Three Chinese energy firms are in talks to buy Shell's stake in a huge Russian natural gas export project, a report says

• Chinese firms are in talks to buy Shell's stake in a Russian natural gas export project, sources told Bloomberg.
• CNOOC, CNPC, and Sinopec are in joint discussions, the sources said.

Three Chinese state-run energy companies are in talks to buy Shell's 27.5% stake in a huge Russian natural gas export project, Bloomberg reported, citing people with knowledge of the matter.

CNOOC, CNPC, and Sinopec are in joint discussions with the Anglo-Dutch oil and natural gas giant over its holding in the Sakhalin-2 liquefied natural gas venture, the people said.

The sources said discussions, which could include selling the stake to one, two, or all three of the firms, were at an early stage and could still fall through. One of the sources said that Shell was also open to talks with potential buyers outside of China.

Shell says that Sakhalin-2 supplies about 4% of the world's current liquefied natural gas market, with Japan, South Korea, and China as the main customers. Russian state-owned energy giant Gazprom owns a 50% stake in the venture, while Japanese corporate group Mitsui owns 12.5%, and fellow Japanese firm Mitsubishi holds 10%.

Shell, CNOOC, CNPC, and Sinopec did not immediately respond to Insider's request for comment.

Russia has huge natural gas reserves, and supplied around a third of the EU and UK's total natural gas demand in 2021, according to the International Energy Agency. It's also the world's third largest oil producer and the second largest crude oil exporter, the agency said.

Some Western oil firms have said they would discontinue operations in Russia following the outbreak of the conflict and the ensuing package of international sanctions, designed to force Russian President Vladimir Putin to abandon the invasion. China, in comparison, hasn't taken sides and has continued buying energy supplies from Russia.

Shell said on February 28 that it would limit business with Russia by divesting from its joint ventures with Kremlin-owned energy company Gazprom and related businesses, as well as pulling out of the Nord Stream 2 natural gas pipeline project. It later said that it would withdraw from the Russian oil and natural gas sector and close all its service stations in the country, which it said would lead to it writing off up to $5 billion in assets.

London-headquartered BP has also said it would dump its 19.75% stake in Russia's state-backed oil giant Rosneft. Sources told Bloomberg last month that BP had reached out to state-backed firms in Asia and the Middle East, including CNPC and Sinopec, to sell the stake.

ExxonMobil, meanwhile, announced that it would discontinue operations at the Sakhalin-1 oil and gas venture, a project it operates on behalf of an international consortium of Russian, Japanese, and Indian companies.

US President Joe Biden has pledged to ban Russian energy imports and the European Commission has said it could reduce EU demand for Russian gas by two-thirds before the end of the year under a plan to diversify supplies. Germany – heavily reliant on supplies of natural gas from Russia – has halted plans for the Nord Stream 2 pipeline, while Lithuania said it became the first EU country to completely cut off Russian natural gas imports.