Japan aims to buy more LNG from Russia
Friday, May 05, 2017
Japan is interested in buying significantly more LNG from Russia as it works to reduce its dependency on the Middle East.

“Japan traditionally buys the majority of oil and gas it needs from the Middle Eastern countries,” Japanese Minister of Economy, Trade and Industry Hiroshige Seko told Russia’s Rossiya-24 television station. “We are concerned over this dependency.”

“That’s why it is very important for us to make sure there is a northern energy supply route, I mean from Russia. It is very important in terms of energy security for our country… I can confirm that we would like to significantly increase the volume [of LNG deliveries from Russia].”

Tokyo and Moscow are also discussing the prospect of building a gas pipeline to link the two countries, he added.

Russia’s energy minister said late last month that Japanese firms were interested in financing the construction of the third phase of Russia’s Sakhalin-2 LNG plant.

“Japanese partners have confirmed interest in the purchase of liquefied natural gas from this project, and in the possibility of financing the project and participating in construction,” Alexander Novak told Rossiya-24.

“When the decisions on Sakhalin-2 are finally adopted, I think the Japanese partners will participate in this.”

Russia’s Gazprom owns around 50% of Sakhalin-2, which is operated by Sakhalin Energy. Anglo-Dutch Shell owns around 27%.

Gazprom itself, however, is not confident of Japan’s future as a growing consumer of natural gas, its deputy head Alexander Medvedev said earlier in April.

“The demand situation in Japan is not clear yet for the next 15, 20, 25 years,” he said, adding that Gazprom saw bigger opportunities in China.
Regarding the proposed gas pipeline between Russia and Japan, he said it “has a history with its ups and downs” and still requires “a deep feasibility study” by both sides.

The link would need a capacity of at least 8 bcm per year and would optimally carry 20 to 30 bcm, Medvedev added. That volume would equate to around a quarter of Japan’s demand.

Gazprom’s ability to win big markets in China and Japan will hinge on the price of its gas, according to Gordon Kwan, head of Asia oil and gas research at Nomura Holdings in Hong Kong.

“There is a place for Russian gas in Japan, but only if Gazprom can lower the price enough – perhaps by 20% – to compete with Qatar and Australia,” he said, noting that China too “does not want to put all supplies in one basket.”

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