Japan concerned over China-Russia LNG alliance after Shell exits Sakhalin-2
Apr 23, 2022
Tokyo [Japan], April 23 : The talks between Energy giant Shell and Chinese companies over its stake in the Sakhalin-2 project raised concern for Japan as possible Moscow-Beijing dominance in the project could end up reducing Tokyo's liquefied natural gas access.
The talks between Energy giant Shell and Chinese companies over its stake in the Sakhalin-2 project raised concern for Japan as possible Moscow-Beijing dominance in the project could end up reducing Tokyo's liquefied natural gas access.
Sakhalin-2, Russia's first LNG project, is operated by Russian gas giant Gazprom, which holds a roughly 50 per cent stake, according to Nikkie Asia.
Shell, the Number 2 shareholder with a 27.5 per cent stake, is reportedly holding joint talks with China National Offshore Oil Corp., China National Petroleum Corp. and China Petrochemical Corp. to sell its entire interest, Nikkie Asia said citing US and UK media.
In February, the London-listed company said that it would exit from the project, after Russia's military operations in Ukraine triggered international sanctions.
As per the reports, Japanese trading houses Mitsui & Co. and Mitsubishi Corp. also hold 12.5 per cent and 10 per cent, respectively, making Sakhalin-2 a crucial project for energy-starved Japan.
Sakhalin-2's export quotas do not correspond to the sizes of the investments. Of the 10 million tons it produces annually, roughly 60 per cent is bound for Japan. The project accounts for almost all of Japan's LNG imports from Russia and about 10 per cent of Japan's overall LNG imports, as per Nikkie Asia.
Citing a source at a Japanese trading company, Nikkie Asia reported that even if China and Russia end up owning a majority of Sakhalin-2, "the long-term contracts will be honored."
"The business impact on Japan will be limited for the time being," the source said.
Japanese energy importer JERA, a 50-50 joint venture between Tokyo Electric Power Co. Holdings and Chubu Electric Power, procures more than 1.5 million tons of Sakhalin-2 LNG annually under a 20-year contract starting from 2009.
For Japan to beef up energy security, policymakers will be tasked with exploring other options, such as diversifying energy supplies, expanding renewable energy sources and restarting idled nuclear plants. The Ministry of Economy, Trade and Industry has formed a new organization to study approaches to ensure stable supplies of energy and rare metals, the media reports said.
