China Energy Giants in Talks for Shell’s Russian Gas Stake

China Energy Giants in Talks for Shell’s Russian Gas Stake

China’s key state-run energy companies are in talks with Shell Plc to buy its stake in a major Russian gas export project, according to people with knowledge of the matter.

Cnooc, CNPC and Sinopec Group are in joint discussions with Shell over the company’s 27.5% holding in the Sakhalin-2 liquefied natural gas venture after the European firm said it would exit Russian operations following the Ukraine invasion, said the people, who requested anonymity to discuss private details. 

Discussions are at an early stage and it remains possible no deal will be agreed with the firms, the people said. Shell is also open to talks with other potential buyers outside of China, one of the people said.  

Shell shares rose as much as 1.3% on the news to 2,236 pence in London on Thursday, while the FTSE 100 Index held steady. Shares were trading 0.4% higher at 2,216 pence at 10:50 a.m.

The talks include a potential sale of the stake to one of the Chinese companies, to two of the firms, or to a consortium of all three. 

Shell declined to comment. Representatives for China National Offshore Oil Corp., China National Petroleum Corp. and China Petrochemical Corp. -- as the three Chinese companies are formally known -- didn’t immediately respond to requests for comment. 

China’s State-owned Assets Supervision and Administration Commission of the State Council, which supervises state-owned firms, also didn’t immediately respond to a request for comment.

Shell, as well as rivals including Exxon Mobil Corp., took the energy industry by surprise by signaling plans to walk away from Russian assets worth billions of dollars after war erupted in Ukraine in February. Earlier this month, Shell said its withdrawal from Russia will result in as much as $5 billion of impairments

London-based competitor BP Plc also reached out to state-backed firms in Asia and the Middle East, including CNPC and Sinopec, as it searches to offload its 20% stake in Russia’s Rosneft PJSC, Bloomberg reported last month.

Dozens of Shell employees on temporary assignment at the Sakhalin-2 project in Russia were removed over the weekend to be relocated back to other offices as the company moves forward with an exit.

Russia’s war in Ukraine has roiled energy markets and sent commodities prices surging, adding pressure on governments globally to rethink their long-term planning for fuel supplies. China’s still-close trading relationship with Moscow makes the nation’s firms well positioned to snap up stakes in projects as Western companies exit.

©2022 Bloomberg L.P.

With assistance from Bloomberg