Japan's Interests in Sakhalin-2 Thrown into Doubt

Economy

Tokyo, July 2 (Jiji Press)--As the Russian government has decided to effectively seize the Sakhalin-2 oil and natural gas development project, it is becoming increasingly unclear whether major Japanese trading houses can retain their interests in the project in the Russian Far East.

Without stable liquefied natural gas supply from the project, Japan will have no choice but to find an alternative supply option amid soaring LNG prices triggered by Russia's invasion of Ukraine. This could lead to a further rise in electricity and gas bills in Japan.

Major Japanese traders Mitsui & Co. <8031> and Mitsubishi Corp. <8058> have held stakes of 12.5 pct and 10 pct, respectively, in Sakhalin Energy Investment Co., the operator of Sakhalin-2.

Sakhalin-2 produces 10 million tons a year of LNG, and around 6 million tons of the annual output has been shipped to Japan, accounting for almost all of Japan's LNG imports from Russia. Japan Relies on Russia for 9 pct of its gas procurement.

"It's not that we will immediately lose imports from Sakhalin-2," industry minister Koichi Hagiuda told a press conference on Friday.

[Copyright The Jiji Press, Ltd.]

Jiji Press