Putin orders Sakhalin II operator's assets

After a news agency reported that Russian President Vladimir Putin had issued an order about a new company taking over the assets of the operator of the Sakhalin II liquified natural gas project, government and company officials were scrambling.

Prime Minister Fumio Kishida said on July 1 that he was on the campaign trail in Okinawa Prefecture, I do not believe that the order will lead to an immediate stop of LNG shipments. Asked about the report that Putin had signed the order, Deputy Chief Cabinet Secretary Seiji Kihara said at his July 1 news conference that it was unacceptable to have rights related to our nation's natural resources hindered. He said that the government was looking into how the order would affect the stakes of the affected Japanese trading companies and LNG imports.

Two Japanese trading companies have stakes in the project. Japan relies on Russia for 8.8 percent of its LNG imports, with much of it coming from the Sakhalin II project.

After the assets of the project operator, Sakhalin Energy Investment Co. are transferred to a new Russian company, the announcement was vague.

That left the possibility that the presidential decree would lead to the seizure of the project by Russia.

The measure is being viewed as a retaliatory move against Japan for going along with Western nations in implementing various sanctions against Russia after its invasion of Ukraine.

Shell Plc of Britain pulled out of the Sakhalin II project just days after the Russian invasion.

Mitsui Co. holds a 12.5 percent stake, while Mitsubishi Corp. has a 10 percent stake.

Officials of the economy ministry, which oversees energy policy, were trying to determine what the presidential order might mean for Japan's energy supply.

A number of electric power and gas companies purchase their LNG from the Sakhalin II project, with Hiroshima Gas Co. procuring half of its LNG from the venture.

The companies that were trying to figure out if the order means they won't receive LNG shipments in the future were not responding to those companies on July 1st.

Japan has been more cautious about a similar step regarding LNG because there are few options for alternative sources, as the other Group of Seven nations have agreed to stop imports of Russian coal and petroleum.