Japan cannot do without the Russian oil and gas project Sakhalin-2

Japan cannot do without the Russian oil and gas project Sakhalin-2


Pushed by a government concerned about winter energy supplies, Japanese business houses Mitsubishi Corp. and Mitsui & Co. remain involved in the Sakhalin-2 oil project and in particular the exploitation of gas in the Russian Far East. Mitsubishi confirmed this on Friday August 26, a few days after Mitsui.

The two companies will submit applications to become shareholders of Sakhalin Energy, a corporation created on August 5 by the Russian authorities, to replace the Sakhalin Energy Investment (SEI) consortium, in which Mitsui held 10% and Mitsubishi 12.5%. The majority shareholder in SEI, the Russian energy giant Gazprom should acquire 50% of the new operator. Another partner in the project, the British Shell group, announced at the end of February its intention to withdraw and sell its 27.5% stake.

Mitsubishi and Mitsui’s maintenance at Sakhalin-2 coincides with announcements by eight Japanese buyers of liquefied natural gas (LNG) from the Piltun-Astokhskoye and Lunskoye fields, off the northeast coast of Sakhalin Island, their renewal. buy contracts on the same terms as the previous ones.

Project “very important for energy security”

Many had contracts of ten or even twenty years, and some are very dependent on them. Some 50% of the LNG purchased by Hiroshima Gas comes from Sakhalin-2. JERA, a joint venture created by the Tokyo Electric Power Company (Tepco) and Chubu, is however the leading importer. Its contract covers the supply of 2 million tons of LNG per year until 2029.

And 60% of the 10 million tons of gas produced in Sakhalin is bought by the Japanese, which covers about 10% of Japanese needs. The Archipelago imports 97.8% of its LNG; 60% goes to electricity production; 30% is used for city gas.

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Hence the government’s pressure to maintain participation in Sakhalin-2, after the unilateral decision taken on June 30 by Moscow to take full control over it. Japan imposed sanctions on Russia after the Ukraine attack, but still scrapped the project “very important for energy security” of the Islands, explained the Prime Minister, Fumio Kishida. At the end of July, the Minister of Economy, Koichi Hagiuda, explained that he had it “gain understanding” of the United States on this issue.

As soon as Sakhalin Energy was established on August 5, Mr. Hagiuda appealed to Mitsubishi and Mitsui “think well” their stay in the project. The minister even promised government support. “The public and private sectors will work together to protect the interests of Japanese companies and ensure a stable supply of LNG. »

The pressure is on as winter approaches

The pressure is high as winter approaches, when LNG prices are rising in Northeast Asia, reaching, on Friday, for delivery in October, 70.50 dollars (70.90 euros) per million British thermal units (MMBtu, unit of Anglo-Saxon energy). an increase of 23.7%, compared to the export tax in September. This price is higher than the December 2021 record of $48 per MMBtu.

“LNG imports in Northeast Asia are expected to increase during the month of September. It is possible that prices will rise significantly once winter arrives”explains Ryhana Rasidi, LNG expert at the Kpler analysis center.

The situation promises to be so dire in Japan that Tokyo has been considering, since July, the introduction of a law to reduce the city’s gas consumption, similar to the existing electricity-saving measures.

The Ministry of Economy can ask families and businesses to reduce the consumption of city gas with or without estimated targets, if there is a severe shortage of supply. For electricity, such an order forces consumers, especially businesses, to save money. Offenders will be fined up to 1 million yen (7,310 euros).