The sources said Shell is negotiating with state-controlled Gazprom Neft, Russia's third-largest oil producer, about acquiring a stake in the onshore Tazovskiy project in the country's northern Yamal region.

Shell declined to comment. Gazprom Neft did not reply to a Reuters request for comment.

The project, first discovered in 1962, has initial resources of 438 million tonnes of oil (3.2 billion barrels) and 186 billion cubic metres of gas, according to Gazprom Neft's website.

It is not a major field: when production reaches its projected peak of 2 million tonnes a year, that will account for only 3 percent of Gazprom Neft's current oil production.

But the deal - if it goes ahead - would mark a return for Shell to making new investments in Russia, one of the world's biggest oil producers which has been under Western sanctions since 2014 because of its role in the Ukraine crisis.

Western oil majors, including US giant ExxonMobil, were planning new projects in Russia before the sanctions, banking on the country's vast and relatively cheap energy resources coupled with stable politics.

Since 2014, when Russia annexed Ukraine's Crimea region and backed separatist rebels in eastern Ukraine, many Western companies have suspended or quit new projects, while mainly focusing on their existing investments.

One of the three sources said Shell is interested in acquiring around 50 percent of the Tazovskiy project. The aim is to conclude the deal by the year-end, the source said.

"For Gazprom Neft, it's a chance to raise quick money, while for Shell - to get cheap reserves," said the source, who spoke on condition of anonymity.

PARTNERSHIP

Gazprom Neft and Shell are partners in western Siberia's Salym Petroleum project, which produces 120,000 barrels of oil per day.

Shell suspended some shale oil and gas projects following the introduction of Western sanctions on Moscow. Gazprom Neft is subject to the US government's sectoral sanctions, which limit its ability to raise funds abroad.

It is not on the US Treasury Department's Specially Designated Nationals list, which bars US entities from doing business with any firm on the list.

Under a separate set of sanctions, US companies are barred from helping Gazprom Neft, along with other Russian oil companies, in developing Arctic offshore, shale oil and deepwater projects.

Gazprom Neft plans to launch the Tazovskiy project in 2021, producing around 2 million tonnes of oil that year, according to the company's website.

Tazovskiy is a conventional onshore oil project and therefore should not fall under the restrictions on shale, deepwater and Arctic projects.