Shell breaks off Gazprom partnerships, Nord Stream 2 pipeline role

Shell said Feb. 28 it was breaking off its partnerships with Russian energy giant Gazprom, including the Sakhalin-2 crude and LNG project in the Russian Far East, and also ending its involvement in the Nord Stream 2 pipeline project in response to the invasion of Ukraine.

In a statement, Shell said it was ending its 30-year-long involvement in Sakhalin-2 along with other joint ventures at the Salym fields in Khanty-Mansiisk and the Gydan project in northwest Siberia. It said it also was ending its financing role in the contentious Nord Stream 2 pipeline project that runs from Russia to Germany under the Baltic Sea.

"The board of Shell today announced its intention to exit its joint ventures with Gazprom and related entities, including its 27.5% stake in the Sakhalin-2 LNG facility, its 50% stake in the Salym Petroleum Development and the Gydan energy venture. Shell also intends to end its involvement in the Nord Stream 2 pipeline project," it said.

CEO Ben van Beurden said: "We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression which threatens European security," adding the company would work with partners in the relief effort in support of Ukraine.

"We cannot and we will not stand by," van Beurden said. "Our immediate focus is the safety of our people in Ukraine and supporting our people in Russia. In discussion with governments around the world, we will also work through the detailed business implications, including the importance of secure energy supplies to Europe and other markets, in compliance with relevant sanctions."

Shell holds a 27.5% stake in Sakhalin-2, which was Russia's first LNG facility and featured Russia's first offshore crude platform. The company has had an at-times fraught history at Sakhalin, having given up part of its original stake to Gazprom in 2007.

Shell was also a backer of the Nord Stream 2 pipeline project, vehemently opposed by the US and Ukraine among others, and seen as a factor straining Russia's international ties in the run-up to the Ukraine invasion. German authorities have put the project on hold and commentators have questioned whether it has a future.

Shell is one of five energy companies to have committed to provide financing and guarantees for up to 10% of the estimated Eur9.5 billion ($10.7 billion) Nord Stream 2 project cost.

On Feb. 27, BP said it was pulling out of its 19.75% stake in Rosneft following growing investor and political pressure.

The moves come as numerous foreign companies are under scrutiny over their involvement in Russian energy and commodity projects.