Tokyo Gas president: Procurement from Sakhalin-2 necessary for stable gas supply

The Yomiuri Shimbun

10:25 JST, April 12, 2022

Liquefied natural gas (LNG) from the Sakhalin-2 project in Russia is necessary for Japan to have a stable gas supply, Tokyo Gas Co. President Takashi Uchida said during a recent interview with The Yomiuri Shimbun.

“If imports stop, the supply of gas will be hindered,” Uchida said, expressing his intention to continue procuring LNG from the project involving Russian state-owned energy firm Gazprom.

About 8% of the LNG imported to Japan is from the Sakhalin-2 project, and it is difficult to quickly make a long-term contract with a different foreign entity.

The amount of LNG available for spot transactions, in which a commodity is bought and sold in accordance with supply and demand, is in short supply.

“It’s simply impossible to buy all [LNG] through spot transactions [to replace Russian gas],” Uchida said.

The contract between Tokyo Gas and the Sakhalin-2 project is valid through 2031.

Tokyo Gas will still have to make payments even if it decides not to procure LNG from the project. “If that happens, the central government would have to think what to do,” he added.

Gas rates have increased due to soaring LNG prices. There is a system in place that allows gas rates to include the increase in raw material prices, but there is also a cap to limit the burden on consumers.

“Everything over the cap will have to be shouldered by us, and it will have a serious impact on the company’s management,” Uchida said.