Japanese giants Mitsui and Mitsubishi have sealed stakes of 12.5% and 10% each in Sakhalinskaya Energia, the operator that has been established to take over Sakhalin 2, following the withdrawal of Shell from the flagship oil and gas development project in Russia’s far east.

The Japanese companies were partners in the former Sakhalin 2 operating consortium Sakhalin Energy, and have had their applications approved by Russian Prime Minister Mikhail Mishustin.

According to a resolution published on the governmental web portal, Mitsui's shareholding will be passed to MIT SEL Investment, a wholly owned subsidiary of Mitsui that is incorporated in the United Arab Emirates.

The Russian government also provided the formal approval to transfer a 10% shareholding in the project to another Japanese company, Mitsubishi.

Under a Russian governmental resolution approved earlier, Mitsubishi had to inform the Russian government on its plan to regain its shareholding before 4 September.

Once the new Sakhalin 2 operator was incorporated, Japan’s industry minister Koichi Hagiuda said authorities had asked both companies to “think positively” about rejoining Sakhalin 2, estimated to supply close to 10% of liquefied natural gas, imported by the country.

Together with UK supermajor Shell, Mitsui and Mitsubishi were minority shareholders in the former Sakhalin 2 operator, Sakhalin Energy Investment.

Russian President Vladimir Putin ordered the operator's Russian assets to be expropriated in June, and passed on to the new entity.

The measures were seen as retaliation by Moscow to the Western sanctions imposed on Russia in response to the Russian military invasion in Ukraine.

The new operator, named Sakhalinskaya Energia, was formally incorporated in the capital of the Sakhalin Island, Yuzhno-Sakhalinsk, in the beginning of August, with Russian gas giant Gazprom assigned a 50% shareholding plus one share in the new company.

Shell has already indicated that it does not intend to apply to Russia to regain the 27.5% stake held before the change,

The Russian government has also signalled that it intends to put up for sale any shareholding in Sakhalinskaya Energia that remains unclaimed after 4 September.

Russian companies and possibly investors from countries that have not joined sanctions against the country, are expected to be permitted to file applications to buy this shareholding.

After several years of debottlenecking efforts at the Sakhalin 2 LNG plant in the south of the Sakhalin Island, total annual liquefaction capacity for the two trains has been increased to over 11 million tonnes per annum of LNG, from 9.6 million tpa previously.

Offtake contracts

The new Sakhalin 2 operator has also invited offtakers to sign new long term contracts on the same delivery and pricing conditions but has introduced an option allowing the operator to request payment for delivered LNG in Russian rubles or currencies other than the US dollar into a Russian bank.

According to Japan’s newspaper The Asahi Shimbun, already three country’s utilities, Tokyo Gas, Kyushu Electric Power and Jera signed new contracts with Sakhalinskaya Energia this week.

The conditions in the new contracts for Tokyo Gas and Jera are the same as in the previous ones regarding energy prices and supply amounts, both companies said.

Kyushu Electric Power has not made public the details of its new contract.

Local media reports in Yuzhno-Sakhalinsk suggested that the three contracts cover at least 3.6 million tonnes of the annual production capacity of Sakhalin 2 LNG plant.

Other Sakhalin 2 long term customers in Japan are Tokyo Electric Power, Toho Gas, Osaka Gas and Hiroshima Gas. The project also delivers LNG to South Korea and China.

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