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Buyers In Japan And South Korea Renew Long-Term Deals With Russian LNG Project

The Sakhalin-2 LNG project could see its revenues double in 2023 compared to before the Russian invasion of Ukraine as LNG prices are now higher and many of the long-term Asian buyers have renewed their deals, Reuters reported on Wednesday, citing analysts and its own calculations.

Most long-term LNG buyers of the Sakhalin-2 project, including from Japan and South Korea, have continued to buy gas from the venture, even though Western majors quit en masse operations in Russia after the Russian invasion of Ukraine in February 2022, including Shell, which said it would leave the project.   

Utilities in Japan and South Korea, however, continued to buy LNG from Sakhalin, citing energy security—and many of them renewed their long-term deals.


In 2021, the latest available data, the Sakhalin-2 project booked revenues of $5.7 billion, according to Reuters estimates. This year, the revenues could double on the back of higher LNG prices and continued demand from Asian buyers.

In August last year, Tokyo Gas, the largest city gas supplier in Japan, signed a long-term LNG agreement with the new Russian operator of Sakhalin-2 to keep supply volumes from the project.


A decree from Vladimir Putin stipulated in early July that a newly set up state Russian company would take over the rights and obligations of Sakhalin Energy Investment Co., the joint venture running the Sakhalin-2 oil and gas project. Shell and Japan’s Mitsui and Mitsubishi were minority shareholders in Sakhalin Energy Investment Co. 

In early August, the Russian government gave Sakhalin-2 minority foreign investors – Shell, Mitsui & Co, and Mitsubishi – one month to claim their stakes in a new entity that will replace the existing project. Shell confirmed it is looking at ways to exit the project, while the Japanese companies kept their stakes.    

Mitsui, which still has 12.5% in Sakhalin-2, said in November that the project had enough technical know-how to run operations without Shell.

By Tom Kool for Oilprice.com 

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  • Mamdouh Salameh on January 25 2023 said:
    Current global LNG production capacity is fully booked pending Qatar’s raising its capacity from 77 million tons (mt) currently to 110 by 2024/25 and 127 by 2028 and the United States expanding its capacity by 2025.

    Therefore, it wasn’t surprising that Japan and South Korea, long-term buyers of LNG from Sakhalin-2 project, to renew their supply contracts with the new Russian operator in the aftermath of Shell’s decision to exit the project while the Japanese companies Mitsui and Mitsubishi keeping their stakes.

    However, the withdrawal of Western companies Shell and ExxonMobil won’t affect production growth and profitability since the new Russian operator has all the technical know-how it needs not only to run operations without Shell and ExxonMobil but to expand production and also revenues.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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