Japan’s energy situation fragile after Putin’s presidential decree on Sakhalin-2

The Yomiuri Shimbun

15:28 JST, July 1, 2022

The sudden announcement by Russia that President Vladimir Putin had signed a presidential decree that the company operating the Sakhalin-2 oil and gas development project in the Russian Far East must give away its assets to a new Russian company has caused confusion in the Japanese government and among the companies that have invested in the liquefied natural gas project.

About 60% of the LNG produced by Sakhalin-2 is destined for Japan. The government has stated that Japan will not withdraw from the project, with Prime Minister Fumio Kishida saying that it is “an extremely important project from the standpoint of energy security.” There were also voices that it would benefit Russia if the concessions held by Japanese companies were given to Russia or a third country.

Deputy Chief Cabinet Secretary Seiji Kihara said Friday, “Japan’s interests in resources must not be lost. We are currently scrutinizing the treatment of interests held by Japanese companies and the impact on LNG imports.”

Mitsubishi Corp., a shareholder of the operating company,commented, “We are aware of the presidential decree and are discussing how to respond to it in cooperation with the government and our business partners, but production is continuing at present.”

Mitsui & Co., also a shareholder, commented, “We are aware of the news reports, and are in the process of confirming the contents of and facts about the presidential decree.”

According to the Economy, Trade and Industry Ministry, LNG from Sakhalin-2 is equivalent to 3% of the electricity supply in Japan. If supply were to be disrupted, the tight situation in power supply-demand would be inevitably worsened.