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Shell plans to expand oil and LNG business in Russia

Shell believes that Russia can grow in this market and become a global leader

MOSCOW, January 17. /TASS/. Shell intends to expand its business in Russia, focusing on oil projects in Western Siberia and LNG projects, Cederic Cremers, Executive Vice President and Country Chair Russia at Shell, told reporters.

"Of course, we are expanding our oil business in Western Siberia, and our goal is to grow and further expand our presence here. As for gas, we are major players in the LNG market (liquefied natural gas - TASS). We believe that Russia can grow in this market and become a global leader. Our goal is to understand how to strengthen and improve our position on Sakhalin, everyone knows that there are technical difficulties there," he said.

On Sakhalin-2 project

The expansion of the Sakhalin-2 project has not been suspended, the issue is on the agenda, Cremers told reporters. According to him, the assessment of the resource base for the third phase of the project may take more than a year.

"It [expansion] has not been suspended. The issue is on the agenda. Yes, it will take longer than we expected before," he said.

At the same time, Cremers believes that the timing will not affect the competitive position of the project, which is located close to the main consumers.

"We proceed from the fact that Sakhalin-1 resources will not be available to us, so Sakhalin Energy should work on developing our own resources and the opportunities that are nearby. We are working on this program now. First of all, we need to evaluate how long we will be able to support the first two lines. I think this will take more than a year," Cremers said, answering a question about the prospects for expanding the capacity of the Sakhalin-2 plant.

In November 2019, Reuters reported, citing sources, that the expansion of the Sakhalin-2 LNG plant was suspended due to a lack of a resource base, international sanctions and Gazprom’s plans to expand gas supplies to China.


About project

Sakhalin-2 is Russia's first liquefied natural gas (LNG) plant. It was launched in 2009, and a year later reached its full capacity of 9.6 mln tonnes of LNG per year.

Since then, Sakhalin Energy, the operator of the Sakhalin-2 project, managed to further increase production to 11.41 mln tonnes of LNG in 2018.

Gazprom holds 50% plus one share in Sakhalin Energy, while Shell has 27.5% minus one share, Mitsui&Co. Ltd owns 12.5%, Mitsubishi Corporation holds 10%.

The construction of the third phase will increase the plant's capacity to 15 million tonnes.

In April 2019, it was reported that Sakhalin Energy completed the development of the project’s documentation for the construction of the third phase of the project, but it is too early to speak about the end of negotiations on raw gas to expand the plant.

In May 2019, Gazprom announced that it was considering Sakhalin-3 as a resource base for expansion of the Sakhalin-2 LNG plant.

On Nord Stream 2

Shell, one of Gazprom’s partners in construction of the Nord Stream 2 gas pipeline, remains committed to the project, Cremers said.

"We believe this project [Nord Stream 2 - TASS] is highly important for energy security in Europe," the top manager said. The pipeline transport has advantages, and we therefore support the project, Cremers noted. Introduced sanctions affect the project and are the cause that the project could be indeed postponed for some time," he noted.

Nord Stream 2 is an international project for the construction of a gas pipeline that will run across the bottom of the Baltic Sea from the Russian coast to Germany bypassing transit states, such as Ukraine, Belarus, Poland and other Eastern European and Baltic countries.

The new 1,200 kilometer pipeline, basically following the same route as Nord Stream, will traverse economic zones and territorial waters of five countries, namely Russia, Finland, Sweden, Denmark, and Germany. The pipeline’s capacity will be 55 billion cubic meters of gas a year.