RBC Daily: "Preference to Japan"
Gazprom to partner with Japan to develop Sakhalin projects
Russian Prime Minister Vladimir Putin offered Japan to cooperate more closely in oil and gas projects. Specifically, Japanese companies will be able to participate in the construction of a liquefied natural gas (LNG) plant and a gas chemical facility in the Primorye Territory.
Analysts believe that active LNG projects indicate that Russia is making serious efforts to diversify its raw material supplies. Gazprom head Alexei Miller said that when the Sakhalin-2 oil and gas project reaches its full capacity, Russian LNG supplies will account for 8% of the Japanese market.
Speaking at a business forum in Tokyo, Prime Minister Putin promised to launch in the near future the second phase of the oil pipeline from Skovorodino to the Pacific Ocean and invited Japanese companies to take part in the project. The Prime Minister also called on the Japanese business community to consider investing in raw materials processing facilities in Russia and first of all in the Far East.
"Specifically, we are planning to construct a liquefied natural gas plant and a gas chemical enterprise in Primorye," Mr Putin said. The raw materials for these projects will be supplied from the off-shore fields of the Sakhalin Island and the fields of Eastern Siberia, Mr Putin explained.
Mr Miller also announced yesterday that there were good prospects for cooperation with Japanese partners in gas and chemical projects, gas processing, and marketing, Prime-TASS reported. He said that the construction of the Sakhalin-Khabarovsk-Vladivostok pipeline, launched by Gazprom this year, would contribute to increased gas supplies from Russia to the countries of the Asia-Pacific region, including Japan.
Mr Miller indicated that Japan was the major consumer of the Sakhalin LNG, accounting for 65% of the supplies, delivered under long-term 25-year contracts. With the Sakhalin-2 project at full capacity, Russian supplies will account for over 8% of the LNG market in Japan, the Gazprom head said. He also stressed that when selecting partners for Sakhalin-3, Gazprom will be giving preference to the existing partners under the Sakhalin-2 project. The latter is jointly developed by Gazprom, Mitsui (12.5%), Shell (27.5%), and Mitsubishi (10%).
The grounds for the continued cooperation between Gazprom and Japanese companies have already been prepared. According to a Gazprom press-release, during his visit to Japan, Alexei Miller signed a memorandum of understanding with the Agency for Natural Resources and Energy of the Japanese Ministry of Economy, Trade, and Industry, the world largest trade company Itochu Corporation, and the Japan Petroleum Exploration company (Japex).
The document stipulates mutual feasibility studies for gas transportation to Vladivostok area, its sale and/or processing and marketing to potential consumers in the Asia-Pacific region. More Russian-Japanese projects are to come soon. According to Mr Miller, Gazprom is currently considering an offer from Mitsui to develop the Chayandinskoye field and is studying the possibility of exchange deals with Japanese partners, involving the entire range of hydrocarbon products.
Alexander Shtok, department director for Due Diligence 2K Audit-Business Consulting, believes that Japan should be interested in Russian raw materials projects. It will provide access to a huge source of raw materials, located next door to Japan. Considering that Russia did not have any problems finding consumers for LNG supplies from the Sakhalin facility, a new project in this region would be quite justified, analyst from Metropol brokerage Alexander Nazarov says.
Furthermore, it will allow Moscow to diversify gas supplies. In view of the recent rows with European gas consumers and transit countries, it is all the more important to have a reliable consumer in the east of the country. It would also make sense to invite Japan to take part in the construction of the Eastern Siberia - Pacific Ocean pipeline (ESPO), analyst from Kapital investment group Vitaly Kryukov says. It will raise the project's status and enable to fund it without providing government loans to Transneft.
