ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintSite TitleTitle ChevronIcon Twitter
Energy

Japan and Russia set to launch $9bn LNG project in Far East

Consortium including Itochu, Rosneft and Exxon look to begin production in 2027

The project will send liquefied natural gas via a 200-km pipeline to Russia and produce 6.2 million tons of LNG a year.   © Kyodo

TOKYO -- A group of Japanese companies and its government are set to launch a new liquefied natural gas project with Russian and U.S. partners in far eastern Russia in a move that may shift the power dynamics of the growing global LNG market.

The project involves Exxon Mobil, Russian state oil company Rosneft and Sakhalin Oil and Gas Development, a Japanese consortium that counts Japan's Ministry of Economy, Trade and Industry as well as Itochu, Japan Petroleum Exploration and Marubeni as shareholders. The parties are in talks to produce LNG from the Sakhalin I Project, which already produces crude oil.

The new project will send gas via a 200-km pipeline to Russia and produce 6.2 million tons of LNG a year, nearly a tenth of Japan's total LNG procurement.

The initial plan was for Sakhalin 2, a project by Russian gas company Gazprom and Royal Dutch Shell, to sell the gas via pipeline, but it was switched to self-export after a disagreement over pricing. Rosneft CEO Igor Sechin confirmed this policy with Japanese counterparts during a recent visit to Japan.

The project could cost 1 trillion yen ($9.1 billion). The parties plan to award an engineering design contract in the spring of 2020, and companies such as Bechtel, Technip FMC and McDermott have participated in the tender. Marketing activities mainly in Asia will begin simultaneously. Thereafter, the parties aim to have a final investment decision in 2021 and start production in 2027.

Russia, the world's second-largest gas producer after the U.S., exports nearly 40% of its domestic production. A big portion goes to Europe, but it is increasing supply to East Asia amid concerns in Europe over becoming too dependent on Russia.

Japan, the world's largest LNG importer, is looking for greater involvement in projects to secure supply amid the growing clout of China and other countries.

The project will mark the third Russian LNG development project with Japanese investment, after Sakhalin 2 and Arctic LNG 2.

But projects in Russia also carry risks. Mitsubishi and Mitsui were involved in Sakhalin 2, but their ownership in the project, as well as Shell's, was reduced in 2006-07 after the Russian government raised environmental issues. Gazprom joined as the largest shareholder.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends July 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media