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Japan mulling participation in Russian natural gas project in Arctic

TOKYO, Oct. 9, Kyodo — The government is considering Japanese companies’ participation in a liquefied natural gas project by Russia’s leading natural gas producer Novatek in the resource-rich Arctic Sea, government sources said Sunday, in what could be a centerpiece of Japan’s economic cooperation with Russia.


In taking part in the multibillion dollar project, Japan is proposing that the government-backed Japan Bank for International Cooperation help with financing, while major trading houses and other Japanese companies are expected to invest and acquire stakes in a potential gas field, the sources said.


By boosting economic ties with Russia through such projects, Japan hopes to make progress on a decades-old territorial dispute over four islands off Hokkaido, Japanese officials said.


Japan, the world’s largest LNG consumer and a resource-poor country, could benefit from the investment project as it would be able to diversify its energy supply sources.


The Russian side is strongly pushing for Japanese companies’ involvement in the natural gas exploration plan in Russia’s Gydan Peninsula in the Arctic, the sources said.


A source familiar with the project said Novatek is aiming to begin production in 2023, with an expected annual output of over 15 million tons of LNG.


With the project requiring funding of as much as $40 billion, Russia, while retaining a 51 percent stake, will seek foreign partners for the remaining 49 percent, according to the source.


But the project entails risks as the Arctic Sea is covered with ice for most of the year, making any resource development difficult.

The Japanese companies are cautiously studying whether to invest in the project, the government sources said. It is uncertain whether an agreement will be reached by year-end.


Novatek is already working on a separate LNG development project on the neighboring Yamal Peninsula, aiming for the first shipments within next year.


Last month, JBIC signed a memorandum of understanding with Novatek to cooperate on oil and natural gas projects, with a promise to provide funding of 400 million euros.


Major Japanese shipping company Mitsui O.S.K. Lines Ltd. is planning to transport LNG through the northern sea route connecting Japan to Yamal.


Prime Minister Shinzo Abe presented an eight-point Japanese economic cooperation plan to Russian President Vladimir Putin in May in the hope of boosting economic cooperation and advancing talks on the Russian-held islands off Hokkaido.


The plan includes cooperation in oil and gas production, the medical field and development of the resource-rich Russian Far East.

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