Despite sanctions imposed on Russia after its annexation of Ukraine’s Crimea region, Royal Dutch Shell CEO Ben van Beurden told Russian President Vladimir Putin the Anglo-Dutch multinational oil and gas company is committed to expansion in Russia.
Shell plans to expand Russia’s only liquefied natural gas (LNG) plant with its partner, Russian gas monopoly Gazprom. “We, of course, will pledge all the necessary administrative guidance and support,” Putin said at a meeting at Putin’s residence on 18 April.
“We are very keen to grow our position in the Russian Federation,” van Beurden said. “We look forward with anticipation and confidence on a very long-term future here in Russia.”
Shell already has an oil-producing project with Gazprom Neft and they have started to tap hard-to-recover oil in Russia.
Van Beurden confirmed that Shell had agreed with Gazprom to expand the Sakhalin-2 LNG plant which produces 10 million tonnes of LNG per year.
Other shareholders include Japan’s Mitsui and Mitsubishi.
The expansion plan is in line with Putin’s demand to increase production of LNG and double Russia’s global market share to around 10% by 2020.
Putin is pushing to add oil and gas routes for Russia to supply Asia, to tap growing demand and ease the country’s reliance on Europe.
Shell’s commitment comes as the European Union and the United States threaten Russia with increasing sanctions, including against itsenergy industry.
Van Beurden said he and Gazprom CEO Alexey Miller agreed “to take the project forward into the next phase” at a meeting in Sochi, the Black Sea city where Russia hosted the Winter Olympics.
“We also know that this is going to be a project that will need strong support to succeed. So one of my purposes of meeting with you, Mr President, is to also secure support for the way forward on this project," Van Beurden said. “Now is the time to expand this lucrative project, we will need strong support to make it a success,”he added.
Putin said he was happy that Shell is continuing its work in Russia.
Gazprom has been considering alternatives to expanding Sakhalin, including construction of a new plant in the Far East. Vladivostok LNG is the preferred option, Gazprom Deputy CEO Alexander Medvedev said in March at an investor meeting in London.
Shell, which has been involved in Alaska, can transfer its expertise to the Russian Arctic.