The future of Shell's involvement in the controversial Sakhalin gas project off the east coast of Russian could be determined by mid-December when Russian environmental regulator Oleg Mitvol delivers his report.

The Anglo-Dutch company has been facing the threat of sanctions on its Sakhalin operations for several months after Moscow officials accused the company of breaking environmental laws. However, critics of the Kremlin have interpreted the development as an excuse to wrestle power from Shell.

Russia is believed to be keen to increase domestic gas giant Gazprom’s holding in the project and, reports suggest, has already offered Shell a cash buyout escape from its potential problems.

Meanwhile, Mr Mitvol has stated that his office has already uncovered serious environmental issues relating to Shell’s activities, for which adequate solutions have not been forwarded by the western company. As for the final environmental report, the regulator said that he was waiting for aerial footage and was expecting to report in mid-December. Shell could be sued for environmental breaches.

Elsewhere, Mitsui is close to selling part of its stake in the Sakhalin project to Gazprom, the Moscow Times has reported. Mitsui is a minor shareholder in Shell’s operation.