Royal Dutch Shell has offered to cede control of the $22 billion Sakhalin-2 project, Russia's biggest single foreign investment, to state gas monopoly Gazprom after months of government pressure, industry sources said.
An agreement in principle for oil major Shell to reduce its 55 per cent stake to a blocking stake of at least a quarter in the world's largest liquefied natural gas (LNG) project was reached at talks last week, the sources told Reuters.
Both companies confirmed that Shell CEO Jeroen van der Veer had met Gazprom head Alexei Miller in Moscow on Friday, but declined to go into detail on their talks.
"I can confirm that Shell's chief executive officer Jeroen van der Veer met Gazprom head Alexei Miller and Energy Minister Viktor Khristenko in Moscow on Friday to discuss Sakhalin-2-related issues," a Shell spokesman told Reuters yesterday.
"The discussions were positive but their contents remain confidential."
The tentative understanding comes after months of pressure from Russia's Natural Resources Ministry and its environmental regulator, which have accused Shell of ecological violations in project work on the remote Far Eastern island of Sakhalin.
Gazprom's chief spokesman, Sergei Kupriyanov, said: "Shell did indeed make several proposals concerning Sakhalin-2 at a meeting on Friday.
"Gazprom has yet to decide on Shell's proposals because the project's problems, including ecological problems, remain in place," Mr Kupriyanov told Reuters.
Industry analysts suspect the official campaign was designed to secure better terms for Russia, which has no equity stake in Sakhalin-2 under a production-sharing agreement struck in the early 1990s.
Work on Sakhalin-2, which will supply an LNG processing facility with a capacity of 9.6 million tonnes per year, is mostly complete but threats of licence withdrawals, fines and litigation are disrupting project work.
Industry watchers say that a high-profile campaign waged against Shell by Oleg Mitvol, deputy head of environmental agency RosPrirodNadzor, may come to an abrupt end if Gazprom does secure control of Sakhalin-2.
"All of these environmental claims will go away now - that's the way deals are done in Russia," one senior investment banker told Reuters.
Shell's London-listed A shares, which have performed in line with the DJ Stoxx European oil and gas sector index over the past 12 months, were down 0.7 per cent at 1,805 pence by 0830 GMT to value the business at £117 billion.
A doubling of estimated costs at Sakhalin derailed an earlier deal under which Shell would have swapped a one-quarter stake in Sakhalin for an interest in Gazprom's Zapolyarnoye gas field, located north of the Arctic Circle in West Siberia.