Japanese likely to put energy security over Western calls for boycott of Russia’s Arctic LNG II project

Monday, 18 September 2023
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The Japan Organization for Metals and Energy Security, a national agency with a stake in the Russian Arctic LNG II project operated by the Novatek natural gas company of Russia, is likely to put Japanese LNG needs over Western sanctions as Japan did when keeping cargo rights from Sakhalin LNG.

“Strengthening mutually beneficial relationships with resource-rich countries is essential for developing oil and natural gas resources,” said the Japanese agency known as JOGMEC.

“As a governmental organization, JOGMEC conducts various projects to support Japan’s resource diplomacy, collaborating with national oil companies and providing technical support for producing countries,” it added in its latest statement on policy.

While Japan like other nations has condemned Russia's invasion of Ukraine it has continued to keep stakes in the Sakhalin LNG plant in the Russian Far East and other energy projects.

Novatek controls 60 percent of the Arctic LNG II project and its other remaining active partners are from China and Japan.


They are China National Petroleum Corp., China National Offshore Oil Corp. and a consortium comprising the Japanese trading company Mitsui & Co. and JOGMEC.

Mitsui has said that while it would comply with any sanctions requirements it would take its final guidance from the Japanese Government.

In the case of Russia’s Sakhalin LNG, Japanese companies Mitsui and Mitsubishi maintained their stakes and offtake with the government saying at the time that if Japan ceded its offtake rights they would likely be taken up by China.

Another energy security issue facing Japanese utilities and LNG importers is that Australia could become an unreliable LNG supplier in the future as labor unions begin to exercise control and more hardline policies at LNG plants, readily backed by key members of the governing left-wing and anti-hydrocarbon Labor party.

This action has resulted in a series of strikes and work stoppages at four facilities in Western Australia, raising security of supply concerns in Asia.

Analysts said that crucially the Japanese have a large offtake portion from the Arctic LNG II project on the Gydan Peninsula that is expected to come on stream in early 2024 and they were unlikely to give this up.

Japanese offtake

The Japanese have basic offtake rights from the Gydan venture to 2 million tonnes per annum and could increase that total.

Arctic LNG II will have three liquefaction Trains, each with 6.6 MTPA of capacity.

One of the Trains is already on site after being towed from a construction yard in the Murmansk Region on a gravity-based structure and deployed in the bay where the plant is located.

The biggest Arctic LNG shareholder, Novatek itself, has been signing multiple additional sales and purchase agreements with Chinese LNG players such as the ENN Group and Zhejiang Energy Gas Group.

The ENN SPA stipulates cargoes from Arctic LNG II will amount to a total of 600,000 tonnes per annum will be delivered over a term of 11 years.

LNG deliveries to ENN will be on a ex-ship (DES) basis whereby Novatek supplies the shipping to ENN’s Zhoushan LNG receiving terminal in eastern China. 

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