Bloomberg: Putin’s decree on Sakhalin-2 will lead to a struggle between Japan and the West for gas
The decision of Russian President Vladimir Putin on Sakhalin-2 could further narrow world markets and push Japan to fight Europe for energy resources. The agency announced this Bloomberg.
According to the publication, one of the largest buyers of liquefied natural gas (LNG) is considering replacing Russian gas supplies. According to experts, the decree on Sakhalin-2 will encourage Tokyo to buy gas in already busy markets. In addition, spot prices may rise further and provoke a panic in the market.
Japanese Economy, Trade and Industry Minister Koichi Hagiuda has already asked US and Australian officials to increase supplies to reduce dependence on Russia. At the same time, in May, he stated that the country did not plan to withdraw from the Sakhalin-2 oil and gas project, even if it was told to take this step, since its predecessors were working on obtaining this asset.
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Redistribution of ownership of Sakhalin-2
On June 30, Russian President Vladimir Putin signed a decree on special measures in the fuel and energy sector in connection with the unfriendly actions of foreign states. In particular, he ordered Sakhalin Energy to change the operator of the Sakhalin-2 oil and gas project. According to the document, the property of the project operator will be transferred to a company created by the government for free use. Also, all the rights and obligations of the project operator will be transferred to the state.
Sakhalin Energy’s current shareholders are Gazprom (50 percent plus one share), Shell (27.5 percent minus one share), and Mitsui & Co. (12.5 percent) and Mitsubishi (10 percent).
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In turn, Kyodo warned that Japanese companies could lose their rights in the project and face a sharp increase in energy prices if there are problems with natural gas supplies.
At the same time, Seiji Kihara, Deputy General Secretary of the Cabinet of Ministers of Japan, said that Tokyo hopes that Moscow’s decision will not affect its rights and interests in this project.
We believe that damage to the rights and interests of our country in relation to natural resources should not be inflicted
Russia accounts for about nine percent of the gas supplied to the country, almost all of it comes from the Sakhalin-2 project.
Three scenarios for Tokyo
Moscow’s actions on the Sakhalin-2 project presented Tokyo with a difficult choice between the unity of the G7 (G7) in its pressure on Russia and its own energy security, the Nikkei newspaper said. The publication also predicted three possible scenarios for Japan. In the first case, the companies would be forced to agree to Russia’s terms and receive a stake in the new Sakhalin-2 operator without a guarantee that the proportion of their participation in the project or the ownership structure would be preserved.
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The second scenario implies a refusal to transfer to a new operator of the project while maintaining existing long-term contracts for the supply of LNG to Japan. The third scenario involves giving up shares in the new operator and terminating contracts. This is considered the worst-case scenario, since it will entail a serious blow to the country’s energy security.
There are no grounds for stopping LNG supplies
Japanese Prime Minister Fumio Kishida, commenting on Putin’s decree, noted that such a decision by the Russian leader does not mean that LNG supplies will be immediately stopped. He also added that now the country needs to consider further steps.
We will closely monitor what requirements will be in the content of the contract as a result of this decree.
The Kremlin spokesman Dmitry Peskov also said that there were no grounds for stopping supplies. When asked whether the decree on Sakhalin-2 could become an example for the nationalization of other companies with Russian national participation, he replied that there could not be any general trend. “Each individual case will be considered separately,” Peskov stressed.
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