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Russia takes full control of Sakhalin gas project, raises stakes with West

The five-page decree, which follows Western sanctions imposed on Moscow over its invasion of Ukraine, indicates the Kremlin will now decide whether the foreign partners can stay

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Russia takes full control of Sakhalin gas project, raises stakes with West
GNN Media: Representational Photo

President Vladimir Putin has raised the stakes in an economic war with the West and its allies with a decree that seizes full control of the Sakhalin-2 gas and oil project in Russia's far east, a move that could force out Shell and Japanese investors.

The order, signed on Thursday, creates a new firm to take over all rights and obligations of Sakhalin Energy Investment Co, in which Shell (SHEL.L) and two Japanese trading companies Mitsui and Mitsubishi hold just under 50%. read more

The five-page decree, which follows Western sanctions imposed on Moscow over its invasion of Ukraine, indicates the Kremlin will now decide whether the foreign partners can stay.

State-run Gazprom (GAZP.MM) already has a 50% plus one share stake in Sakhalin-2, which accounts for about 4% of the world's liquefied natural gas (LNG) production.

The move threatens to unsettle an already tight LNG market, although Moscow said it saw no reason for Sakhalin-2 deliveries to stop. Japan imports 10% of its LNG each year from Russia, mainly under long-term contract from Sakhalin-2. The action also raises the risks facing Western companies still in Russia.

"Russia's decree effectively expropriates foreign stakes in the Sakhalin Energy Investment Company, marking a further escalation in ongoing tensions," said Lucy Cullen, a principal analyst from consultancy Wood Mackenzie.

Many Western firms have already packed up, while others have said they would quit, but Putin's move adds complications to an already complex process for those looking for the exit. Moscow has been preparing a law, expected to pass soon, to allow the state to seize assets of Western firms which decide to go.

Shell, which has already written off the value of its Russian assets, made clear months ago it intended to quit Sakhalin-2 and has been in talks with potential buyers. It said on Friday it was assessing the Russian decree.

Sources have said Shell believed there was a risk Russia would nationalise foreign-held assets, while Putin has repeatedly said Moscow would retaliate against the United States and its allies for freezing Russian assets and other sanctions.

Sakhalin-2, in which Shell has a 27.5% minus one share stake, is one of the world's largest LNG projects with output of 12 million tonnes. Its cargoes mainly head to Japan, South Korea, China, India and other Asian countries.

MAKING PREPARATIONS

Kremlin spokesman Dmitry Peskov said Russia saw no grounds for halting LNG deliveries from Sakhalin-2 and said the future of other projects or investments would be determined case by case.

"There can be no general rule here," he said.

Japan, which depends heavily on imported energy, has said it would not give up its interests in Sakhalin-2, in which Japan's Mitsui has a 12.5% stake and Mitsubishi holds 10%.

Japanese Prime Minister Fumio Kishida said on Friday that Russia's decision would not immediately stop LNG imports from the development, while Japan's Industry Minister Koichi Hagiuda said the government did not consider the decree a requisition.

"The decree does not mean that Japan's LNG imports will become immediately impossible, but it is necessary to take all possible measures in preparation for unforeseen circumstances," Hagiuda told reporters.

Japan has 2-3 weeks of LNG stocks held by utilities and city gas suppliers and Hagiuda has asked his U.S. and Australian energy counterparts for alternative supplies, he said.

According to the decree, Gazprom keeps its stake but others must ask the Russian government for a stake in the new firm within one month. The government will decide whether to approve any request.

Gazprom, Sakhalin Energy and the Russian energy ministry did not respond to requests for comment.

A Mitsubishi spokesperson said the company was discussing with partners in Sakhalin and Japan's government about how to respond to the decree. Mitsui did not comment immediately.

Shares in Mitsui & Co (8031.T) and Mitsubishi Corp (8058.T) slid more than 5% on Friday. Shell's shares edged higher.

Shell Chief Executive Ben van Beurden said on Wednesday the company was "making good progress" in its plan to exit from the Sakhalin Energy joint venture without giving details.

Sources had told Reuters in May that Shell was in talks with an Indian consortium to sell its stake. 

Russian LNG production from projects such as Sakhalin-2 was likely to suffer as foreign expertise and parts became unavailable, said Saul Kavonic, head of Integrated Energy and Resources Research at Credit Suisse.

"This will tighten the LNG market materially this decade," he said.

SOURCE: REUTERS

Pakistan

New aircraft being inducted into PIA to improve performance, Senate told

The house will now meet tomorrow at 10:30 am.

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New aircraft being inducted into PIA to improve performance, Senate told

Islamabad: Minister for Aviation Khawaja Saad Rafique says new aircraft are being inducted into the PIA to improve its performance.

Speaking in the Senate on Thursday, he said there is no proposal under consideration to sell out the assets of the national flag carrier.

Saad Rafique said it is our effort to operationalize this year about three hundred rooms of Hotel Roosevelt. He said we want to enter into a joint venture for the complete revival of this hotel which will help bring revenue to the country.

The Minister for Railways and Aviation said one hundred and thirty four kilometers rail track of the Sibi-Harnai-Khost section has been completed. He said we have to install a bridge on this section. However, operationalization of this section is linked with the security situation.

Minister of State for Law Shahadat Awan assured the house during question hour that the present government has initiated strict action against illegal housing societies.

He said those who hoodwinked the masses will not be spared and they will land in prisons.He said cases of illegal housing societies are before the NAB and FIA. He said a campaign has also been started to create awareness amongst masses about these illegal housing societies.

The Minister of State told the house that Pakistanis enjoy visa free access to forty six countries. He said efforts are afoot to further improve the image of Pakistan in the world.

Shahadat Awan further informed that the Korang Bridge project on Islamabad Expressway will be completed by the end of this year.

Minister of State for Law said the contract for the project was awarded in September 2020. However, the contractor slow down work on the project due to price escalation in construction material. He said the contract has now been assigned to Frontier Works Organization.

Responding to another question, the Minister of State for Law said beggary has been reduced to a great extent in the federal capital territory. He said two anti-beggary squads have been established to apprehend the beggars. He said the patrolling system within Islamabad has been revamped and SHOs of all the police stations have been strictly directed to utilize their mobiles as well as staff from Rescue 15 to curb this menace.

Shahadat Awan said action has also been taken against the gang leaders of beggars. Cases have been registered against them and they have also been sentenced.

The Minister of State said the government has also established shelter homes in the federal capital for the poor and needy people. He said there are also centers for rehabilitation of women and children.

Responding to points raised by the opposition leader Shahzad Wasim, Leader of House in the Senate Azam Nazeer Tarar said it was the PTI government which victimized political opponents during its tenure. He said a case was registered against Shehbaz Gill as per the law for inciting mutiny in a state institution.

Assuring there will be no custodial torture of the PTI leader, he, however said nobody can be allowed to escape investigation and that the law will take its course in the case.

The house will now meet tomorrow at 10:30 am.

 

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Pakistan

PM directs to speed-up relief operations in flood-affected areas immediately

"50000 rupees should be provided immediately to each victim's family"

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PM directs to speed-up relief operations in flood-affected areas immediately

Islamabad: Prime Minister Muhammad Shehbaz Sharif has directed NDMA, PDMA, and the provincial government to speed up relief operations in the flood-affected areas immediately.

According to PM Office, Shehbaz Sharif said the first priority in a flood situation is the rescue of the affected people and their immediate assistance.

He also directed that 50000 rupees should be provided immediately to each victim's family.

The Prime Minister directed for immediate provision of accommodation, medical facilities, food, and clean drinking water to the victims.

He expressed deep sorrow over the loss of lives and properties due to floods in southern Sindh.

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Pakistan

Pakistan, UK ink reciprocal agreement to return criminals

The agreement included ongoing work to improve and expand UK-Pakistani law enforcement cooperation.

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Pakistan, UK ink reciprocal agreement to return criminals

Islamabad: Pakistan and the United Kingdom have signed reciprocal agreement to return foreign criminals and immigration offenders from the UK to Pakistan.

In a press release, UK Home Department said the agreement underlined both countries’ ongoing commitment to tackle issue of illegal migration and the significant threats it posed to both nations.

The agreement included ongoing work to improve and expand UK-Pakistani law enforcement cooperation.

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