Russia sees no grounds for LNG supplies from Sakhalin-2 to stop

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MOSCOW — Russia sees no grounds for any halt to liquefied natural gas (LNG) deliveries from Sakhalin-2 after Moscow moved to create a new firm to take over all rights and obligations of the energy project, the Kremlin said on Friday.

The decree, signed by President Vladimir Putin on Thursday, creates a firm to take over rights and obligations of Sakhalin Energy Investment Co, in which Shell and two Japanese trading companies Mitsui and Mitsubishi hold just under 50%.

The five-page decree, which follows Western sanctions imposed on Moscow over its actions in Ukraine, indicates the Kremlin will now decide whether the foreign partners can stay in Sakhalin-2, which meets about 4% of the global LNG supply.

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In case they no longer can stay, they will be paid a compensation discounted on any damage made to the project after an audit by the government, yet to be conducted. The funds will be paid to special accounts and kept there until further notice.

Asked whether LNG exports from Sakhalin-2 were at risk, Kremlin spokesman Dmitry Peskov said: “So far, we do not see any grounds for this, especially given procedures which will be conducted based on the decree.”

Many Western companies are seeking to exit Russia after what Moscow describes as a “special military operation” in Ukraine and are looking for indications about any moves by Kremlin that could affect their plans to leave.

Asked if Russia’s approach to Sakhalin-2 could be repeated in other area, Peskov said: “There can be no general rule here. Each situation will be reviewed case by case.”

(Reporting by Reuters; Editing by Edmund Blair)

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