Japan’s Mitsui, Mitsubishi to apply for stake in new Sakhalin-2 LNG operator

Japanese trading houses Mitsui & Co and Mitsubishi Corp have decided to join the new Russian entity that took over the Sakhalin-2 liquefied natural gas (LNG) project, the two firms said on Thursday.

The decisions come after the Japanese government asked the trading houses to “think positively” about joining the new entity as Sakhalin-2 is a key source of stable energy supplies for Japan. “A resolution was passed this morning regarding the submission of a consent to take a stake. The consent will be filed by the deadline,” a Mitsubishi spokesperson said, referring to the Sept. 4 deadline.

“We have decided to retain our stake in the Sakhalin-2 project,” a Mitsui spokesperson said. Shares in Mitsubishi were up nearly 2% after the news and shares in Mitsui rose about 1%, outperforming a 0.6% rise in the broader Nikkei index.

Russian President Vladimir Putin signed a decree in June to take charge of the Sakhalin-2 project in Russia’s far east, raising the stakes in an economic war with the West and its allies. The order created a new Russian entity to take over all rights and obligations of the previous operator Sakhalin Energy Investment, in which Shell and the two Japanese trading companies hold just under 50%.

Russia’s state gas company Gazprom received just over 50% of the new entity, which is holding the remaining share until existing shareholders apply for a stake. A Russian government decree signed early in August gave the foreign investors a month to claim their stakes. If they failed to do so, the stake would be evaluated and sold by the government to a Russian entity.

The move by Mitsui and Mitsubishi was largely expected as the Japanese government has repeatedly said it would support the trading houses in their efforts to stay in the project. Japan imports about 10% of its LNG from Russia, mainly from Sakhalin-2. Mitsui and Mitsubishi together hold 22.5% in the project.

Shell, which has already written off the value of its Russian assets, made clear months ago it intended to quit Sakhalin-2 and has been in talks with potential buyers. Sakhalinskaya Energiya LLC, the new Russian entity, said last Friday that it has started business activity and is continuing production and export operations.

Separately, Japanese gas and electric utilities with long-term contracts to buy LNG from Sakhalin-2 received a new contract offer from the new Russian operator, which they are currently assessing.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)