Concerned regarding Putin’s order to set up new energy project operator, Japan worries regarding damage to interests
Russian President Vladimir Putin signed a decree on June 30 to establish a new company responsible for operating the energy cooperation development project “Sakhalin 2”. Whether the original foreign investors can continue to hold shares is up to Russia to decide. Japanese media reported on the 1st that two Japanese companies with holdings may be forced to withdraw, which may further push up the price of natural gas and electricity in Japan.
The “Sakhalin 2” project is located on the continental shelf of Sakhalin Island in the Russian Far East. It mainly exploits oil and natural gas. The oil reserves involved in the project are regarding 100 million tons and the natural gas reserves are more than 400 billion cubic meters. According to Archyde.com data, this project accounts for regarding 4% of global LNG production, mainly supplying Asian countries.
About 9% of Japan’s LNG imports come from Russia, almost all from the Sakhalin 2 project. After the radiation leakage accident of the Fukushima Daiichi nuclear power plant in March 2011, the power generation of Japan’s nuclear power plants has been greatly reduced, and the dependence on natural gas and other fossil fuels has increased.
The original operator of the “Sakhalin 2” project was Sakhalin Energy Investment Co., Ltd. Among them, Gazprom holds more than 50% of the shares, and Japan’s Mitsui & Co. and Mitsubishi Corporation hold 12.5% and 10% of the shares respectively.
According to the new decree signed by Putin, Russia will establish a new company to fully take over the personnel and business of Sakhalin Energy Investment Co., Ltd. Gazprom will continue to retain its original shares, and foreign investors must submit an application to retain shares within one month, and the Russian government will decide whether to approve it.
The Russian side said that the new decree is intended to protect Russia’s national interests from the “unfriendly behavior” of the United States and other Western countries. After Russia launched a special military operation once morest Ukraine in late February, Japan followed the United States, Europe and other countries to impose sanctions on Russia, and was listed by Russia as an “unfriendly country”.
Shares in Mitsui & Co. and Mitsubishi Corporation fell, both down more than 5 percent, following news of Putin’s signing of the new decree came out. The two companies said they were verifying the situation and considering countermeasures.
Japanese Deputy Chief Cabinet Secretary Makoto Kihara told media reporters on the 2nd that the Japanese government is evaluating the impact of Russia’s move and cannot answer how to respond at this stage. “Japan’s resource-related interests should not be compromised,” he said.
Japanese media worry that the two companies may be forced to withdraw from the “Sakhalin 2” project, thereby pushing up the price of natural gas and electricity in Japan. In the past few days, Japan has encountered rare high temperature weather and the power supply is tight. The government has called on the public to save electricity.
Japanese Prime Minister Fumio Kishida said in March that Japan will not withdraw from the “Sakhalin 2” project, which is crucial to ensuring Japan’s energy security. According to him, this project provides Japan with a “long-term and stable supply of cheap natural gas”, and withdrawing from this project is not in line with Japan’s policy.
According to Xinhua
Photo courtesy/Visual China
