The Japanese government hopes to help Mitsui and Mitsubishi retain shares in the Sakhalin-2 oil and gas project in Russia's Far East. However, the Russian government has not yet issued terms to allow Japanese enterprises to continue participating in the project, the Japan Times reported.
If Japan loses benefits in one of the key liquefied natural gas (LNG) suppliers Sakhalin-2, the country's LNG purchases for gas and thermal power production could be unstable for a long time.
At the end of June, Russian President Vladimir Putin signed a decree allowing a newly established domestic company to take control of the Sakhalin-2 project. In the major oil and gas project in Russia's Far East, about 50% of its shares belong to Russia's Gazprom, 12.5% belong to Mitsui and 10% belong to Mitsubishi.
About 60% of the total 10 million tons of LNG produced at Sakhalin-2 per year are exported to Japan to meet about 8% of the country's total LNG demand.
To keep a stake in the Sakhalin-2 project, Mitsui and Mitsubishi need to announce an investment plan in the new Russian company within one month of the company's launch and need to receive Russian approval in investment plans.
In a meeting last week, Prime Minister Fumio Kishida and Industry Minister Koichi Hagiuda agreed to extend the government's comprehensive support for the two Japanese companies' efforts to become shareholders in the new Russian company.
However, the Japan Times noted that it is not ruled out that Russia will provide difficult conditions or deny the participation of Japanese companies in the Sakhalin-2 project. This refusal will be seen as Russia's response to the sanctions imposed by Japan, the US and the West on Russia after the conflict in Ukraine.
Japanese sides involved in the Sakhalin-2 project are calling for a cautious approach to avoid pushing Russia to impose unreasonable conditions.
However, Yasuhide Yajima, chief economist at the NLI Research Institute, noted that there will be no appropriate negotiations with the Russian government in the current situation.
Meanwhile, Hiroshi Hashimoto, senior analyst at the Institute of Energy Economics, said a "505050 opportunity" for Japanese companies to maintain their benefits at the Sakhalin-2 oil and gas giant project.
