As Russia's invasion of Ukraine escalated, Shell Plc sold its 27.5% stake in Russia's liquefied natural gas company Sakhalin-2. The energy giant is in discussions with a major Chinese-owned energy company, according to people familiar with this, as reported by Bloomberg on Friday (22/4).
Shell has spoken to Cnooc, CNPC and Sinopec Group in an effort to exit the Russian natural gas business. Discussions are at an early stage and it remains possible no deal will be agreed with the company, the people said.
The talks include a potential sale of shares to one of the Chinese companies, to two companies, or to a consortium of all three. Shell is also open to talking to other potential buyers outside of China, one of the sources said.
However, Shell declined to comment. Representatives for China National Offshore Oil Corp., China National Petroleum Corp. and China Petrochemical Corp., the official names for the three Chinese companies, did not immediately respond to requests for comment.
The State Council's China State-Owned Assets Administration and Supervision Commission, which oversees state-owned enterprises, also did not immediately respond to a request for comment.
Shell, as well as rivals including Exxon Mobil Corp., shocked the energy industry by hinting at plans to abandon billions of dollars worth of Russian assets after war broke out in Ukraine in February. Earlier this month, Shell said its withdrawal from Russia would result in a loss of US$5 billion.
London-based competitor BP Plc is also reaching out to state-backed firms in Asia and the Middle East, including CNPC and Sinopec, in a bid to sell off its 20% stake in Russia's Rosneft PJSC, Bloomberg reported last month.
In fact, dozens of Shell employees temporarily assigned to the Sakhalin-2 project in Russia have been moved over the weekend to be reassigned to other offices as the company moves forward with an exit.
Russia's war in Ukraine has rattled energy markets and sent commodity prices soaring, adding to pressure on governments globally to rethink their long-term planning for fuel supplies.
China's still close trade ties with Moscow leave the country's companies well-positioned to take stakes in projects when Western firms exit.
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