Shell agrees to sell Russian gas overseas

The Anglo-Dutch company Shell has received permission from Gazprom to sell Russian gas abroad in a collaborative project with Baltiiskii LNG.

Shell has agreed to maintain specified limits on LNG’s marketing in the project, particularly by avoiding supplies in European countries where Gazprom has gas pipelines, in order to avoid direct competition with Gazprom.

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Before Baltiiskii LNG can supply gas abroad, it is necessary to make changes to Russian legislation. According to the law, only certain companies have the right to sell Russian gas. First is Gazprom and its 100 percent subsidiaries. Other state-owned companies may also sell Russian gas abroad only in liquefaction form of gas from offshore deposits, such as Rosneft. Additionally, companies with a mining license for gas liquefaction at the beginning of 2013 may also sell abroad, such as Yamal LNG.

Shell is also in discussions with Gazprom about obtaining gas assets in Russia in exchange for Gazprom receiving certain positions in Asia. However, U.S. sanctions have made such a deal unlikely.

Baltiiskii LNG is a construction project in the Ust-Luga area of Leningradski Oblast, a gas liquefaction plant with a capacity of 10 million tons a year. The plant is scheduled to open in late 2021, with investments of $11.5 billion. In June 2015, Gazprom signed a memorandum of partnership with Shell, but there still have been no legally binding agreements between the two countries.

First published in Russian by Kommersant

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