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    Shell eyes Indian bid for Sakhalin-2 stake: press

Summary

UK major was previously reported to be seeking Chinese interest in a sale.

by: Callum Cyrus

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Natural Gas & LNG News, Europe, Liquefied Natural Gas (LNG), Security of Supply, Corporate, Mergers & Acquisitions, Political, Territorial dispute, News By Country, Russia

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Shell eyes Indian bid for Sakhalin-2 stake: press

Shell has opened talks with Indian energy companies including ONGC Videsh and GAIL regarding its stake in the Sakhalin-2 LNG project in Russia's Far East, Reuters reported May 26.

The UK major owns 27.5% in Sakhalin-2, but it is exiting the project as part of its gradual drawdown of its Russian activities, announced March 8. Russia's Gazprom owns a 50% operating stake plus one share, while Japan's Mitsui and Mitsubishi have 12.5% and 10% respectively.

Western sanctions against Russia prevent US and European IOCs from buying Shell’s stake. Reuters reported April 21 that Shell's shareholding could be sold to Sinopec, CNOOC and CNPC, with China officially neutral regarding Moscow's invasion of Ukraine. India has maintained its non-aligned policy stance in light of the war, and has resisted Western calls to ban Russian energy imports.

China has closer political ties to the Kremlin and arguably seems the more likely buyer, given India currently purchases relatively little Russian LNG. GAIL has a contract to buy 2.5mn mt/yr from Gazprom's Singapore-based trading arm. It bought 2mn mt from Gazprom in 2021, and plans to import 2.5mn mt in 2022 and 2.85mn mt in 2023, according to the Economic Times.

However, India is the world’s fourth-largest LNG customer, and demand is expected to ramp up significantly over the coming decades. In the 2020 to 2040 period, India is projected to require an additional 35 to 45mn mt/yr of LNG, according to Shell estimates reported by local media.  

India's LNG import capacity currently stands at 42.5mn mt/yr, and it has many expansion projects underway. That might reduce the budget that ONGC and GAIL  - both bankrolled by the Indian state - are willing to splash during the Sakhalin-2 negotiations. 

India also has other options if it wants to grab an LNG foothold abroad. Its biggest LNG importer, the privately-owned Petronet LNG, has told Reuters it could buy into the expansion of Qatar’s North Field LNG project, potentially in partnership with ONGC Videsh.

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