A newly created state-owned Russian company will take over the rights and obligations of Sakhalin Energy Investment Co., the joint venture that manages the Sakhalin-2 oil and gas project, Reuters reported today.
This could mean a forced exit from the project for Shell and Japan’s Mitsui and Mitsubishi, which are minority shareholders in Sakhalin Energy Investment Co.
Shell already said it would exit the project a few months ago and has since been looking for buyers for its stake in Sakhalin-2. According to earlier reports, a sale may be made to a group of Indian companies.
However, the Japanese companies have not announced any intention to leave the project. Indeed, earlier this year, Japan’s Minister of Economy, Trade and Industry Koichi Hagiuda said the Sakhalin-1 and Sakhalin-2 projects were “essentially important for energy security, as the projects allow Japan to deliver supplies below the market price, especially against the background of the current high energy prices.
Despite its involvement in Western sanctions against Russia, Japan continues to buy LNG from Sakhalin-2. Although it has stated its intention to increase intake from alternative sources, a complete shutdown of Russian energy imports seems unlikely at this stage.
Japan has also signaled that it has no intention of exiting energy projects in Russia in which it is involved, but may be forced to do so after the latest news.
Reuters notes in its report that Mitsubishi is discussing the presidential decree containing the change of ownership with its Sakhalin-2 partners.
The project, according to Reuters, represents 4 percent of global annual LNG supplies. Its main buyers are Japan – until recently the world’s largest importer of LNG – as well as China and South Korea, which also buy oil from the Sakhalin-2 development.
According to some analysts, the exit of Western and Asian partners will eventually lead to tighter LNG supplies due to the lack of experience and parts. At the same time, selling gas will become more difficult because of state control of the project, Credit Suisse’s Saul Kavonik told Reuters.
By Irina Slav for Oilprice.com
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