Japan gas supplies safe despite Russia taking over Sakhalin-2 project: Kishida

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Japan gas supplies safe despite Russia taking over Sakhalin-2 project: Kishida

Japan gas supplies safe despite Russia taking over Sakhalin-2 project: Kishida

Japan has been introducing sanctions on Russian coal and oil, but LNG is not part of that process as the country may find it difficult to procure alternatives.

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01 Jul 2022 10:07:33 GMT9

Japan Prime Minister says it won’t affect gas supplies to Japan

Arab News Japan

TOKYO: With the news that Russian President Vladimir Putin had ordered that the assets of Sakhalin-2, an oil and natural gas development project in Russia’s Far East, be transferred to a newly established Russian corporation without compensation, Japan Prime Minister KISHIDA Fumio says it won’t affect gas supplies to Japan.

“We must communicate with the operator and consider how to respond,” he said.

But Japanese Deputy Chief Cabinet Secretary Seiji Kihara was more blunt in his comments. “Our interests in our country’s resources must not be undermined,” he said, adding that the government is examining how the latest development will affect the gas business. Economy, Trade and Industry Minister Koichi Hagiuda believes that Japan will be able to procure the energy supplies it needs.

Japan has been introducing sanctions on Russian coal and oil, but LNG is not part of that process as the country may find it difficult to procure alternatives.

Putin ordered that the assets of Sakhalin-2 be transferred to a newly established Russian corporation without compensation.

Two Japanese corporations involved in the project – Mitsui & Co. and Mitsubishi Corp. – now face the prospect of being excluded from it and losing their assets and investment.

Russia has said that current shareholders can participate as shareholders in the new company if they agree to the conditions of the Russian authorities. If they refuse, the Japanese trading companies could lose their investment in Sakhalin-2.

Sakhalin-2 produces about 10 million tons of liquefied natural gas per year, 6 million of which go to Japan. The project accounts for about 10 percent of Japan’s LNG imports.

Mitsui reportedly wrote off 80.6 billion yen ($594.9 million) in net assets, including LNG from Sakhalin-2, and impairment losses of 20.9 billion yen in the fiscal year ended March 2022. Mitsubishi also wrote off 50 billion yen related to Sakhalin-2.

Shell has already announced a withdrawal from Russian energy projects after Moscow began its invasion of Ukraine and is reportedly negotiating with a consortium of Indian energy companies to sell its interests in Russia.

Chinese energy companies are also said to have expressed interest in acquiring Shell’s side of the business.