Russia approves Mitsubishi for stake in new Sakhalin-2 operator

(Reuters) -Russia has approved an application by Japan’s Mitsubishi to take a stake in the new operator of Russia’s Sakhalin-2 liquefied natural gas (LNG) project, a government order published on Wednesday showed.

In an order signed by Russia’s Prime Minister Mikhail Mishustin, Russia’s government said it had approved Mitsubishi’s request to transfer a 10% stake in the old operator to an equal stake in Sakhalin Energy, a new entity that President Vladimir Putin ordered to be established to take over ownership of the vast LNG project in Russia’s far east.

Following Russia’s invasion of Ukraine and the imposition of Western sanctions on Moscow, President Putin ordered the project be transferred from its Bermuda-based operator to a domestic company and told foreign shareholders they would have to reapply to maintain their stake in the new entity.

The move was seen as raising the stakes in an economic war with the West and its allies.

Sakhalin-2 is one of the world’s largest LNG projects, supplying about 4% of the global market. A joint venture between Shell, Russia’s Gazprom and Japan’s Mitsui & Co and Mitsubishi, it had been viewed as a flagship example of international investment in Russia’s lucrative energy industry.

Shell said earlier this year that it would exit its 27.5% stake, writing off an investment with a book value of $1.6 billion. It is unclear what will happen to Shell’s shares, though the company was reported to be in discussions with potential buyers over the summer.

Gazprom holds a 50%-plus-one-share stake in the operation.

On Tuesday the Kremlin approved a separate application from Japan’s Mitsui & Co to transfer its 12.5% stake in the project to the new entity.

(Reporting by ReutersEditing by David Goodman)