Japan Plans to Protect Companies Involved in Sakhalin-2 Project

After Putin signed a decree to allow the government to take over the Sakhalin-2 oil and gas project, the Japanese government  plans to support its two companies, Mitsui and Mitsubishi, in their attempts to stay in the project. There has been uncertainty whether the two companies would stay in the consortium after the Kremlin’s move, as tensions between the two countries rise over Russia’s invasion of Ukraine, and Japan joining the Western sanctions on Moscow.

Japan’s trade and industry ministry is expected to relay its decision to the companies shortly.

As tensions intensify in terms of tight global energy supplies and skyrocketing prices, Japan faces a historic energy security. Japan imports 10% of its LNG from Russia, most of which are under long term contracts from Sakhalin-2.

Japan’s effort is likely aimed at sending a clear signal of government backing for the project and bucks moves by Western nations that have prohibited private companies from making new investments in Russia.

Last week, Prime Minister Kishida said the government would work with companies about possible solutions, as Japan tries to secure its stable supply of LNG.

Mitsui and Mitsubishi also said they will discuss the matter with the government as well their partners.

Shell , one of the largest stakeholders in the consortium, has already announced its withdrawal from the project and is in talks to sell its stake to a consortium of Indian energy companies.

Russia’s state-run Gazprom has a 50% plus one stake in the project, while Mitsui holds 12.5% and Mitsubishi 10%.

Last month, the Kremlin said a new firm would be created to take over all rights and obligations of the Sakhalin Energy Investment Co, amid Western sanctions imposed on Moscow.

It was up to up to the government of sanctions-hit Russia to decide whether foreign shareholders were to remain in the consortium.

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