GLNG: Japan’s Mitsubishi applies to keep its stake in Russia’s Sakhalin-2 LNG plant

Japan’s Mitsubishi has decided to apply to the Russian government to keep its stake in the Sakhalin-2 oil and gas project but still needs Kremlin approval.

Russian President Vladimir Putin signed a decree on June 30 that will transfer all rights and obligations of the Sakhalin-2 oil and gas project to a new Russian entity, in effect giving the Kremlin the power to nationalise foreigners’ stakes in what is one of the largest energy projects in the world, and escalating the ongoing gas wars.

Sakhalin-2 in Russia's Far East supplies circa 4% of the global LNG market and is a key source of energy for Asian countries and Japan in particular, which is heavily dependent on LNG imports. Russia accounts for 8.8% of Japan’s import of liquefied national gas, almost all of which comes from Sakhalin-2. Japan has been a partner in the project for decades. At the same time, Japan has condemned Russia’s invasion of Ukraine and supposed Western sanctions on Russia.

Putin’s decree stipulates that Gazprom will keep its majority stake, but foreign investors must ask the Russian government for a stake in the newly created firm within one month or be dispossessed.

Putin has been using its market power in the energy business as his weapon in the economic war with the West. This week analysts estimated that Europe has already spent an additions $278bn on energy since the start of the conflict and is expected to pay the same again over the winter.

Now Japan has applied the Russian government is expected to announce its decision by the end of August, Nikkei reports, citing its sources.