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Japan warns of ‘interests’ after enactment of Russian gas project – AFR


Japan’s energy interests “must not be undermined,” Tokyo said on Friday after Moscow issued a decree transferring operations of a key oil and gas project to a new Russian company.

Japanese trading houses Mitsui and Mitsubishi Corp own 12.5 and 10 percent stakes in the Sakhalin 2 project, respectively, but the future of their investments seems uncertain following the Russian move.

The decree calls for the creation of a new Russian operator and requires existing foreign shareholders to apply for the right to participate in the new company, with Moscow deciding on their inclusion.

Japanese government spokesman Seiji Kihara said Friday morning that Tokyo was “closely studying the impact on liquefied natural gas (LNG) imports.”

“Generally speaking, we believe that our resource interests must not be undermined,” he added, declining to comment further.

Later on Friday, Prime Minister Fumio Kishida said the government does not believe the decree will “immediately halt LNG imports,” on which Japan is heavily dependent.

“We believe we need to carefully monitor how the decree affects our contract,” he told reporters.

Japan’s economy minister, meanwhile, said Tokyo will look for alternative suppliers.

“In the medium to long term, we will do everything to ensure stable energy supply, including through alternative sourcing of LNG suppliers outside Russia, buying on the spot market and reducing demand when necessary,” Koichi Hagiuda said journalists.

He said Japan will also look into promoting renewable and nuclear energy, which remained controversial in the country after the 2011 Fukushima disaster.

The Russian decree says the move is in response to “unfriendly actions” by countries imposing “restrictive measures” on Russia over its invasion of Ukraine.

It warns the Russian government against conducting a “financial, environmental and technical audit” of foreign stakeholders and identifying any “damages” caused by them.

Those accused of such damages could be ordered to pay unspecified compensation, she adds.

Energy-poor Japan relies heavily on LNG imports and had previously ruled out a withdrawal from the Sakhalin-2 project despite joining Western-led energy sanctions against Russia over the invasion of Ukraine.

Spokesmen for Mitsubishi and Mitsui would only say that the companies are reviewing the details of the decree in coordination with the government.

The other major shareholder in the project is oil giant Shell, which has already committed to selling its 27.5 percent stake.

“As a shareholder, Shell has always acted in the best interests of Sakhalin-2 and in accordance with all applicable legal requirements,” the British group said on Friday.

“We are aware of the decree and are examining its implications,” he added.

Shell announced in May that it had suffered a total hit totaling $1.6 billion related to Sakhalin-2.

Japan is heavily dependent on imported fossil fuels, in part because many of its nuclear reactors have been shut down since the Fukushima disaster.

Russia supplies nearly nine percent of Japan’s LNG needs, with Australian exports accounting for about 40 percent of the market.

Japan is currently suffering from a record heatwave and the government has issued multiple warnings of a power crisis in the Tokyo area in recent days.

A three-month period began Friday during which residents are being urged to conserve electricity amid fears of shortages during the summer heat.

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