What it will be?

Sakhalin Project Impact of Putin Presidential Decree July 1, 20:20

Sakhalin is an island located just 43 kilometers north of Wakkanai City, Hokkaido.

A huge amount of money of over 3 trillion yen has been invested in the islands of the Russian Far East, and oil and natural gas are being produced.

Japan is also deeply involved in the development project on this island and procures a lot of energy.

On June 30, Russian President Vladimir Putin signed a presidential decree ordering one of its oil and gas development projects, "Sakhalin 2", to change its business entity to a Russian company, shocking Japan. rice field.

An urgent report on what Russia's true aim is and how much it will affect the Japanese economy.

(Reporter, Riki Yamane, Keisuke Igarashi, Kouki Nishizono, Ministry of Economic Affairs)

* Based on the article published on March 8, the latest situation was covered and revised.

can't believe it

"I can't believe it. If you really do something like nationalize what you invest in a contract for no reason, few private companies will invest in Russia in the future."

Chairman Mimura of the Japan Chamber of Commerce and Industry, who has been involved in global business as the current owner of Nippon Steel for many years, told reporters on the afternoon of July 1st, and did not hide his surprise.

Sakhalin 2 Free transfer

It all started with the signing of a presidential directive by Russian President Vladimir Putin.

Regarding the oil and natural gas development project "Sakhalin 2" in Far East Sakhalin, the president orders the business entity to be changed to a Russian company newly established by the government and the assets to be transferred to the new company free of charge. The decree was signed by President Putin on June 30th.

The presidential decree alleges that there was a breach of contract obligations regarding development, creating a threat to Russia's national interests and economic security, and whether shareholders, excluding Gazprom, agree to the terms of the Russian government within a month. I need to be notified.

History of energy development in Sakhalin

Japan has a deep connection with Sakhalin's oil and natural gas development.

Geographically, it is a long and narrow island 800 km north and south just north of Hokkaido. Before the war, the southern half was called South Sakhalin and was a territory of Japan.

The origin of this large energy development project dates back to the 1970s.

Japan, which was hit hard by the first oil crisis, began to seek a way to break the dependence of crude oil on the Middle East from the viewpoint of energy security with the involvement of the government, and Sakhalin was selected as one of the candidate sites. I chose it.

It is geographically much closer than the Middle East, and has the great advantage of reducing transportation costs.

Two projects

After that, the former Soviet Union collapsed, development continued even in Russia, and two projects went into full-scale operation.

Sakhalin 1 and Sakhalin 2.

Sakhalin-I includes the American oil major "ExxonMobil", the Russian state-owned oil company "Rosneft" and its subsidiaries, the Indian state-owned oil company.

The Japanese companies have participated in "SODECO / Saharin Oil and Gas Development," in which the government has a 50% stake, and major trading companies such as "Itochu", "Marubeni," and "Petroleum Resource Development." I own.

It mainly produces oil and exports it to Asia such as Japan, China and South Korea.

Sakhalin 2 is a joint venture "Sakhalin Energy" company.

Russian government-affiliated gas company "Gazprom" has a 50% stake, oil major "Shell" has a 27.5% stake, a major trading company "Mitsui & Co." has a 12.5% ​​stake, and "Mitsubishi Corporation" has a 10% stake. increase.

We transport natural gas to facilities in the south, convert it to LNG = liquefied natural gas, and export it to Japan and other countries.

According to JOGMEC, Sakhalin 1 crude oil accounts for 1.5% (2021) of the crude oil imported by Japan, while Sakhalin 2 accounts for 7.9% (2021) of the imported LNG. ..

Western oil majors announce withdrawal one after another

Following Russia's military invasion of Ukraine, the major British oil company Shell, which participates in Sakhalin 2, announced its withdrawal on February 28.

Following Shell's announcement of withdrawal from Sakhalin 2, on the morning of March 2, Japan time, ExxonMobil, the leader of Sakhalin 1, stopped operations of Sakhalin 1 in response to Russia's invasion of Ukraine and headed for withdrawal. Announced to start the procedure.

The shock ran through the companies involved in the project and the relevant ministries and agencies.

Disputation eruption

At this time, the Agency for Natural Resources and Energy, which has jurisdiction over energy, was urgently convened by a person in charge to discuss the response.

The focus of the discussion was on the differences between the members of Sakhalin 1 and 2.

Sakhalin 2 is a Japanese group that only participates in private companies, but Sakhalin 1 is deeply involved in the government.

As G7 countries tighten sanctions on Russia, a government official said that there was a heated opinion as to whether it would be okay to continue Russia's energy business involving the government.

As for Sakhalin 2, LNG, which is the fuel for power plants, is produced, and the majority of the opinion was that it would not be possible to withdraw from the beginning due to energy security.

On the other hand, there was an opinion that Sakhalin-I should be taken seriously only by the decision of the oil major, which has a pipe with the US government called ExxonMobil.

A company official also revealed a difficult heart, saying, "Russia and Ukraine during the war, an event that I have never experienced in the past. I think it is unavoidable to quit."

Some corporate officials have expressed the view that Sakhalin-I is in a different position between the United States and Japan.

"From ExxonMobil's point of view, Sakhalin-I is one of many projects. It just announced its withdrawal in view of the international political situation and the reputation of the company. However, Japan received crude oil supply from Sakhalin-I and received crude oil. Having an interest in a place that does not depend on the Middle East is very significant. "

If another party follows the path of withdrawal, the participating companies will have to sell their shares and interests to someone, but they question whether they will sell.

He emphasizes that if the company sells in two bundles and three sentences, it will damage the corporate value and expose it to the risk of a representative litigation from shareholders, which is not very tolerable as a company.

At that time, discussions were repeated within the government and among companies, and both projects settled down in a direction that would not immediately decide to withdraw.

However, suddenly, in the form of a presidential decree, Sakhalin 2 was forced to be transferred free of charge, and both the government and related companies are busy collecting information.

Can cause tight power in winter

In the future, the focus will be on the investment of major Japanese trading companies and the impact on LNG = liquefied natural gas imports.

Approximately 60% of the LNG produced by "Sakhalin 2" is purchased by Japanese electric power companies and gas companies under long-term contracts.

A government official said that if a major trading company were shut out from a newly established Russian company and the import of LNG was hindered, the supply and demand of electricity would become even tighter, which could have a serious impact on the electricity supply, especially in winter. I point out that.

Japan has just experienced a four-day tight warning of electricity supply and demand within the jurisdiction of TEPCO.

According to the Ministry of Economy, Trade and Industry, electricity supply and demand in winter is expected to become even more severe.

The "reserve rate", which indicates the surplus power supply capacity, is 3%, which is the minimum required for stable supply.

However, in Tohoku and Tokyo, January next year will be 1.5% and February will be 1.6%, which is a severe situation below 3%.

In Chubu, Hokuriku, Kansai, China, Shikoku, and Kyushu, January was 1.9% and February was 3.4%.

This expectation assumes that LNG from Sakhalin 2 will arrive as usual.

Do you want to step on?

What is the true aim of the Russian side?

The presidential directive states at the beginning that "it protects Russia's national interests in connection with unfriendly and unlawful acts aimed at imposing restrictive measures against Russia."

It is believed that Russia, which continues its military invasion of Ukraine, is also aiming to shake the Japanese side, which is tightening sanctions along with Europe and the United States.

In an electronic version of the article dated July 1, the leading Russian newspaper "Kommersant" states that "it is urging foreign companies participating in the project to step on."

Some Japanese government officials have speculated that Russia may have begun to use LNG as a weapon against Japan, just as Russia uses pipeline gas as a weapon in Europe.

If Japanese companies are excluded from the newly established Russian corporation, the Russian side will be able to freely control the supply amount.

Another government official is wary that Japanese power and gas companies will have to re-conclude new contracts with the new Russian corporation, even if they transfer their shares to a Russian corporation.

It is quite possible that the contract at that time will not have the same conditions as the previous contract, and it is possible that the price will be raised.

Ken Koyama, Principal Researcher of the Institute of Energy Economics, Japan, who is familiar with the international energy situation, also analyzes as follows.

Principal Investigator Koyama

"It is better to think that the Russian side is naturally aware of the situation in Japan, where the supply and demand of electricity is tight and the stable supply of electricity is a major issue. I think it came. "

Will the difficult phase continue?

Saharin's oil and natural gas development has been built up over time by Japan, which lacks energy resources, to ensure energy security.

Russia's military invasion, sanctions exchanges, and seemingly domineering presidential directives are now at a major crossroads.

Economic Department Reporter

Riki Yamane

Joined in 2007

After working at Matsue Bureau, Kobe Bureau, Economic Department, and Tottori Bureau, Economic Department is

currently in charge of the trading company industry.

Keisuke Igarashi ,

Reporter of the Ministry of Economic Affairs

Joined in 2012

After working at the Yokohama Bureau, Akita Bureau, and Sapporo Bureau, the Ministry of Economic Affairs

is currently in charge of the energy industry.

Reporter of the Ministry of Economic Affairs

Kouki Nishizono

Joined the Ministry of Economic Affairs in 2014

After working at the Oita Bureau, the Ministry of Economic Affairs is

currently in charge of the Ministry of Economy, Trade and Industry and the

energy industry.