Shell And Gazprom Reach Agreement On Baltic LNG Project

Integrated energy major, Royal Dutch Shell (LON:RDSa) plc RDS.A and Russian gas giant Gazprom (MCX:GAZP) recently signed a memorandum of understanding for the Baltic LNG project. The deal was inked at the International Economic Forum in St. Petersburg and was signed by the respective CEOs.The project aims to diversify Gazprom’s LNG sales operations and to boost its LNG portfolio.

Per Gazprom, the project will involve the construction of a two-train LNG plant. Also, a 360-kilometer gas pipeline to connect the facility with the Gazprom-operated trunkline network will be part of the project. The plant is estimated to have a yearly production capacity of about 10 million tons of liquefied natural gas. In addition, there will be an option increase production up to 15 million tons. The plant is scheduled to become operational by Dec 2021.The deal is expected to provide the Anglo-Dutch company a 25–35% stake in the project for about $10 billion.

Shell and Gazprom will be jointly investing $13 billion in three projects in Russia – Baltic Sea LNG plant, Gazprom's Yuzhno-Kirinskoye gas field and the Sakhalin-2 LNG plant expansion.

Headquartered in The Hague, the Netherlands, Shell is one of the largest integrated oil and gas companies in the world. It explores for and extracts crude oil, natural gas and natural gas liquids. It has interests in chemicals as well as in power generation and renewable energy. Shell recently decided to restart buying Iranian crude. Interestingly, the company is the second-largest energy player after Total S.A. (TOT) to recommence trade with Iran since the country came out of sanctions.

Shell currently carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players from the broader energy sector are PBF Logistics LP (NYSE:PBFX) , McDermott International Inc. (NYSE:MDR) and Sasol Ltd. (NYSE:SSL) . All these stocks sport a Zacks Rank #1 (Strong Buy).