Shell is looking for a way out of Russia

Gazprom Neft is asking the court to allow Shell to sell a stake in their parity joint venture OOO Salym Petroleum Development (SPD) to a Russian company to consolidate the asset. Previously, the court transferred SPD from the Dutch to Russian jurisdiction and imposed a ban on the alienation of Shell’s stake in the joint venture. According to lawyers, Gazprom Neft’s appeal to the court indicates an agreement with Shell on a deal. If it takes place, Gazprom Neft can independently start looking for a partner for 50% in SPD. Based on the name of the company-buyer, mainly the calculation goes to the Middle East.

Dutch Shell Salym Development (SSD; owned by Shell) may be eligible to sell 50% in SPD. On December 12, the second SPD shareholder, GPN-Salym Projects LLC (a Gazprom Neft structure), which also owns 50%, filed a corresponding application with the Arbitration Court of the Moscow Region. The plaintiff asks to give SSD permission to sell its 50% stake in SPD to another structure of Gazprom Neft – GPN-Middle East Projects LLC. The first meeting is scheduled for December 22. Gazprom Neft did not respond to Kommersant’s request, Shell declined to comment.

At the end of August, Gazprom Neft through a Russian court got a translation SPD from the Dutch to Russian jurisdiction. In addition, the court until 2024 introduced a restriction for Shell to dispose of shares in the capital of the joint venture, since, according to Gazprom Neft, the British company interfered with the functioning of the JV. Thus, with the permission of the court, Gazprom Neft can consolidate 100% in the JV: the oil company has a pre-emptive right to buy out a stake in the JV.

“The fact is that in the previous case on the transformation of a foreign branch into a Russian LLC, the court retained Shell’s rights to a share in SPD, but limited the right to use it,” recalls Ekaterina Makeeva, partner at the A-Pro law firm. “In particular, until December 31 2023, Shell is prohibited from demanding the buyback of the share and disposing of the shares.” In addition, in accordance with the wording of the charter of LLC SPD approved by the court, the alienation of a share requires the consent of another participant, and exit is prohibited, Ms. Makeeva adds. Roman Makarov, a partner at NSP Law Firm, explains that Law 320-FZ obliges, after the creation of a new LLC from a branch of a foreign company, transactions with shares of such an LLC must be carried out with the approval of the court, and it is the Arbitration Court of the Moscow Region that has exclusive jurisdiction in such cases.

Lawyers believe that an agreement between Gazprom Neft and Shell on the sale of the stake has already been reached. This can be evidenced by the very fact of Gazprom Neft’s appeal to the court, which, according to the law, can only give permission, but it is meaningless without the consent of the seller, Mr. Makarov explains.

In his opinion, if the seller supports the application, the court will promptly give permission for the transaction, “probably within one month.” At the same time, Ekaterina Makeeva believes that the presence of Gazprom Neft under EU sanctions should not interfere with the deal: “It depends on the terms of the share buyback, but it is unlikely that they imply any settlements between the companies that could be considered as investments in the Russian economy.”

Shell decided to go out from the Russian fuel and energy sector in February, condemning the outbreak of hostilities in Ukraine. The SPD stake is Shell’s last major asset in the Russian oil and gas industry. Formerly Shell lost 27.5% in the Sakhalin-2 gas liquefaction project, disagreeing with the transfer of the operating company to Russian jurisdiction, as well as sold LUKOIL has a network of its filling stations in Russia. Shell also tried to sell its stake in SPD and even collected bids from bidders, but the winner of the tender was never announced.

By consolidating SPD, Gazprom Neft will be able to independently start searching for a buyer “convenient for it” for half of the package, Kommersant sources say. So, as Kommersant reported, the Russian authorities discussed the purchase of this stake by the little-known Wellnord company, which is registered in the UAE (see “Kommersant” dated September 2). Its beneficiaries are unknown, but, according to Kommersant’s sources, it includes investors from the Russian Federation and Hungary.

Dmitry Kozlov, Anna Zanina