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New Russian operator offers Japan firms same contracts for Sakhalin 2

In this April 6, 2009 file photo taken from a Mainichi Shimbun helicopter, a ship carrying liquefied natural gas from the Sakhalin-2 project in Russia is seen docked in Sodegaura, Chiba Prefecture. (Mainichi)

TOKYO (Kyodo) -- The new Russian operator for the Sakhalin 2 oil and gas project in the Russian Far East has offered Japanese power companies and other buyers the same prices, supply levels and other conditions as before, a source familiar with the deal said Wednesday.

    The new company was launched on Aug. 5 following a decree signed by Russian President Vladimir Putin, and Japan -- whose relations with Moscow have deteriorated since it launched its offensive in Ukraine -- has been waiting to see whether Japanese utilities could maintain their contracts with the operator.

    But as the new operator has presented specific conditions for the deal, the Japanese side will consider signing it, the source said.

    At present, Jera Co., a Tokyo-based energy company jointly owned by a group company of Tokyo Electric Power Company Holdings Inc. and Chubu Electric Power Co., as well as Tokyo Gas Co., Hiroshima Gas Co. and several other companies procure liquefied natural gas from Sakhalin 2.

    Long-term contracts have allowed these utilities to procure LNG in a stable fashion at relatively low prices.

    The new Russian operator has informed several Japanese players of its intent to sign contacts with them under the same conditions as before, according to the source.

    The development comes as Japan, which is already reeling from the effects of higher energy prices following Russia's invasion of Ukraine in February, might be forced to source LNG at higher prices.

    Around 9 percent of Japan's LNG imports come from Russia, almost all of them supplied by Sakhalin 2.

    In late June, Putin signed a decree that saw the new operating company seize control of the project.

    Earlier Wednesday, Japan's industry minister Yasutoshi Nishimura asked Mitsubishi Corp. President Katsuya Nakanishi during their meeting to consider investing in the new Russian operator. Mitsubishi and another major Japanese trading house, Mitsui & Co., each hold stakes in Sakhalin 2.

    "I think (Mitsubishi) has accepted my request," Nishimura told reporters.

    Russia has not set any conditions he thinks would make the signing of a new deal difficult, said Nishimura, who became Japan's minister of economy, trade and industry in last week's Cabinet reshuffle by Prime Minister Fumio Kishida.

    Nishimura's predecessor Koichi Hagiuda made a similar request during a meeting with Mitsui's President Kenichi Hori on Aug. 5.

    According to the decree, foreign investors are required to apply by Sept. 4 to maintain their stakes in the project.

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