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Japan's METI asks Mitsui to consider participating in new Russian Sakhalin 2 operator

Highlights

Sakhalin 2 important for Japan's power, gas supply: Hagiuda

Russia orders to set up new Sakhalin 2 operator

Japan's Minister of Economy, Trade and Industry Koichi Haguida earlier Aug. 5 requested the CEO of Japanese firm Mitsui to "positively consider" taking stakes in Russia's new operator of the Sakhalin 2 LNG project.

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"I myself conveyed a message about positively considering its participation agreement for a new Russian entity to be established," Haguida said Aug. 5 during a meeting with Kenichi Hori, president and CEO of Mitsui.

The Russian government issued an order Aug. 2 to set up a new operator, namely Sakhalinskaya Energija, for the Sakhalin 2 LNG project in the country's Far East within three days. The new operator will be established in Yuzhno-Sakhalinsk, according to the order published on the national legislative database on Aug. 3.

Gazprom will hold just over 50% in the new entity, in line with its ownership of the former operator. Foreign shareholders have a month from the entity's establishment to decide whether to take stakes, according to a previous Russian presidential order signed on June 30.

Speaking at a press conference, Japan's Hagiuda said METI officials had conveyed a similar message to Japanese firm Mitsubishi, which Haguida plans to meet in the near future.

"Sakhalin 2 is an important project from a standpoint of Japan's power and gas supply," Hagiuda said. "Together with the private sector, we will work to secure Japan's stable LNG supply by keeping its companies' interests."

More than half of the 9.6 million mt/year LNG production capacity at Sakhalin 2, in which Japan's Mitsui has a 12.5% stake and Mitsubishi a 10% interest, is committed to Japanese offtakers.

During a separate meeting with Prime Minister Fumio Kishida earlier Aug. 5, Hagiuda said he had reaffirmed Japan's "basic principle" of the Sakhalin 2 project.

"I have also confirmed [with Kishida] about continuously maintaining [stakes in the Sakhalin 2 project] as the Japanese government because it is an important supply base."

Russian decree

The latest Russian order comes amid heightened concerns in Japan over potential LNG supply disruptions after Russia issued on June 30 a decree to transfer all rights and obligations held by Sakhalin Energy to a new Russian entity.

The decree stipulates existing stakeholders have one month to submit their approval for the transfer of stakes to the newly created company, after which the government will rule on the admissibility of the submissions.

Russia accounted for 9% of Japan's total LNG imports of 74.32 million mt in 2021, its fifth-largest supplier, according to data from Japan's Ministry of Finance.