Russian Prime Minister Mikhail Mishustin has rubber-stamped government plans to sell the stake formerly held by supermajor Shell in the Sakhalin 2 oil and gas development to Russia’s largest independent gas producer, Novatek.

The government holds the 27.5% stake in the project that used to belong to Shell after expropriating the development last year and transferring operator Sakhalin Energy Investment’s assets to a new operator, Sakhalinskaya Energia, following the supermajor’s decision to exit Russia in response to the invasion of Ukraine.

Russian authorities last week tried to gauge whether Shell would agree to the sale of its former stake as the government looks to minimise risk for the project’s future operations and exports.

Novatek said it planned to submit a bid for the shareholding after received assurance from the government that any funds from the sale would be transferred directly to Shell instead of keeping them frozen in Russia.

The government said this week that the stake will be sold to Novatek’s regional subsidiary Novatek Moskovskaya Oblast for 94.8 billion roubles, which equates to about $1.15 billion based on current exchange rates as the Russian currency continues to drop in value against major world currencies after several months of stability.

A Novatek spokesperson said the company is unable to provide any comment at the moment.

The Sakhalin 2 project in Russia’s far east was the country’s first liquefied natural gas project and a key supplier to Japan, South Korea and China, producing about 11 million tonnes per annum.

Other foreign companies involved in Sakhalin Energy Investment — Japan’s Mitsui and Mitsubishi — agreed to the Russian government’s offer to take a stake in the new operator that matched their previous shareholding.

However, Shell refused the government offer — leaving the government holding the supermajor’s interest — and has repeatedly argued that it continues to reserve “all of its legal rights relating to… the Sakhalin 2 assets” and its interest in Sakhalin Energy Investment.

Russian state gas giant Gazprom holds a 50% stake in Sakhalin 2 and a direct shareholding of almost 10% in Novatek, though the two companies are often regarded in the industry as competitors rather than partners.

Novatek reported a continued increase in gas production for the first quarter, with output rising by over 1% to almost 21 billion cubic metres.

According to the Novatek, the increase in output was mainly due to sales of liquefied natural gas on international markets, while domestic gas sales remained unchanged from the same period last year.

Novatek holds a 50% shareholding in Russia’s largest LNG project, Yamal LNG in West Siberia, which came online in December 2017.

The company also has a 60% stake in the country’s next largest development, Arctic LNG 2, where the first train is expected online before end of this year.

Meanwhile, there are expectations among various analysts in Moscow that Gazprom’s gas production will continue to decline this year, falling by between 3% and 5% against last year, according to a recent poll by state news agency Ria-Novosti.