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ECONOMY > Energy

Japanese firms rushing to find alternative to Sakhalin-2 LNG

  • August 1, 2022
  • , Sankei , p. 11
  • JMH Translation

By Nagata Takehiko


A month has passed since Russian President Vladimir Putin signed an executive order to transfer the operation of the Sakhalin-2 oil and natural gas development project, in which two Japanese trading firms have stakes, to a new Russian firm. Japan intends to retain its interests in the project, but the likelihood of Russia cutting the supply of liquefied natural gas (LNG) in retaliation for economic sanctions remains. Russia has yet to set up a new operator, but Japanese unities and gas firms are being pressed to review their procurement and respond to Russia’s recent request to change the payment method.


Company names

Annual contract volume

(in million tons)

Percentage of Sakhalin-2 LNG in total procurements



Less than 10%

Tokyo Gas


Little less than 10%

Kyushu Electric Power


About 23%

Toho Gas


Little less than 20%

Tohoku Electric Power


About 10%

Hiroshima Gas


About 50%

Osaka Gas


A few percent

Saibu Gas


About 9%

Source: Japan Oil, Gas and Metals National Corporation (JOGMEC)


Eight Japanese electricity and gas firms procure LNG from the Sakhalin-2 project through long-term contracts. Some of them rely heavily on the Sakhalin-2 project for procurement of LNG. As the continuation of procurement from Sakhalin-2 is vital to their operations, they have no choice but to prepare for the worst case scenario.


Hiroshima Gas, which sources about 50% of its LNG from the Sakhalin-2 project, is approaching Malaysia and other long-term contract suppliers to sound out the possibility of procurement ahead of schedule. It has also signed a reciprocal agreement with eight firms for help in LNG procurement in times of emergency.


Kyushu Electric Power, which sources about 23% of LNG from the Sakhalin-2, is in discussions with other contract suppliers.


If it is difficult to find alternative sources, they will have no choice but to rely on spot trades, but the spot price is higher than that of a long-term contract. They also need to factor in transportation costs if they source LNG from places other than Saklhalin-2, which is located close to Japan. As it is estimated that annual costs will increase by several tens to hundreds of billions of yen, the cost could be passed down to end users. (Abridged)

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