Shell has been suspended from exercising its shareholder rights in the newly formed Salym Development oil producing joint venture that Russian authorities had ordered to be created to take over the assets of the Salym fields operating group in West Siberia.
A Russian arbitration court issued the ruling on Monday, less than a month after Russian state controlled oil producer Gazprom Neft requested approval of the new venture to replace Salym Petroleum Petroleum (SPD) — a Dutch-registered venture in which Shell became a partner in 1996.
Shell held a 50% stake in SPD, while a subsidiary of Gazprom Neft had the remaining 50% interest in the company.
The court’s decision, reported to take effect immediately, means Shell will have little say over further development of the Salym fields and will be unable to sell or transfer its 50% stake in the new operator.
According to court documents open to the public, the court initially supported a request from Gazprom Neft to deprive Salym Petroleum Development of its Russian oil assets and pass them to a new operator, which would be incorporated in the village of Salym in the Khanty-Mansiysk region.
The court also approved a slightly different name for the new venture, Salym Development, and said Shell would have a 50% shareholding in it, similar to the stake it held in SPD.
The new venture will be managed by SPD executive director Denis Paramoshin, who was appointed to the post in May this year.
However, according to the same court ruling, Shell cannot exit the new venture or vote at general meetings of shareholders.
Also, it cannot manage and sell assets of the company and its subsidiaries without the agreement of GPN–Salymskiye Proyekty, the Gazprom Neft subsidiary that will hold the remaining 50% stake in Salym Development.
The court added that the suspension of Shell’s rights in Salym Development will remain effective until 31 December 2023.
A Shell spokesperson said, "We are monitoring the situation and assessing our legal options. We have no further comment at this stage."
The supermajor is one of the Western companies that decided to exit Russia following its invasion of Ukraine in February.
The court’s decision over Salym follows earlier moves by the Russian government to limit the ability of major international investors to sell or transfer their shareholdings in the country’s oil and gas development projects.
Earlier in August, Russian President Vladimir Putin signed a decree that thwarted ExxonMobil's purported plan to sell its 30% share in the Sakhalin 1 oil and gas development in Russia’s far east to an unnamed third party.
And in July, the government moved to disband and replace Sakhalin 2 oil and gas development operator Sakhalin Energy Investment, in which Shell is also involved.
Production from the Salym fields has depleted significantly since first output in 2003, and was reported at about 118,000 barrels of oil per day in 2021.
However, their development continued as Shell provided technical advice and enhanced oil recovery technologies while experimenting with tapping deeper tight oil reservoirs within the venture’s licence area.
* The story has been updated to include a comment from Shell.