The Sankei Shimbun learned on Oct. 19 that as part of the Japanese government’s economic cooperation with Russia, Japan Bank for International Cooperation (JBIC) has decided to provide with European financial institutions $600 million (about 60 billion yen) in joint financing for the development of a liquefied natural gas (LNG) base. Russian major natural gas development company Novatek is leading the project in the Yamal Peninsula in the Arctic Circle. The agreement will be concluded shortly. There is also a plan to build a major export base in Vladivostok of the Russian Far East where the LNG will be transported via the Northern Sea Route. JBIC’s financing could become a centerpiece of Japan’s economic cooperation with Russia.
Japan is the world’s largest LNG importer. The ability to import relatively inexpensive and resalable LNG from the nearby Russian Far East will help boost the competitiveness of Japanese companies. In addition, as Russia has strongly called for Japan’s cooperation in developing an LNG base in the Arctic Circle, the government is hoping that the joint financing will lead to progress in the bilateral negotiations on concluding a peace treaty to resolve the Northern Territories issue when President Putin visits Japan in December.
The joint financing will be provided by JBIC; Italy’s export credit agency, SACE (Servizi Assicurativi del Commercio Estero); and France’s export credit agency, COFACE (Compagnie Française d’Assurance pour le Commerce Extérieur). JBIC will apparently shoulder around $200 million. Chinese financial agencies and Russian funds have already provided financing for the base development, which is expected to cost $30 billion in total.
Although the portion of financing shouldered by the Japanese and the European agencies is small, Novatek has reportedly been very eager for “Japan and other nations to participate in the project in order to avoid excessively relying on China,” according to sources connected to the negotiations
The Yamal base that is under construction is scheduled to begin production in 2017 with a goal of producing 16.5 million tons of LNG a year – 1.5 times more than the “Sahkhalin-2” LNG business project undertaken by Japan. Given the fact that two Japanese major plant construction companies, JGC Corporation and Chiyoda Corporation, have received orders to construct liquefaction facilities at the Yamal base, JBIC’s joint financing is also apparently intended to support the Japanese companies.
Russia has also called for Japan’s participation in the development of gas fields and LNG bases in the Gydan Peninsula adjacent to Yamal, which the Japanese government is currently considering.
In the meantime, Japan, as part of its economic cooperation, plans to construct LNG-receiving and regasification terminals in Vladivostok. Russia intends to make Vladivostok a “gateway” to the Pacific by transporting LNG from the Yamal Peninsula to the Russian Far East via the Northern Sea Route.
“President Putin has a dream of reviving Vladivostok as an international city, and that is also my dream,” said Prime Minister Shinzo Abe at the Eastern Economic Forum [held in Vladivostok] in September, indicating his cooperative stance.