Japanese companies hold minority stakes in Russian fuel projects in the Far East 

Japanese companies will continue to participate in Russian energy projects on Sakhalin Island due to their importance for Tokyo’s energy security, the country’s foreign ministry announced on Tuesday. 

Tokyo will continue its “close cooperation” with the Group of Seven industrialized nations (G7) to pursue a “policy of tough sanctions” on Russia, the ministry said in its annual Diplomatic Bluebook, which reviews Japan’s foreign affairs activities.

Japan is also set to further cut reliance on Moscow’s energy resources by phasing out oil and coal imports. 

However, Tokyo will retain its interests in the Sakhalin-2 liquefied natural gas (LNG) project and the Sakhalin-1 offshore oil and gas venture in Russia’s Far East, according to the foreign ministry. 

“In light of ensuring stable supplies in the medium and long term, Japan continues to view these projects as important in the field of energy security and intends to maintain its share,” it stated. 

Sakhalin-1 is a consortium for offshore oil and gas production. Its sister project, Sakhalin-2, is one of the world’s largest LNG ventures, supplying around 4% of the global market. 

Both projects faced disruptions in 2022 after Western energy majors including US ExxonMobil and Britain’s Shell opted to leave Russia after the West sanctioned the country over its military operation in Ukraine. 

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Japan’s Sakhalin Oil and Gas Development Co (SODECO) owns a 30% stake in Sakhalin-1. In 2022, the Russian government allowed SODECO to keep its stake under the new domestic operator of Sakhalin-1 following the exit of ExxonMobil, the previous operator and former owner of a 30% stake. 

Exxon Neftegaz was disbanded as the operator of the project and all its assets and equipment were transferred to a new company managed by Rosneft subsidiary Sakhalinmorneftegaz-Shelf. 

Mitsui, along with Mitsubishi, have also retained their 22.5% combined stake in the Sakhalin-2 LNG project.

Mitsubishi CEO Katsuya Nakanishi said in February that Russia’s LNG project remained “extremely important” for ensuring that Japan maintains a stable supply of energy.

In the summer of 2022, Russia transferred the project from its Bermuda-based operator, Sakhalin Energy, to a domestic company, Sakhalin Energy LLC, and allowed foreign shareholders to retain their stakes in the new operator proportionate to their old stakes. Last year, the Japanese government estimated that demand for LNG would continue to grow.