Japanese Prime Minister Taro Aso views the Sakhalin-2 oil and gas project as an example of mutually advantageous cooperation, giving Russia new technologies and access to the Asian market, while granting Japan new sources of hydrocarbons.
Aso said as much in an interview with Russian state media last week ahead of his Feb. 18 visit to Sakhalin Island, where he met with Russian President Dmitry Medvedev and took part in the opening ceremony of the Sakhalin-2 project.
“Japan has a long record of participation in oil and gas developments on Sakhalin, which dates back to the beginning of the 20th century,” he said, noting that the onset of production “after overcoming numerous difficulties is a memorable and very happy event for Japan and Russia.”
Aso was diplomatic in side-stepping details of the so-called “numerous difficulties.” In fact, the project has been fraught with difficulties, not least the fact that Russia at one point withdrew approval for the development, citing environmental concerns.
Moscow’s grip
At the time, many thought the real reason was Moscow’s desire to tighten its grip on energy resources, and the fiasco was settled only when it was agreed that Russia’s OAO Gazprom would acquire a majority interest in the project.
As a result, Gazprom acquired a 50%-plus-one-share stake, while Royal Dutch Shell PLC holds a 27.5%-minus-one-share stake, Mitsui & Co. holds 12.5%, and Mitsubishi Corp. holds 10%.
While Aso was diplomatic in his refusal to discuss such problems, doing business on Sakhalin Island continues to be risky.
In October it was reported that the ExxonMobil Corp.-led Sakhalin-1 project, in which Itochu Corp. and Marubeni Corp. have stakes, was barred from exporting gas to China, due to pressure from Moscow and Gazprom. In fact, the Sakhalin 1 developers have proposed exporting the majority of the gas to China, with Gazprom a wholesaler for only a portion. But Gazprom is looking to obtain exclusive rights to purchase all the gas from Sakhalin-1.
Problems emerge
Not least, Gazprom is proposing a relatively low price in its negotiations to purchase the gas produced by Sakhalin-1. Not surprisingly, problems have begun to emerge for the project. Two weeks ago the Sakhalin-1 consortium started to suspend future phases of the project, citing Moscow’s failure to give timely approval for its budget plans.
A spokeswoman for ExxonMobil affiliate ENL said the Authorized State Body had not given its approval for 2009 plans and budgets, as well as for additions to 2008 plans for the future phase of Odoptu and Arkutun-Dagi developments.
“ENL has begun to demobilize the Odoptu work sites and will defer the advancement of engineering work and contracting opportunities,” she said, adding that ENL will continue to seek approval for the budgets and was committed to the project.
Aso was indeed diplomatic, preferring to focus on the positive and say nothing of Russian perfidy.