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