Tuesday evening’s Nikkei wrote that the British oil major Shell announced on Monday that it will withdraw from the joint venture for the Sakhalin-2 offshore liquefied natural gas plant in the Russian Far East. Shell holds a 27.5% interest in Sakhalin-2, while the Russian state-owned energy giant Gazprom owns 50% of the project. The paper wrote that as Japan’s Mitsui & Co. and Mitsubishi Corp. own 12.5% and 10% of the project, respectively, Sakhalin-2 is important for Japan’s energy security as a key LNG source for Japan and has served as a symbol of economic cooperation between Tokyo and Moscow. Sakhalin-2, Russia’s first LNG plant, received funding from the government-owned Japan Bank for International Cooperation, and Japanese engineering firm Chiyoda was involved in its design and construction. It started operating in 2009.
The paper also wrote that Sakhalin-2 has a capacity of about 10 million tons of LNG per year, equivalent to more than 10% of Japan’s annual imports, and that about half of it is supplied to eight Japanese gas and power companies through long-term contracts. The paper wrote that attention will be focused on how Mitsui and Mitsubishi will react to Shell’s decision. According to the paper, Shell will also withdraw from the Salym oil field in western Siberia, an Arctic energy venture on northern Russia’s Gydan Peninsula in which it had promised to take a stake of up to 10%, and the Nord Stream 2 gas pipeline connecting Russia and the rest of Europe. All papers ran similar reports this morning.