinational energy companies attempting to withdraw from Russia.
Shell had invested in Sakhalin II over several decades.
The project had survived regulatory controversy, political pressure and a major ownership restructuring in 2006.
Gazprom had acquired control.
Shell remained a minority shareholder.
The project continued producing oil and LNG.
By February 2022, Shell was still participating in an established and commercially important international energy development.
Russia’s invasion of Ukraine changed the company’s position.
Shell announced that it would withdraw.
But deciding to leave an investment and successfully disposing of it are different matters.
A conventional exit requires a willing buyer, agreement on commercial terms and the ability to complete a legally effective transfer.
For Sakhalin II, Russian government approval was also necessary.
The reported Indian negotiations offered a possible solution.
Indian energy companies had relevant commercial experience.
They were interested in international energy supplies.
Their government had maintained a different approach to Russian energy trade from several Western governments.
A negotiated transaction might therefore have been commercially conceivable.
But the evidence does not establish that such a transaction had reached an advanced stage.
That limitation is important.
We should not reconstruct a completed deal that never existed.
The decisive change
The Russian presidential decree altered the position fundamentally.
The existing operator’s rights and obligations were to be transferred into a new Russian structure.
Foreign shareholders had to seek approval to participate.
Shell refused.
Japan’s Mitsui and Mitsubishi pursued continued involvement.
Russia subsequently arranged for the unclaimed interest to pass to a Russian purchaser.
By March 2024, the approved purchaser was a Gazprom-controlled company.
This was a very different outcome from the potential Indian transaction reported in May 2022.
The distinction illustrates the limits of commercial decision-making when an investment is subject to extensive state control.
Shell could decide that it wanted to leave Russia.
It could explore discussions with potential buyers.
But it could not independently determine how Russian authorities would treat the investment.
Nor could it guarantee that a proposed transaction would be permitted to proceed.
What the financial accounts reveal
The financial statements provide another important lesson.
A company may recognise an impairment before the precise legal consequences of an investment have been resolved.
Shell’s Sakhalin II impairment was recorded in the first quarter of 2022.
Its loss of significant influence was recognised from 1 April.
The Russian decree followed on 30 June.
The company formally refused participation in the replacement structure on 1 September.
A Russian valuation and proposed sale followed later.
These events should not be collapsed into a single transaction.
They are separate stages in the financial and legal history of the investment.
The impairment did not mean Shell had sold the stake.
The Russian valuation did not mean Shell had received the proceeds.
And the subsequent lawsuit did not establish that Russia’s claims were legally justified.
The distinctions are particularly important for shareholders.
The wider historical significance
The Sakhalin II story began long before the events of 2022.
Shell had participated in developing a strategically important energy project in Russia’s Far East.
The company experienced the ownership confrontation of 2006.
It accepted a minority position following Gazprom’s acquisition of control.
It continued to participate for approximately fifteen years.
Then Russia’s invasion of Ukraine prompted Shell to withdraw.
The Indian consortium discussions represented one possible route out.
The Russian presidential decree introduced another route, controlled by the Russian state.
The eventual Gazprom transaction and related financial disputes demonstrated that the consequences extended well beyond Shell’s original announcement.
The central documentary conclusion is that Shell explored a possible commercial exit from Sakhalin II in May 2022, but the subsequent transfer of the project’s operating arrangements was governed by Russian state action rather than an independently completed sale to the reported Indian consortium.
That conclusion is established by the surviving records.
It requires no speculation about secret agreements or improper conduct.
But it also leaves a substantial historical question.
What might have happened had Shell completed a negotiated sale before President Putin’s intervention?
The documents do not permit a definitive answer.
And that uncertainty is part of the record.
PRINCIPAL SOURCES
1. Shell plc — Original Announcement of Withdrawal From Gazprom Partnerships, 28 February 2022
The authenticated corporate announcement identifying Shell’s intention to withdraw from its 27.5% Sakhalin II interest and other Russian ventures.
Read Shell’s original announcement
2. Reuters — Ron Bousso and Nidhi Verma, Exclusive: Shell in Talks With Indian Consortium to Sell Russian LNG Plant Stake, 26 May 2022
The principal contemporaneous investigation reporting discussions with Indian companies, including ONGC Videsh and GAIL, and possible separate transactions concerning LNG and crude-oil supply arrangements.
Read the Reuters investigation preserved by RoyalDutchShellPlc.com
3. Reuters — Original Report Republished by The Times of India, 26 May 2022
A second accessible publication of the same Reuters investigation. It is included for accessibility, not as independent corroboration of the anonymous sources.
4. Shell plc — Completion of Russian Retail and Lubricants Business Sale, 25 May 2022
The authenticated corporate statement confirming the completed sale of Shell Neft to LUKOIL. It provides a useful comparison with the proposed Sakhalin II transaction.
Read Shell’s original announcement
5. Shell plc — Second Quarter 2022 Interim Financial Report
The SEC-hosted financial statement documenting Shell’s loss of significant influence over Sakhalin II, the $1.614 billion impairment and the subsequent accounting treatment.
6. Reuters — Russia Will Replace Sakhalin II Project Operator With New Firm, 30 June 2022
The contemporaneous report concerning Presidential Decree No. 416 and the requirement for foreign shareholders to seek approval for continued participation.
7. Japan External Trade Organization — Report on Russian Presidential Decree No. 416, 4 July 2022
The official Japanese trade organisation’s contemporary examination of the decree and its implications for the project’s existing ownership arrangements.
8. Mitsui & Co. — Sakhalin II Project Announcement, 31 August 2022
The authenticated corporate statement confirming Mitsui’s application and Russian approval for continued participation in the replacement operator.
Read Mitsui’s original announcement
9. Mitsubishi Corporation — Sakhalin II Project Announcement, 1 September 2022
The authenticated corporate statement confirming Mitsubishi’s corresponding application and approval.
Read Mitsubishi’s original announcement
10. Shell plc — 2022 Annual Report and Form 20-F, Note 6
The principal authenticated Shell record documenting the presidential decree, Shell’s formal refusal to participate in the new Russian company, its objections and its year-end accounting treatment.
Read the SEC-hosted 2022 Form 20-F
11. Interfax — Shell Has Not Received Funds for Sakhalin II Stake, 4 May 2023
Contemporaneous reporting of Shell Chief Financial Officer Sinead Gorman’s statement that Shell had received no payment and retained its legal rights.
12. Interfax — Gazprom Replaces Novatek as Buyer of 27.5% Stake in Sakhalin Energy, 25 March 2024
The report identifying Russian Government Order No. 701-r and the approval of a Gazprom-controlled purchaser at a price of 94.8 billion roubles.
13. Reuters — Gazprom’s Unit Buys Former Shell Stake in Sakhalin Energy, 26 March 2024
Independent contemporaneous reporting of the Russian government’s decision concerning the unclaimed stake.
14. Shell plc — 2025 Form 20-F, Filed 12 March 2026
The latest annual Shell filing examined for this investigation. It includes the company’s disclosure of the Moscow proceedings concerning Sakhalin II, the alleged €1.5 billion gas debt and the funds said to have been reserved for Shell.
Read Shell’s SEC filing — Note 32, Legal Proceedings and Other Matters
15. RoyalDutchShellPlc.com — Original Contemporary Archive Entry, 28 May 2022
The Donovan–Shell archive’s preservation of the Reuters investigation, published before President Putin’s June 2022 intervention.
Read the original archive entry
DOCUMENTARY DISCLAIMER
This instalment relies upon authenticated Shell corporate announcements, financial statements filed with the United States Securities and Exchange Commission, contemporaneous Reuters and Interfax reporting, official Russian measures and public statements issued by Mitsui and Mitsubishi.
The negotiations involving Indian energy companies are reported on the authority of Reuters’ investigation of 26 May 2022.
The original sources cited by Reuters were anonymous.
No binding sale agreement involving the Indian consortium has been independently obtained or identified.
The reported negotiations are distinguished throughout from a completed transaction.
The original equity interest held through Sakhalin Energy Investment Company Ltd is distinguished from the corresponding interest in the replacement Russian operating company established following Presidential Decree No. 416.
Shell’s description of the transfer of rights and obligations as purported is preserved.
The company’s financial impairments are distinguished from realised sale proceeds.
The 94.8 billion rouble valuation is identified as an amount approved under Russian government arrangements, not as evidence that Shell received unrestricted payment.
The subsequent Russian legal proceedings are identified as contested.
The allegations made by the Russian prosecutor are not presented as judicial findings.
The relevant court claims are described principally through Shell’s public financial disclosures and contemporaneous reporting. The complete original Russian court file has not been independently examined for this instalment.
No allegation is made that the Indian companies acted unlawfully.
No allegation is made that Shell deliberately misrepresented the negotiations.
No allegation is made that Russia’s restructuring was specifically designed to defeat a completed Indian purchase agreement.
Editorial commentary is identified separately from authenticated facts and attributed reporting.
Relevant corrections, additional primary documents and responses from Shell, the Indian companies and other interested parties are welcome.
The website’s general disclaimer also applies.
NEXT IN THE SHELL LEAKS FILES
SLF-2007-107 — The Sakhalin Papers XCVII: Thirty Days to Decide — Putin’s Decree, Japan’s Acceptance and Shell’s Refusal
On 30 June 2022, President Vladimir Putin signed Decree No. 416.
The measure fundamentally changed the ownership arrangements surrounding Sakhalin II.
A new Russian company was to assume the existing operator’s rights and obligations.
Foreign shareholders would have to seek approval to retain their interests.
The decree also introduced a potentially consequential provision concerning compensation.
Russia could assess damages allegedly caused by foreign shareholders and apply deductions against proceeds from the sale of unclaimed interests.
For Shell, the implications were extraordinary.
The company had already announced its intention to withdraw.
It had recognised a substantial impairment.
Its directors and technical personnel had left the project.
Now the Russian government was establishing the terms under which foreign shareholders could participate in the replacement company.
Japan’s Mitsui and Mitsubishi sought approval to remain.
Shell refused.
The company’s annual report subsequently recorded its objections to the purported transfer of the original operator’s assets and rights.
But the decree’s consequences extended well beyond the immediate ownership question.
Who would determine the value of the unclaimed interests?
How would the Russian authorities calculate any alleged damages?
What legal protection would the original foreign shareholders retain?
Could the proceeds be withheld?
And how would the production-sharing agreement originally negotiated in the 1990s interact with the new Russian measures?
The next instalment will examine the decree itself, the official Russian implementation measures, the Japanese shareholders’ responses and Shell’s authenticated financial disclosures.
It will distinguish Russian legal assertions from Shell’s position and identify the limits of what can be established without the complete underlying court records.
The investigation will also return to an issue that has followed Sakhalin II since the confrontation of 2006:
The extent to which a foreign energy investor could protect its commercial rights when the Russian state determined the terms of continued participation.
In 2006, Shell surrendered control of Sakhalin II to Gazprom through a negotiated transaction.
In 2022, it refused to participate in a new Russian structure imposed after the invasion of Ukraine.
The two episodes were legally and politically different.
But they raised an enduring question about corporate exposure to state power.
Who ultimately controlled the future of Sakhalin II — its shareholders, or the Russian government?
The documentary record contains important evidence.
The Sakhalin Papers continue.
Editorial note: The essential distinction in this instalment is between the reported Indian negotiations of May 2022 and the later transfer of an interest in the replacement Russian company. The evidence supports the existence of reported negotiations but not a completed Indian purchase. That qualification should remain prominent in the published version.
*This website and sisters royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net, and shellwikipedia.com, are owned by John Donovan - more information here. There is also a Wikipedia segment, the Shell DPA Files, "Shell and the Spies", the Shell Leaks files, the Independent Shell Archive, as well as books written and published by John Donovan - Kindle eBooks. Timeline of the Donovan Shell Feud. Toxic History of Royal Dutch Shell Group. Shell and the Donovans: The Full Media Record — 550+ Articles, 110 Books, 40 Years. *All conjured up by internet wizz, Nick Gill.
