Japan govt to support trading firms' stakes in Sakhalin-2- sources

[July 16, 2022]  By Yoshifumi Takemoto, Ritsuko Shimizu and Miho Uranaka

TOKYO (Reuters) - The Japanese government plans to support Mitsui & Co and Mitsubishi Corp in their attempts to stay in the Sakhalin-2 oil and gas project, three sources said, after Russia seized control of the development key to Japan's energy supply.

There has been speculation whether the Japanese firms would remain in the consortium, as Tokyo-Moscow tensions rise over Russia's invasion of Ukraine. Japan has joined Western sanctions on Russia.

Japan's trade and industry ministry will be relaying the decision to the firms shortly, said the three people with the knowledge of the matter. They asked not to be named because the information is not public.

Resource-poor Japan faces a historic energy security risk as tensions intensify with global supply tight and prices sky-high. Japan imports 10% of its liquefied natural gas from Russia, mainly under long-term contract 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.

The people declined to give details on what the Japanese government will do to help the trading houses maintain their stakes.

Prime Minister Fumio Kishida said on Thursday the government would work with the private sector on the matter, as Japan aims to secure its right and stable supply of liquefied natural gas.

A general view shows the Sakhalin-2 project's liquefaction gas plant in Prigorodnoye, about 70 km (44 miles) south of Yuzhno-Sakhalinsk October 13, 2006. REUTERS/Sergei Karpukhin/File Photo

Mitsui and Mitsubishi representatives said on Saturday the companies will discuss the matter in collaboration with the government as well as their partners. Officials from the Ministry of Economy, Trade and Industry could not be reached for comment outside business hours.

Shell, one of the largest stakeholders in the consortium, announced its exit from the project and is in talks to sell its stake to a consortium of Indian energy companies, Reuters reported in May.

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

Russia last month decided to create a firm that willtake over all rights and obligations of the Sakhalin EnergyInvestment Co in Russia's Far East, amid Western sanctions imposed on Moscow.

It was up to up to the government of sanctions-hitRussia to decide whether foreign shareholders were to remain inthe consortium.

(Reporting by Yoshifumi Takemoto, Ritsuko Shimizu, Miho Uranaka; Writing by Junko Fujita; Editing by William Mallard)

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