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Japan opted for Russian gas

31 August 2022

Belogoryev Alexey M. Research and Development Director, Director of the Center for Energy strategic analysis and forecasting

Alexey Belogoryev, Deputy Principal Director on Energy Studies at the Institute for Energy and Finance, commented to the Expert publication on the prospects for further participation of Japanese companies in the Sakhalin-2 project.

Alexey Belogoryev recalled that both Japanese partners in the Sakhalin-2 project had earlier received a recommendation from the Japanese government to "hold firmly on their shares in the new operator."

“This is logical, because the issue is political, and even internal political. Companies are forced to make decisions with an eye on the government. Therefore, I do not think that it was about some kind of external pressure. For example, from the US," he said.

The expert drew attention to the fact that now various Japanese energy companies have long-term contracts for gas supplies with Sakhalin-2, many of them are valid until 2029-2030.

“Japan has no plans to abandon them. In the current environment, all consumers who have such contracts try to adhere to them, because the prices for them are much lower than in the same spot market. I think that the Japanese government will consistently adhere to this line. Firstly, this is a question of price, it is very important, they will not find cheaper. Secondly, it is extremely convenient logistics, there is nothing better and safer. Thirdly, the reliability of long-term contracts plays a role. Fourthly, it is important for Japan to prevent the Chinese from entering Sakhalin-2. And Tokyo has big concerns about this, given that the project is attractive. Therefore, the attitude of the Japanese to the project will not change not only in the coming months, but also in the coming years,” he suggested.

As for another major participant in Sakhalin-2, Shell, which announced back in February that it was withdrawing from the project, the situation here is less clear-cut. According to the expert, the company does not want to conclude a contract with a new operator and is trying to play for time, expecting that Russia itself will terminate it. Then the British-Dutch oil and gas company plan to file a claim for damages.
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