Japan's Mitsui and Mitsubishi have until the end of July to confirm Russian Sakhalin LNG stake retentions

Monday, 18 July 2022
Free Read

Japan companies have until the end of July to decide whether to maintain stakes in the Sakhalin II liquefied natural gas export project in the Russian Far East.

The Japanese government is currently coordinating possible future arrangements with the two Japanese LNG stakeholders in the Sakhalin plant, Mitsui & Co and Mitsubishi Corp.

Under the retention plan, Mitsui and Mitsubishi would keep 12.5 percent and 10 percent stakes respectively, even after Russian President Vladimir Putin's signing of an order that sets up a new operating company to safeguard control by Russia of the oil and gas ventures on and offshore Sakhalin Island.

According to the new Sakhalin II LNG operating company decree, foreign shareholders have until the end of July 2022 to apply to retain their existing shares in the new LNG operating entity after it is established.

Analysts noted that Japan acquires about 9 percent of its LNG from the Sakhalin II plant but pressure has mounted on the Japanese to quit Sakhalin amid sanctions and a pull-out by the other main shareholder Shell over Russia’s invasion of Ukraine.

Gazprom owns just over a 50 percent stake in the Sakhalin II operating company, while Shell held around 27.5 percent and the balance is owned by Mitsui and Mitsubishi.

China interest

The Sakhalin II plant began LNG exports in 2009 and has annual capacity from its two Trains of around 10 million tonnes per annum with shipments going mainly to Japan and South Korea and with China standing by to take over any relinquished Japanese stakes.

A statement said that the Japanese Prime Minister Fumio Kishida and Koichi Hagiuda, the Minister of Economy, Trade and Industry, discussed the Sakhalin energy supply issue at a meeting on July 15.

The Kishida government has stressed the need to retain interests in oil and gas projects off Sakhalin as they are vital to securing stable energy supplies in a global environment of surging energy prices.

The Mitsui and Mitsubishi stakes in Sakhalin II are in addition to Japan’s investments in the Sakhalin 1 project, Sakhalin Oil and Gas Development Co. though a consortium including Japan Petroleum Exploration Co, Japan National Oil Corp, Itochu Corp and Marubeni Corp.

US major ExxonMobil, the operator of Sakhalin I, has already announced its pull-out from the oil venture where it said other shareholders in addition to the Japanese included Russian and Indian companies.

These are units of oil company Rosneft and the New Delhi-based Indian company ONGC-Videsh.

The Japanese companies have taken part in the Sakhalin I oil project since 2006 and they have been main customers for the oil shipments.

Related Video

Free Read