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Cases / Oil, gas and coal operations · Russia · 2022–2026

Sakhalin-2 and Sakhalin-1 in 2022: transfer decrees, the ecological-audit deduction clause and write-downs

Nature's voice · report
No measurement of the harm done to me here is on record.
Did nature suffer? Not measured.
Not on record
  • The record does not name which of my species, waters, soils or forests were harmed.
What the record lacks: 2 none on record · 2 not disclosed · 1 insufficient · 1 not measured · 2 disputed · 1 unclear See the gaps

Presidential Decree No. 416 of 30 June 2022 passed the rights of the Sakhalin-2 operator to a new Russian company and provided that a government audit, including an ecological audit, would set a damage amount to be debited from foreign shareholders' sale proceeds. Shell recorded a USD 1,614 million impairment on Sakhalin-2, and ExxonMobil said Russia terminated its Sakhalin-1 interests on 14 October 2022.

RUB 94.8 billionSale price of Shell's 27.5% stake, paid into a Type "C" account
Price in government order 701-r of 23 March 2024 (Interfax). Under Decree No. 416 a damage amount set by government act after an audit that includes an ecological audit would be debited from the account; no such amount is on record.

Status As of October 2026: the Prosecutor General's claim against eight Shell entities in Moscow is ongoing; no result of the decree's ecological audit is on record.

What?
Decree No. 416 of 30 June 2022 moved the Sakhalin-2 operator's rights to a new Russian company, with sale proceeds of unclaimed foreign shares held in a Type "C" account from which a damage amount set after an audit that includes an ecological audit would be debited; no audit result is on record. Shell, Mitsui, Mitsubishi and ExxonMobil recorded write-downs, and the Prosecutor General filed a claim against eight Shell entities. President of Russia (kremlin.ru)
Where?
Sakhalin Energy LLC in Yuzhno-Sakhalinsk and the Sakhalin-2 and Sakhalin-1 assets, Sakhalin; the Moscow Arbitration Court. President of Russia (kremlin.ru)
When?
Decree 30 June 2022; transfer 17 August 2022; Shell declines 1 September 2022; Exxon termination 14 October 2022; sale orders April 2023 and 23 March 2024; Prosecutor General's claim 2 October 2024; Shell Form 20-F 12 March 2026. Shell plc (SEC filing)
Who?
Gained
  • Gazprom group (Gazprom Sakhalin Holding, Sakhalinsky Proekt LLC) — Shares in the new company pro rata and the purchase of Shell's 27.5% for RUB 94.8 billion Interfax
  • The new Russian company — Rights and obligations of SEIC and free use of PSA-created property; any government-set damage amount debited in its favour President of Russia (kremlin.ru)
Lost
  • Shell — USD 1,614 million impairment on Sakhalin-2; carrying value zero at 31 December 2022; sale proceeds in a Type "C" account Shell plc (SEC filing)
  • Mitsui and Mitsubishi — Investment value cuts of JPY 136.6 billion and JPY 81.1 billion; funds only after any damages are determined and offset Business & Human Rights Resource Centre
  • ExxonMobil — Charge of USD 3.4 billion after tax in Q1 2022; Sakhalin-1 interests terminated on 14 October 2022 Exxon Mobil Corporation (SEC filing)
Harmed
None on record
Why?
The decree cites unfriendly actions of certain foreign states and international organisations and a threat of a natural and man-made emergency; Shell objected to the transfers, and Exxon stated that the Russian government unilaterally terminated its interests. President of Russia (kremlin.ru)
How?
A presidential decree created a Russian company to take over SEIC, with unclaimed shares sold tax-free and proceeds held in a Type "C" account subject to a government-set damage amount. President of Russia (kremlin.ru)
6 of 6 questions answered from the record

What happened

The record, in order.

Decree No. 416 of 30 June 2022, citing among its grounds the "threat of a natural and man-made emergency", provided that the Government create a Russian limited liability company to which all rights and obligations of Sakhalin Energy Investment Company (SEIC) pass, and that SEIC property created under the production sharing agreement (PSA) pass into Russian Federation ownership with free use by the company. Shares pass to Gazprom Sakhalin Holding pro rata, with other shares held by the company pending transfer; foreign shareholders had one month to notify consent; unclaimed shares are valued and sold to a Russian legal entity free of tax, with proceeds credited to a Type "C" account in the shareholder's name. The Government conducts a "financial, ecological, technological and other audit" of the foreign persons' PSA activities; a government act sets the "amount of damage caused" and the liable persons; and that amount is debited from the Type "C" account in favour of the company. Disputes go to the Moscow Arbitration Court. The decree was amended on 30 December 2022 (No. 982) and 3 January 2024 (No. 2).

Shell reported that the transfer to the new company took place on 17 August 2022, that on 1 September 2022 it advised it would not apply for shares and "reserved all rights and remedies", and that the Russian Federation was expected to conduct an audit determining the "amount of damage caused". On 30-31 August 2022 the Russian Government approved the Mitsui (12.5%, via MIT SEL Investment) and Mitsubishi (10%, via DGS Japan Co.) stakes, with appraiser B1-Consult (formerly EY); Interfax reported that "Foreign partners receive funds only after compensation for any damages is determined and offset."

In April 2023 government order 890-r provided for the sale of Shell's 27.5% to Novatek Moscow Region LLC; Kommersant reported on 4 April 2023 that President Putin agreed Shell could receive the full RUB 94.8 billion and that authorities had planned an audit "suspecting Shell of harming the project", with a deduction of damage. On 23 March 2024 order 701-r replaced the buyer with Sakhalinsky Proekt LLC, wholly owned by Gazprom Sakhalin Holding, kept the price at RUB 94.8 billion and invalidated the 2023 order; proceeds go to the Type "C" account. Novatek said in 2023 that shortcomings could be covered from Shell's unpaid 2021 dividends.

Shell recorded a Sakhalin-2 impairment of USD 1,614 million in the first quarter of 2022 and a carrying value of zero at 31 December 2022. Kyodo reported on 2 August 2022 that Mitsui reduced its investment value by JPY 136.6 billion and Mitsubishi by JPY 81.1 billion. On 2 October 2024 the Prosecutor General of Russia filed a claim in Moscow against eight Shell entities including a claim for about EUR 1.5 billion from Shell Energy Europe to Gazprom Export for alleged unpaid 2022 gas, and a declaration that Gazprom Export can take RUB 94 billion "purportedly set aside for Shell for Sakhalin equity compensation from a Type-C account"; Shell's 2025 Form 20-F states the proceedings are ongoing. Hearings are closed, and prosecutors said the information "may increase sanctions pressure on our country".

For Sakhalin-1, Exxon reported in its 2022 Form 10-K a first-quarter 2022 charge of USD 3.4 billion after tax (USD 4.6 billion pre-tax), "largely representing the full impairment of its operations related to Sakhalin", and said that "Effective October 14, 2022, the Russian government unilaterally terminated the Corporation's interests in Sakhalin". About 150 million oil-equivalent barrels were removed from proved reserves, and a fourth-quarter after-tax benefit of USD 1.1 billion was described by Exxon as "largely reflecting the impact of the expropriation on the company's various obligations". As of October 2026 a US OFAC general licence for Sakhalin-2 (oil to Japan, services, Gazprombank) runs to 18 December 2026 and UK permission for Sakhalin 2 LNG shipping to Japan and South Korea runs to 31 March 2028; the owners are Gazprom, Mitsui and Mitsubishi.

  1. 2022Decree No. 416 signed (30 Jun)
  2. 2022Shell Sakhalin-2 impairment of USD 1,614 million, first quarter results
  3. 2022Transfer to the new company (17 Aug); Shell advises on 1 Sep it will not apply for shares
  4. 2022Mitsui and Mitsubishi stakes approved by the Government (30-31 Aug)
  5. 2022Exxon Sakhalin-1 interests terminated (14 Oct)
  6. 2023Order 890-r for sale of Shell's 27.5% to Novatek Moscow Region LLC (Apr)
  7. 2024Order 701-r: buyer replaced by Sakhalinsky Proekt LLC, price RUB 94.8 billion (23 Mar)
  8. 2024Prosecutor General files claim in Moscow against eight Shell entities (2 Oct)
  9. 2026Shell Form 20-F states proceedings are ongoing (12 Mar); US licence extended to 18 Dec (15 Jun); UK permission extended to 31 Mar 2028 (1 Oct)

What was said

Claims, in the words of those who made them.

“reserved all rights and remedies”

“it is not possible to reliably estimate the magnitude and timing of any possible obligations or payments”

“Foreign partners receive funds only after compensation for any damages is determined and offset.”

Interfax, on the approval of Mitsui and Mitsubishi stakes · 31 August 2022 · Interfax

“Effective October 14, 2022, the Russian government unilaterally terminated the Corporation's interests in Sakhalin”

“properly deal with the situation following consultations with the Japanese government and project partners”

“may increase sanctions pressure on our country”

Russian prosecutors, on disclosure of information in the Shell case · April 2025 · translated from Russian · Interfax

Where accounts differ

Each party's account, side by side, with its source. The record does not settle these points; it shows them.

Legality of the transfer of Sakhalin-2 rights and shares
Company or project
Shell

Objected to the transfers and reserved all rights and remedies.

Shell plc (SEC filing)
Government and regulators
President of Russia, Decree No. 416

Special economic measures are justified by a threat of a natural and man-made emergency; disputes go to the Moscow Arbitration Court.

President of Russia (kremlin.ru)
Forum for disputes
Press and investigations
A lawyer quoted by Kommersant (4 April 2023)

The production sharing agreement provides for Stockholm arbitration, while the decree provides for the Moscow Arbitration Court.

Kommersant
Government and regulators
Decree No. 416

Disputes go to the Moscow Arbitration Court.

President of Russia (kremlin.ru)

How it looked

What was shown, beside what was recorded.

Shown

  • Decree grounds: "threat of a natural and man-made emergency" (translated).
    President of Russia, Decree No. 416 · President of Russia (kremlin.ru)
  • Authorities planned an audit "suspecting Shell of harming the project" with a deduction of damage (translated).
    Kommersant, 4 April 2023 · Kommersant
  • Shell's investment in Sakhalin-2 is held at 27.5% (minus one share) in SEIC, which "purportedly no longer holds any licences, rights and obligations in Sakhalin-2".
    Shell Form 20-F 2025 · Shell plc (SEC filing)

Recorded

  • Decree No. 416 provides for a financial, ecological, technological and other audit of foreign persons' PSA activities and for a government act setting the amount of damage caused, to be debited from the Type "C" account.
  • Sale price of Shell's 27.5% stake: RUB 94.8 billion (order 701-r, 23 March 2024), proceeds to the Type "C" account.
  • Shell received USD 165 million of 2021 dividends in April 2022 and estimated unpaid dividends at about USD 1 billion (Kommersant).
  • Sakhalin-2 output was about 11.5 million tonnes of LNG and about 3.7 million tonnes of oil in 2022, and 10.3 million tonnes of LNG in 2025.
  • Shell's carrying value of the Sakhalin-2 investment was zero at 31 December 2022.

Who gained

Money that reached nature, beside money that stayed elsewhere.

Reached nature or the ground

Not published
Damage amount to be set by government act under Decree No. 416 and debited from the Type "C" account—
No amount on record.

Gained elsewhere

Not totalled
Shell impairment of Sakhalin-2 (USD m)1.6bn
Shell total Russia pre-tax charges (USD m)4.2bn
Post-tax USD 3,894 million.
Sale price of Shell's 27.5% stake (RUB m)94.8bn
Mitsui reduction of investment value (JPY m)136.6bn
Mitsubishi reduction of investment value (JPY m)81.1bn
Exxon Q1 2022 charge, after tax (USD m)3.4bn
Pre-tax USD 4,600 million.
Prosecutor General's claim from Shell Energy Europe to Gazprom Export, about (EUR m)≈ 1.5bn
Currency: Mixed (see each line) · Window: 2022-2026. All figures cover the same period. * Estimate built from cited figures.

Responses on record

  • Shell (September 2022; March 2026): Objected to the transfers and reserved all rights and remedies; it is not possible to reliably estimate the magnitude and timing of any possible obligations or payments. · Shell plc (SEC filing)
  • Mitsui (August 2022): Will properly deal with the situation following consultations with the Japanese government and project partners. · Business & Human Rights Resource Centre
  • Novatek (2023): Shortcomings could be covered from Shell's unpaid 2021 dividends. · Kommersant
  • ExxonMobil (2022): Remained focused on safety of people, protection of the environment, and integrity of operations. · Exxon Mobil Corporation (SEC filing)
  • Russian prosecutors (April 2025): Disclosure of information in the Shell case may increase sanctions pressure on the country. · Interfax

In court and with insurers

Every proceeding and every insurer decision on record.

Lawsuits and rulings

  1. 2022–2022Ongoing
    Decree No. 416 of 30 June 2022 (transfer of SEIC rights and shares; audit and damage-deduction clause)
    President of Russia · Regulatory · Russian Federation → Foreign shareholders of SEIC (Shell, Mitsui, Mitsubishi)

    Creates a Russian company to take SEIC's rights and obligations, transfers PSA-created property to federal ownership, sells unclaimed shares with proceeds credited to a Type "C" account, and provides for a financial, ecological, technological and other audit and a government act setting the amount of damage to be debited from that account. Amended 30 December 2022 (No. 982) and 3 January 2024 (No. 2). President of Russia (kremlin.ru)

  2. 2024–Ongoing€1.5bn claimed, about (million)
    Prosecutor General of Russia v. eight Shell entities
    Moscow Arbitration Court · Civil · Prosecutor General of Russia → Eight Shell entities (including Shell Energy Europe)

    Filed 2 October 2024. According to Shell's 2025 Form 20-F the claim seeks declarations concerning support of SEIC that Shell abandoned, about EUR 1.5 billion from Shell Energy Europe to Gazprom Export for alleged unpaid 2022 gas, and a declaration that Gazprom Export can take RUB 94 billion "purportedly set aside for Shell for Sakhalin equity compensation from a Type-C account". Hearings are closed; the proceedings are ongoing. Shell plc (SEC filing)

Insurers

No insurer decision on record.

What nature saw

Outcomes measured on the ground, and nature's note.

Nature's report opens this page. Below: further outcomes measured on the ground.

Audit result published
none
No result of the decree's ecological audit or damage-amount act on record
Shell impairment, Sakhalin-2
USD 1,614 million
First quarter of 2022
Sale price of Shell's 27.5%
RUB 94.8 billion
Held in a Type "C" account
Mitsui and Mitsubishi value cuts
JPY 217.7 billion
Combined, reported August 2022

What we don't know

Undisclosed, unproven, untried: recorded as data.

Nature

  • Not measured Harm to nature: No independent ecological evaluation is on record.

Money

  • None on record Damage amount to be set by government act under Decree No. 416 and debited from the Type "C" account — No amount on record.

Accounts

  • Disputed Legality of the transfer of Sakhalin-2 rights and shares
  • Disputed Forum for disputes

Record

  • None on record None on record: a published result of the decree's ecological audit, or any government act fixing the "amount of damage caused"; the Kommersant (2025) and Interfax (2025) articles on the prosecutor's claim do not mention environmental damage.
  • Not disclosed Not disclosed: the court case number of the Prosecutor General's claim; the hearings are closed.
  • Not disclosed Not disclosed: whether any sum has been debited from the Type "C" account.
  • Insufficient Insufficient: Shell stated that it is not possible to reliably estimate the magnitude and timing of any possible obligations or payments.
  • Unclear Unclear: the status of Exxon's former Sakhalin-1 stake in 2026.

Did the harm stop?

None on record.

Who paid?

No damage amount has been set on record. Proceeds of the RUB 94.8 billion sale of Shell's stake are held in a Type "C" account from which a government-set damage amount would be debited.

Sources

Voices on record: ✓ Company or project✓ Government and regulators— Courts✓ Press and investigations— Communities and civil society— Researchers

Company or project

  1. Q1 2022 results, exhibit 99.2
    Shell plc (SEC filing) · 2022-05
  2. Form 20-F 2022
    Shell plc (SEC filing) · 2023-03
  3. Form 20-F 2025
    Shell plc (SEC filing) · 2026-03-12
  4. Form 10-K 2022
    Exxon Mobil Corporation (SEC filing) · 2023-02

Connected cases

Related matters, and cases linked to this one through the same organisations, with the role each played in both.

Law and courts

Arbitration
A private dispute process in which an appointed arbitrator, instead of a court, decides the case.

Carbon and conservation finance

Offset
Using carbon credits to balance emissions released elsewhere, so that a buyer can claim lower or zero net emissions.

Institutions

SEC
The US Securities and Exchange Commission, which regulates securities markets and what companies tell investors.

Insurance

Underwriter
An insurer, or a person at an insurer, who assesses a risk and decides whether and on what terms to insure it.