Japan will remain a stakeholder in the Russian Sakhalin-1 oil and gas project after the government asked the Japanese companies that participated in the original consortium to retain their stakes in the new entity that will operate the project.
Russia's president signed a decree to change the ownership of Sakhalin-1 last month, with the state setting up a new entity to manage the project. Previous shareholders such as Japan's SODECO consortium were offered the chance to retain their stakes.
SODECO, or Sakhalin Oil and Gas Development Co, comprises Itochu, the conglomerate, Marubeni, and Japan Petroleum Exploration Co. The Japanese government has a 50-percent stake in the consortium.
"The Sakhalin-1 is extremely important for Japan's energy security as it is a valuable source outside of the Middle East," said trade minister Yasutoshi Nishimura this week, as quoted by Reuters.
Previously, the Sakhalin-1 project was operated by Exxon but Russia removed the supermajor from the operatorship position earlier this year, amid the company's own total pullout from Russia.
India's ONGC is also reportedly considering taking a stake in the new entity operating Sakhalin-1. The Indian state oil major was a shareholder in the consortium running Sakhalin-1 before Exxon's pullout and wanted to retain its interest in the project.
The news that the Japanese companies will retain their interest in Sakhalin-1 is not a surprising development. The trade minister has repeatedly indicated that the offshore project is important for Japan, despite Western sanctions that have forced the country to shrink its import of Russian oil.
"From the standpoint of diversifying Japan's crude oil import, that's a very important project," trade minister Nishimura said last month.
The chief executive of Itochu went further, saying in an interview with the Financial Times that Japan could not afford to follow its Western allies in cutting off all energy trade relations with Russia because, unlike them, Japan's survival depended on energy imports.
By Irina Slav for Oilprice.com
More Top Reads From Oilprice.com:
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More