Japan does not withdraw from the gas project with Russia

Japan stresses the importance of LNG projects in Russia for energy supply and insists Tokyo has no intention of giving up.

Japan’s top cabinet secretary Hirokazu Matsuno said today that the Sakhalin-1 and Sakhalin-2 liquefied natural gas (LNG) projects in Russia are “extremely important” for the country’s stable energy supply and Tokyo has no intention of withdrawing from the project.

Mr Matsuno’s statement came after Japan decided to phase out Russian oil imports, in the context of a G7 commitment to ban or eliminate Russian oil to pressure Moscow over the military campaign.

“In principle, Japan will ban crude oil imports from Russia. For a country heavily dependent on energy imports, this is a very difficult decision for Minister Fumio Kishida.

Japanese Prime Minister Fumio Kishida delivers a speech on May 9 at the Prime Minister's Office on the war in Ukraine.  Photo: AFP.

Japanese Prime Minister Fumio Kishida delivers a speech on May 9 at the Prime Minister’s Office on the war in Ukraine. Picture: AFP.

“When we cut or stop importing Russian oil, we will consider when assessing the actual situation. We will take time to take steps towards a gradual elimination,” the Japanese prime minister said.

The Sakhalin-1 oil and gas development project off the island of Sakhalin in the Russian Far East is operated by Exxon Neftegas, a subsidiary of US oil giant Exxon Mobil, with a 30% stake. Other project partners are the Japanese company SODECO with 30%, the Indian company ONGC Videsh with 20% and the Russian oil company Rosneft with 20%.

Sakhalin-2 is Russia’s first offshore LNG project. Japan’s Mitsui Corporation holds 12.5% ​​of the shares, while Mitsubishi Corporation holds 10%. The Russian Gazprom now holds a 50% stake.

Japan’s prime minister said in late March that Sakhalin-2 is an extremely important project in terms of energy security as it will help create cheap, stable and long-term LNG. However, Mr Kishida pledged to make joint efforts with the G7 to reduce energy dependency on Russia.

For more than a decade, Japan has been using Russian gas to reduce its dependence on Middle East oil. According to the Japan Foreign Trade Organization, Russia will supply 3.6% of crude oil and 8.8% of LNG to the country in 2021.

Although it accounts for only a small portion of Japan’s total LNG imports, Russian gas has a low price compared to the average on the spot market. LNG accounts for a quarter of Japan’s overall energy mix and generates 36% of the country’s electricity.

According to an Energy Agency official, Japan will have to spend another 3 trillion yen ($25 billion) if it is forced to replace Russian LNG with gas on the spot market.

After Russia launched a military campaign in Ukraine in late February, Japan imposed sanctions on Russia, including lifting Russia’s most-favoured-nation status, expelling diplomatic staff and halting coal imports. Moscow on May 4 announced an indefinite travel ban for 63 Japanese citizens, including Prime Minister Kishida. He had criticized Kishida’s ban as “completely unacceptable”.

Huyen Le (Corresponding Reuters)