“Gazprom Neft” releases Shell
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Gazprom Neft is close to lifting the ban on Shell selling a 50% stake in their Salym Petroleum Development joint venture. In the card of the arbitration case, an entry appeared about the satisfaction of the application of the oil company, which may mean that the court agreed to approve the deal, but there is no confirmation of this yet, since the process was closed from the press. At the same time, a special permit from the President of the Russian Federation is also required for Shell to exit the joint venture, which could take a long time, but the other day the EU extended the deadline for its residents to terminate cooperation with Russian state-owned companies until mid-2023. According to lawyers, the European authorities take into account the complexity of the procedure for getting rid of Russian assets and do not want their own companies to be violators of sanctions.
On December 22, the Arbitration Court of the Moscow Region satisfied the application of GPN-Salym Projects (a structure of Gazprom Neft), which asked to allow Shell to sell 50% in their joint venture Salym Petroleum Development (SPD). This was recorded in the filing cabinet of arbitration cases. However, this may mean both the satisfaction of the plaintiff’s request to transfer the process to a closed regime, and the satisfaction of his request to allow the sale of a stake in SPD.
Another structure of Gazprom Neft, GPN-Middle East Projects, is planning to buy a Shell stake in the joint venture, as a result, the Russian oil company will consolidate 100% in SPD. The application of Gazprom Neft was satisfied by the court in an operational mode, it took a little more than an hour to consider it, just like at the court session in August. Then Gazprom Neft secured through the courts the transfer of their joint venture with Shell from the Netherlands to Russian jurisdiction.
At the same time, the court forbade Shell from disposing of a stake in the capital of the joint venture, since, according to Gazprom Neft, the British company interfered with the functioning of the JV. To consolidate 100% in the SPD, Gazprom Neft had to lift this ban.
This is Shell’s last oil-producing asset in Russia, which in February decided to go out from Russian business, condemning the outbreak of hostilities in Ukraine. In addition, Shell and Gazprom Neft retain the Khanty-Mansiysk Oil and Gas Union, a parity geological exploration joint venture, which owns licenses for the Yuilsky-4, Yuilsky-5 and Yuzhno-Lungorsky-1 blocks. According to Kommersant’s sources in the industry, Gazprom Neft will also buy out Shell’s stake in this joint venture.
In May, the EU authorities imposed sanctions on Gazprom Neft, which, according to regulation No. 833/2014, means a ban on interaction with the company for European legal entities, including Shell. Anastasia Cheredova, head of the Vegas Lex special projects practice, clarifies that the EU authorities gave a deadline of September 5 to wind down joint European-Russian ventures created before March 16, 2022, but in July it was extended until December 31.
As a result, Shell risked becoming a violator of EU sanctions, as it could not have time to withdraw from the Salym joint venture before the end of the year.
However, Sergey Glandin, a partner at the NSP law firm, points out that on December 16, as part of the ninth package of EU sanctions, amendments were made to the regulation, which extended the period for terminating a joint venture with Russian state-owned companies until June 30, 2023. During this period, “the competent authorities of the countries of the union can give permission to their residents for transactions to get rid of Russian assets,” the lawyer adds.
“The EU authorities are forced to extend the deadlines in order to avoid violating by their own companies the ban on transactions with “sanctioned” persons,” Anastasia Cheredova believes. In her opinion, the extension is due to the “difficulty of promptly withdrawing from the joint venture in such significant sectors”, and also takes into account “the adoption of counter restrictive measures by the Russian Federation”, requiring special permits and approvals.
Thus, Gazprom Neft needs to obtain a special permit from the President of the Russian Federation for a deal on SPD, since Decree No. 520 of the President of the Russian Federation of August 5 prohibited Western investors in the fuel and energy complex from leaving Russian strategic enterprises, says Lyubov Stepanova, a lawyer at Kazakov and Partners. The ban was introduced until the end of 2022, but most likely, the lawyer believes, it will be extended. So, for example, such a permit had to be obtained in order for LUKOIL to acquire a controlling stake in Enel Russia from the Italian Enel.
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