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Mitsui, Mitsubishi cut stakes in Sakhalin-2,

buyers asked to change payment scheme

INVESTMENT JAPAN’S two shareholders in Russia’s Sakha- stake in Sakhalin-2. OVL holds a 20% stake in
lin-2 LNG project have trimmed their stake Sakhalin-1, which produces around 400,000 bpd.
holdings by a total of JPY217.7bn ($1.66bn) fol- Japanese media reported that Mitsui had
lowing a decision in June by Russian President cut its stake in Sakhalin-2 LNG by JPY136.6bn
Vladimir Putin to subsume the entire Sakhalin-2 ($1.04bn) to JPY90.2bn ($685mn) at the end
oil and gas project – Sakhalin Energy Investment of June, and that Mitsubishi had reduced its
– under Russian ownership. share by JPY81.1bn ($616mn) to JPY62.3bn
In late July, Russia informed Japanese import- ($473mn).
ers from Sakhalin that they would have to make The companies made separate statements.
all future payments for LNG deliveries to the Mitsui’s CFO, Tetsuya Shigeta, told reporters:
European branch of a Russian bank, accord- “Details of [Putin’s] presidential decree are still
ing to a report in Japanese media. A number of not clear and we have made a conservative eval-
Japanese firms import LNG from Sakhalin-2. uation.” The CFO of Mitsubishi, Yuzo Nouchi,
Payments will still be made in dollars and LNG said the financial impact on the company is neg-
supplies will continue without interruption, the ligible given Mitsubishi’s equity capital of more LNG from the
report said. than JPY7 trillion ($53bn).
The decree issued by Putin to seize Sakhalin-2 “There is a strong possibility that we will raise project is also
was in response to sanctions imposed by West- annual guidance,” Nouchi added, “but we will
ern countries and their allies following Russia’s examine various factors over the current quarter, exported to a
invasion of Ukraine in late February. as there is growing uncertainty.”
Shareholders in the project include Russian Both companies reported huge profits for number of other
state-owned monopoly Gazprom with a 50% the April-June quarter. Mitsui’s profit rose 44% Asian countries,
plus one share, Shell with a 27.5% minus 1 share, to JPY275bn ($2bn) and Mitsubishi reported a
Mitsui with 12.5% and Mitsubishi with 10%. The profit of JPY533.95bn ($4.06bn). including China,
Japanese government has said it will support the Japanese media said Moscow’s instructions
two companies in their efforts to retain a stake to LNG importers on changing the payment South Korea and
in Sakhalin-2, which supplies Japan with about scheme were likely meant to shield Russia’s LNG
10% of its LNG imports. The facility produces revenue against sanctions, adding that Sakhalin India.
around 10-12mn tonnes per year (tpy) of LNG Energy appears to want payments (in dollars
and has a capacity to produce 150,000 barrels per for now) to be made to an account that is sub-
day (bpd) of crude. ject to Russian laws and regulations. That would
LNG from the project is also exported to ensure Moscow’s stable access to those funds, the
a number of other Asian countries, including reports said.
China, South Korea and India. Tohoku Electric Power has complied with the
Earlier this year, Shell entered talks with an request. Kyushu Electric, Hiroshima Gas, Tokyo
Indian consortium including ONGC Videsh Ltd Gas and Saibu Gas Holdings have yet to make
(OVL) and GAIL (India) about the sale of Shell’s their response clear.™

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