LNG

Exports of Russian liquefied natural gas cargoes from the Yamal plant in northern Siberia and the Sakhalin plant in Russia’s Far East declined only slightly in the past year as Moscow also adapted its oil export policies under the OPEC+ regime as well as to cope with Western sanctions over Ukraine.

Japanese liquefied natural gas imports dropped again last month as storage increased and North Asian prices declined with thermal coal deliveries also plunging while nuclear plant usage is increasing.

Japanese liquefied natural gas imports for the first six months of the current fiscal year rose by 4 percent and with deliveries from the Russian Far East Sakhalin liquefaction plant increasing year-on-year and costing 90 percent more than the previous year as more Atlantic Basin shipments pointed at Europe.

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.

July 1 (LNGJ) - Russian President Vladimir Putin has signed a decree to set up a new operating company for the Sakhalin II oil and liquefied natural gas projects on Sakhalin Island in Russia’s Far East. While Shell has abandoned its stake in Sakhalin II LNG since Russia’s invasion of Ukraine, two Japanese companies Mitsui and Mitsubishi Corp. remain shareholders and it was unclear what their new status would be. Japan still receives LNG shipments from the Gazprom-operated Sakhalin II plant.

May 25 (LNGJ) - Shell, which has pledged to withdraw from Russian hydrocarbons from crude oil to the LNG plant on Sakhalin Island in a phased manner, has completed the sale for an undisclosed sum of its subsidiary Shell Neft’s retail filling stations and lubricants business in Russia to Lukoil. Shell Neft’s retail network consists of more than 400 stations, 240 sites owned by Shell and 171 other sites owned by dealerships.

   “All people currently working for Shell Neft, more than 350 in total, will remain employed by Shell Neft, which is now owned by Lukoil,” said the company. Shell noted that Lukoil is one of the largest publicly traded oil and gas companies in the world in terms of proved reserves and production and is the second-largest producer of oil in Russia.

Shell reported an almost three-fold jump in earnings to $9.1 billion compared with $3.2Bln in the same three months of 2021 as quarterly LNG sales increased along with oil and refined product prices.

Japan would pay one-third more per annum for imported liquefied natural gas if it followed the route of Shell and exited the Sakhalin II LNG project in the Russian Far East where two Japanese trading houses are shareholders.

UK major Shell plc said it intended to withdraw from involvement in all Russian hydrocarbons, including crude oil, petroleum products, gas and liquefied natural gas in a phased manner, aligned with new government guidance.

The now London-based company said that as an immediate first step, it would stop all spot purchases of Russian crude oil and would close its filling stations as well as jet fuel and lubricants operations in Russia.

The latest Shell statement follows last week’s moves to end involvement in the Nord Stream II natural gas pipeline project and to exit its equity partnerships with Russian gas giant Gazprom and related entities.

These included ending its 27.5 percent stake shareholdings in the Sakhalin-II LNG export facility in the Russian Far East, its 50 percent stake in the Salym Petroleum Development and the Gydan energy venture.

“We are acutely aware that our decision last week to purchase a cargo of Russian crude oil to be refined into products like petrol and diesel - despite being made with security of supplies at the forefront of our thinking - was not the right one and we are sorry,” declared Shell Chief Executive Ben van Beurden.

“As we have already said, we will commit profits from the limited, remaining amounts of Russian oil we will process to a dedicated fund,” he added.

“We will work with aid partners and humanitarian agencies over the coming days and weeks to determine where the monies from this fund are best placed to alleviate the terrible consequences that this war is having on the people of Ukraine,” stated Van Beurden.

Discussions

Shell also explained that its actions to date had been guided by “continuous discussions with governments” about the need to disentangle society from Russian energy flows, while maintaining energy supplies.

The company said that threats to stop pipeline flows to Europe further illustrated the “difficult choices and potential consequences” that are being faced.

Shell plans to immediately stop buying Russian crude oil on the spot market and we will not renew term contracts.

“At the same time, in close consultation with governments, we are changing our crude oil supply chain to remove Russian volumes,” said the company.

“We will do this as fast as possible, but the physical location and availability of alternatives mean this could take weeks to complete and will lead to reduced throughput at some of our refineries,” it added.

Shell is now implementing a “phased withdrawal” from Russian petroleum products, pipeline gas and LNG.

“This is a complex challenge. Changing this part of the energy system will require concerted action by governments, energy suppliers and customers, and a transition to other energy supplies will take much longer,” it stated.

Van Beurden also declared that ultimately, it was for governments to decide on the “incredibly difficult trade-offs” that must be made during the war in Ukraine.

“We will continue to work with them to help manage the potential impacts on the security of energy supplies, particularly in Europe,” the CEO concluded.

US major ExxonMobil with LNG production stakes in nations like Qatar, Australia, Papua New Guinea and at Golden Pass in Texas has become the latest energy company to quit Russia over the Ukrainian invasion and is expected to take a hit on earnings of up to $4 billion by leaving behind mainly oil interests in the Russian Far East.