Royal Dutch Shell Plc will wait at least five years to boost capacity at a Russian liquefied natural gas plant supplying Asia amid the company’s outlook for a “prolonged downtown” in the oil market.

Shell, state-run Gazprom PJSC and their Japanese partners will make a final investment decision on expanding the plant in Russia’s Far East in the second half of 2017, the joint venture called Sakhalin Energy Investment Co. said Thursday on its website. The preliminary start date of Sakhalin-2’s third LNG unit is 2021, it said.

Shell had previously been pushing the expansion of Russia’s only LNG plant to strengthen its position in the growing Asian energy market. The company, which holds 27.5 percent of the venture, last year won President Vladimir Putin’s support for the plans.

Gazprom, owner of 50 percent of the venture, hasn’t prioritized the project after the gas exporter signed a 30-year contract to supply China by pipeline in May. Shell said Thursday it’s cutting thousands of jobs and reducing capital investment by $7 billion this year as the oil price downturn could last for “several years.”

A spokesman for Gazprom declined to immediately comment on the Sakhalin venture statement. “All the partners are committed to moving the project ahead as fast as possible,” the press service for Shell in Russia said in an e-mail.

Raising the plant’s output to 15 million metric tons of LNG a year from 10 million tons may cost more than $7 billion, Gazprom has estimated. While the owners have agreed a budget, there needs to be enough gas resources to justify the extra capacity and the investment decision won’t come until next year at the earliest, Gazprom Deputy Chief Executive Officer Alexander Medvedev said June 16.

Japan’s Mitsui & Co. and Mitsubishi Corp. are also partners in the project on Sakhalin Island, off Russia’s Pacific coast, holding stakes of 12.5 percent and 10 percent, respectively.

Source: www.bloomberg.com

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