Russia OK’s trader Mitsui’s investment in new Sakhalin-2 operator

The liquefied natural gas plant operated by Sakhalin Energy is seen in July 2021 in Sakhalin, Russia.

TOKYO (Jiji Press) — The Russian government has approved a plan for Japanese trading house Mitsui & Co. to hold a 12.5% equity stake in a new Russian operator of the Sakhalin-2 oil and natural gas development project in the Russian Far East, according to a government decree announced Tuesday.

The project is crucial for Japan’s liquefied natural gas procurement. Mitsui’s investment will likely lead to Japan maintaining its interests in the project.

The decree, published on a Russian government website, did not mention anything about Russia’s decision over investment by another Japanese trader Mitsubishi Corp., also involved in the Sakhalin-2 project.

According to the decree, a Dubai-based subsidiary of Mitsui will take a 12.5% stake in the new Sakhalin-2 operator.

The Russian government has instructed the new company to create documents necessary for the transfer of shares to the Mitsui side.

“We remain in discussion with stakeholders, including the Japanese government and business partners, regarding possible future action considering energy supply needs,” Mitsui said in a statement on the Sakhalin-2 project released on Wednesday.

In late June this year, Russian President Vladimir Putin signed a presidential decree that the operations of the Sakhalin-2 project and all assets of Sakhalin Energy Investment Co., the previous operator, be transferred to a new company to be established by the Russian government.

Mitsui owned a 12.5% stake in the old operator, while Mitsubishi owned 10%.

The two Japanese firms had decided to join the new operator, which was established on Aug. 5.

The Sakhalin-2 project supplies Japan with 6 million tons of LNG, or around 8% of the country’s LNG imports per year.

Although Tuesday’s decree suggested that Mitsui would be able to hold the same proportion of shares in the new company as it did in the previous operator, some experts said the details of the deal will be decided based on negotiations with the Russian side, which will begin after the share acquisition plan’s approval.

Meanwhile, Russia has become increasingly critical of Japan’s sanctions against Russia that have been imposed in step with the United States and European countries over Moscow’s invasion of Ukraine.

There remain concerns that Japan’s stable procurement of LNG may be threatened, as Russia may try to exert pressure on Japan over the sanctions.