The decree transfers the rights of the project to a new Russian company.
Shell has currently a 27.5% stake worth $4.1 billion (£3.4bn).
According to the project’s overview documents, Sakhalin-2 is one of the world’s largest integrated, export-oriented, oil and gas projects, as well as Russia’s first offshore gas project.
Sakhalin Energy Investment Company Ltd., the project operator, is owned by Gazprom, Shell, Mitsui and Mitsubishi.
The project includes three offshore platforms, an onshore processing facility, 1,900 kilometres of onshore and offshore pipelines, an oil export terminal and a liquefied natural gas plant.
Bloomberg cited a statement signed by Vladimir Putin, which states threats to Russia’s natural interests and economic security.
A Shell spokesperson told ELN: “As a shareholder, Shell has always acted in the best interests of Sakhalin-2 and in accordance with all applicable legal requirements.
“We are aware of the decree and are assessing its implications.”