Report: Mitsubishi to stay in Sakhalin-2 with new operator

TOKYO, Aug 25 (PRIME) -- Japan’s Mitsubishi corporation will not quit liquefied natural gas (LNG) project Sakhalin-2 under the new operator company, while the other Japanese participants are to notify Russia of their decisions until the end of August, Japanese business daily Nikkei reported on Thursday.“Mitsubishi Corporation decided on August 25 to notify publish its decision to participate in the new operator of the Sakhalin-2 project in Russia’s Far East. Mitsui & Co. also decided to adhere to the track of notification (of the Russian side) about its participation. Both companies should announce their decisions until the end of the month given detailed analysis of the Russian side’s actions,” Nikkei reported.

Tokyo’s Chief Cabinet Secretary Hirokazu Matsuno said in a news conference that the government had been notified about the intent of Mitsubishi and Mitsui to stay in Sakhalin-2 and that the authorities would closely track the situation further.

Kommersant business daily reported quoting sources that British-Dutch hydrocarbon giant Shell was unlikely to renegotiate its long-term LNG contract that expires in 2028 with the Sakhalin-2 project with the new operator. Under the current deal, Shell buys 1 million tonnes of LNG per year.

“Shell has no plans to sign a new contract with Sakhalinskaya Energiya and will stall for time until the Russian side terminates it. After that … Shell plans to file a suit seeking compensation of losses on the basis of a five-fold difference between the price of the Sakhalin LNG under the contract and the current LNG price on the spot market,” Kommersant reported.

Previously, Bloomberg reported that the new operator of Sakhalin-2 was working on re-signing long-term contracts with LNG buyers at previous conditions, but including a possibility of paying in other currencies if payments in U.S. dollars are impossible and conducting operations through Russian banks like Gazprombank. At the same time, the operator already cancelled delivery to at least one Asian customer because of delays in payments and signing of the revised contracts.

Earlier in August, the Russian government signed a regulation to establish Sakhalinskaya Energiya (Sakhalin Energy) LLC in the city of Yuzhno-Sakhalinsk that became a new operator of the Sakhalin-2 project on August 19.

Russian gas giant Gazprom owned 50% plus one share in the previous operator, while Shell had a stake of 27.5% minus one share, and Japan’s Mitsui and Mitsubishi had the stakes of 12.5% and 10%, respectively.

The government allowed all the companies to receive the same stakes in the new operator that they had in the old one.

End %%md/jst%%