Eric Watkins
Oil Diplomacy
The international oil and gas industry seems to be taking a shine to Russia these days, judging from recent events taking place in Moscow and Tokyo.
Indeed, Japan's new Minister of Economy, Trade, and Industry Banri Kaieda said cooperation with Russia is an important part of his country's energy diversification strategy. "Too much dependence on the Strait of Malacca" exposes Japan to significant risk of supply disruption, Kaieda said. "The route from Russia is important for delivery of natural gas and oil."
The route Kaieda mentioned is actually two routes. The first is the East Siberia-Pacific Ocean oil pipeline, which extends from Taishet in East Siberia to Skovorodino near Russia's border with China.
Russian exports up
Work to extend the ESPO line all the way from Skovorodino to Russia's Pacific Coast is under way, with completion expected soon. But the project's incomplete status has not slowed Russia's oil exports to Japan.
According to METI, Japan imported 250,000 b/d of oil from Russia in the first 11 months of 2010, up 53% on year. Most of the increase is ESPO crude, carried by rail from Skovorodino to Kozmino.
Japan has also signed a new agreement with Russia's OAO Gazprom to undertake a joint front-end engineering design toward construction of an LNG plant near Vladivostok.
"The parties will also study the possibility of a pilot project on natural gas compression in Vladivostok for subsequent offshore transportation and organization of gas chemicals production," said the two sides.
That agreement follows a meeting last December, when Alexander Ananenkov, deputy chairman of Gazprom's management committee, welcomed a Japanese delegation to Moscow.
Remember Sakhalin-2?
"Special emphasis was placed on interaction in the context of the Eastern Gas Program implementation as well as on creation of gas chemical industries, gas liquefaction and compression facilities in Eastern Russia near Vladivostok for further export to Asia-Pacific markets by sea," Gazprom said.
The activity in Vladivostok will rely on a 1,300-km pipeline that Gazprom is building from fields off Sakhalin Island, a spot already well-known to the Japanese—perhaps too well-known.
To their cost, Japan's Mitsubishi Corp. and Mitsui & Co. found themselves on the short end of the stick in the Sakhalin-2 project when Gazprom decided to muscle in on the enterprise, eventually wresting control from operator Royal Dutch Shell PLC.
That was a while ago, and memories may be short at METI. Still, there must have been shivers elsewhere in Tokyo when Gazprom Chief Executive Alexei Miller recently said his "company is gradually moving eastward."
To some, that sounds a little too cozy for comfort. By comparison, pirates in the Strait of Malacca look tame.
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