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August 29, 2022

Japan’s JERA to continue LNG purchase from Russia’s Sakhalin-2 project

Japanese firms that are under long-term contracts with Sakhalin-2 project have received a new offer from the new operator.

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Japan’s JERA has signed gas supply deal with Russian entity that operates the Sakhalin-2 oil and gas development project in the Russian Far East, reported Reuters citing the Japanese company’s spokesperson.

In June 2022, Russian President Vladimir Putin ordered to transfer the operatorship of the Sakhalin-2 project to a new legal entity to deal with buyers and shareholders, which include Shell and Japanese trading houses Mitsubishi and Mitsui.

Subsequently, Japanese gas and electric utilities that are under long-term contracts to buy LNG from the Sakhalin-2 project have received a new contract offer from the new Russian operator.

JERA spokesperson told the news agency: “The main conditions such as volume, price and (payment) currency remained the same as the previous contract.”

Japanese buyers are gauging options whether or not to continue LNG purchase from the Sakhalin 2 project.

Kyushu Electric Power is looking to maintain its long-term LNG contract while Tokyo Gas was considering the matter.

Furthermore, Tohoku Electric Power and Saibu Gas are assessing details of the LNG sale and purchase contract, reported Reuters.

Japan, which considers Sakhalin-2 project as key in ensuing energy security, purchases about 9% of its LNG from Russia.

Last week, Reuters reported that Japanese trading houses Mitsui and Mitsubishi will retain their stakes in the operator of Sakhalin-2 project.

The decisions follow a request made by the Japanese Government to ‘think positively’ about joining the new Russian entity.

Shell decided to withdraw from the Sakhalin-2 project months ago. Since then, it has been in talks with potential buyers.

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