Mumbai: Royal Dutch Shell has offered to reduce its 55-per cent stake to around 25 per cent, thereby ceding control of the $22 billion Sakhalin-2 project to Russia's state gas monopoly Gazprom.

Shell's controlling stake in the world's largest liquefied natural gas (LNG) project is by far the single biggest foreign investment in Russia. The in-principle agreement to reduce oil major Shell's 55-per cent stake to a blocking stake of at least a quarter came after months of government pressure, industry sources said.

Shell CEO Jeroen van der Veer and Gazprom head Alexei Miller met in Moscow in the presence of energy minister Viktor Khristenko the weekend, the two companies said without elaborating.

Russia's natural resources ministry and its environmental regulator have accused Shell of ecological violations in project work on the remote Far Eastern island of Sakhalin.

Although Shell made several proposals concerning Sakhalin-2 at a meeting, "Gazprom has yet to decide on Shell's proposals because the project's problems, including ecological problems," sources said.

Work on the 9.6-million tonne Sakhalin-2 LNG processing facility is mostly complete but threats of licence withdrawals, fines and litigation are disrupting progress.

Sources also say the environment campaign was designed to secure better terms for Russia, which has no equity stake in Sakhalin-2 under a production-sharing agreement struck in the early 1990s.

Cost escalation derailed an earlier deal under which Shell would have swapped a one-quarter stake in Sakhalin for an interest in Gazprom's Zapolyarnoye gas field, located north of the Arctic Circle in West Siberia. Instead, Gazprom is now expected to swap field assets and possibly make a cash payment for a controlling stake of over 50 per cent in Sakhalin-2, now operated by Shell.