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Gas Mergers Could Pressure Prices In Europe

Gas Mergers Could Pressure Prices In Europe

The merger of the PEG-Nord…

Japan and Russia to Build Natural Gas Pipeline?

Following the Fukushima nuclear disaster Japan has closed down all of its nuclear power plants and instead has to produce its energy by different means. This has caused it to increase its imports of fossil fuels; something it cannot afford to do for long.

Currently Japan ships liquefied natural gas from Sakhalin in Russia, but LNG is expensive; a better, more affordable solution must be found.

Seiji Maehara, the former Japanese Foreign Minister, recently visited the offices of the Russian gas giant, Gazprom, where he announced that Russia and Japan are discussing the possibility of constructing a gas pipeline along the sea bed linking the two countries.

The pipeline will enable Japan to import natural gas direct from Russia in favour of the more expensive and slower method of shipping LNG in by tanker.

According to Denis Borisov, an oil and gas analyst at Kosmos Bank, the idea of creating a Russo-Japanese pipeline has been approached many times before, but talks have always failed due to political differences. The Japanese refused to accept the project whilst there still remains an unresolved territorial dispute over the Kuril Islands.

“The crucial issue for a possible joint action between Russia and Japan on the gas issue is an achievement of a common political consensus, an agreement which is presently being hindered by the Kuril Islands. If that obstacle is removed, more dynamic cooperation between the two nations will be possible. Japan is quite close to Sakhalin, which is rich in crude oil and gas, and which will be cheaper to pump to Japan by pipe than the supply of liquefied gas” he said.

The lack of nuclear power and the resulting desperate demand for alternative sources of energy mean that Japan is likely to accept the latest proposal by Russia.

By. Charles Kennedy of Oilprice.com



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