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China’s interest in acquiring an abandoned stake in a Russian liquefied natural gas export project is providing further justification for Japan to continue its joint venture with Gazprom PJSC.
“If Japan leaves a project, then a third party can acquire it,” trade minister Koichi Hagiuda said in Tokyo on Friday. “Exiting energy projects in Russia would push up prices even further, and would not be an effective sanction strategy.”
Shell PLC is in discussions with several Chinese state-owned oil giants to sell a stake in the Sakhalin 2 LNG project that the London-based firm planned to exit after war erupted in Ukraine, it was reported on Thursday. Japanese trading houses Mitsubishi Corp. and Mitsui & Co. own a combined 22.5% of the Sakhalin project, and a majority of the gas produced there supplies Japan.
Exiting Russian LNG projects would force Japan to source replacement fuel from the already tight spot market, threatening to boost prices that are trading near record-high levels.
Hagiuda declined to comment on the details of “individual business discussions” regarding Shell’s talks with Chinese firms. Mitsubishi and Mitsui weren’t immediately available for comment on Friday.
Japan is grappling with how to put pressure on Moscow, while also continuing to import natural gas and oil from Russia amid a global supply crunch. Sakhalin 2 is the closest LNG export project to Japan, and Prime Minister Fumio Kishida said last month that the nation shouldn’t withdraw due to its strategic importance for the resource-poor nation.
Still, Kishida made a surprise decision earlier this month that Japan would ban imports of Russian coal. So far, he is avoiding similar restrictions on other fuels.
Shell holds a 27.5% stake in the Sakhalin 2 project, which Wood Mackenzie estimates is worth $4.1 billion. Russia’s Gazprom has the remaining 50%.
