Russia’s Sakhalin Energy Investment Company has approached Chinese gas buyers and affiliate power producers with an offer to ship 12 LNG cargoes per year over a term period of up to five years, starting this August. The price tender – linked to Brent crude oil prices – closed in the first week of March, though Japanese buyers have not been invited to participate.
At the height of the 2022 energy crisis, savvy Chinese buyers snapped up several shipments from the Sakhalin-II export terminals at nearly half the current spot prices. Deliveries were arranged from August through December that year, in a tender dedicated specifically to pre-notified buyers.
With the latest tender, Sakhalin Energy seems to take a similar approach. Cargoes from the liquefaction plant in Russia’ Far East have often been offered to legacy buyers and stakeholder in the project – not the wider market. Shareholders of Sakhalin Energy are Gazprom (50% + 1 share), Mitsui (12%) and Mitsubishi-affiliate Diamond Gas (10%) while Shell’s stake had been confiscated by a Russian auditor following the Kremlin’s invasion of Ukraine.
The two liquefaction trains at Sakhalin II entered service in 2009 with a total capacity of 9.6 million tons per annum. Plans for a third train are in the making for quite some time.
Japan reliant on cargoes from Sakhalin
Unphased by criticism, Japan continued to rely on LNG cargoes from Sakhalin to cover nearly a tenth of its gas demand in 2023, similar to previous years – despite Western sanctions against Russia. “Finding a substitute would take several years,” the trade ministry said, supporting policies to keep importing gas from both Sakhalin-I and -II.
Going forward, Japan may become even more reliant on Russian LNG given that some US projects are being delayed over permitting issues, the energy ministry noted. Still, Japanese trading houses and utility sources told S&P Global they were not invited to bid for the latest term tender for shipments from Sakhalin II.
Price review to start in April
Sakhalin Energy Investment Company will be reviewing prices for LNG shipments from April onwards. Under current contracts, buyers in Japan and South Korea used to secure Sakhalin-2 cargoes linked with a 13 percent or 13.5 percent slope to customs-cleared Brent crude oil rates. Most of the terminal’s one or two spot cargoes per month, meanwhile, have been headed to China which might make the country the preferred destination for future term deliveries.
