Mitsui, Mitsubishi Shave $1.7 Billion off Sakhalin-2 LNG Stakes

By Yuka Obayashi
Tuesday, August 2, 2022
(File photo: Shell)

Japanese trading houses Mitsui & Co and Mitsubishi Corp have cut the value of their stakes in the Sakhalin-2 liquefied natural gas (LNG) project in Russia by 217.7 billion yen ($1.66 billion) following Moscow's move to seize control of the project.

Russian President Vladimir Putin signed a decree on June 30 to create a company to take over the rights and obligations of the Sakhalin-2 oil and gas project, raising the stakes in an economic war with the West.

State-run Gazprom has a 50% plus one share stake in Sakhalin Energy, the joint venture that operates Sakhalin-2, while Shell owns 27.5% minus one share. Mitsui and Mitsubishi hold 12.5% and 10% respectively.

Mitsui trimmed the investment value of its stake by 136.6 billion yen to 90.2 billion yen at the end of June and Mitsubishi has lowered the value by 81.1 billion yen to 62.3 billon yen, the companies said separately on Tuesday.

"Details of the presidential decree are still not clear and we have made a conservative evaluation," Mitsui Chief Financial Officer Tetsuya Shigeta told a news conference, adding there would be no impact on its profit or loss, and on cash flow.

Mitsubishi Chief Financial Officer Yuzo Nouchi said the financial impact is negligible given the company's equity capital of more than 7 trillion yen.

The Japanese government plans to support the trading companies in their attempts to stay in the Sakhalin-2 project. Japan imports about 10% of its LNG from Russia, mainly from Sakhalin-2.

A surge in energy prices, driven by concern over supply disruption linked to leading oil and gas producer Russia's invasion of Ukraine begun on Feb. 24., led both trading houses to report bumper profits for the April-June first quarter.

Mitsubishi's net profit for the quarter nearly tripled from a year earlier to a record 533.95 billion yen while Mitsui's profit rose 44% to 275 billion yen, a record for the time of year.

Both companies maintained their annual profit estimates, but said uncertainty over the global economy could lead to changes in future.

"There is a strong possibility that we will raise annual guidance, but we will examine various factors over the current quarter as there is growing uncertainty," Mitsubishi's Nouchi said.

"Our business environment is expected to toughen due to a slowdown in the global economy hit by the prolonged Russia-Ukraine conflict, a resurgence in the pandemic and monetary tightening."


($1 = 130.8500 yen)

(Reuters - Reporting by Yuka Obayashi; editing by Barbara Lewis)

Categories: Finance LNG Russia Industry News Production Natural Gas

Related Stories

Scarborough FPU's Topsides and Hull Come Together in Major Engineering Feat (Video)

Scarborough FPU's Topsides and Hull Come Together in Major Engineering Feat (Video)

CNOOC Puts Into Production New Oil Field in South China Sea

CNOOC Puts Into Production New Oil Field in South China Sea

CNOOC Sees 11% Profit Growth in 2024 Driven by Record Oil Production

CNOOC Sees 11% Profit Growth in 2024 Driven by Record Oil Production

Woodside Inks Long-Term LNG Supply Deal with China Resources

SLB Names Raman CSO, CMO

ONGC and BP Sign Deal to Boost Production at India's Largest Offshore Oil Field

Japan's Mitsui Eyes Alaska LNG Project

European LNG Imports Up with Asian Influx

Kazakhstan Looks to Improve Oil Production Agreements Terms

China's CNOOC Aims for Record Oil and Gas Production in 2025

Current News

Petronas, Inpex Secure Oil and Gas Exploration Rights off Indonesia

Mubadala Energy Open to Sell Andaman Gas for Domestic Use

Velesto’s Jack-Up Rig Up for Drilling Job Offshore Vietnam

ABS Greenlights SHI’s Multi-Purpose Deepwater LNG Floating Unit

Turkey Discovers New Black Sea Gas Reserve

Indonesia's Medco Starts Production at Natuna Sea Fields

Indonesia Grants Approval to Kuwaiti Firm for Anambas Block in Natuna Sea

ADNOC’s XRG Partners Up with Petronas for Offshore Gas Block in Caspian Sea

Valeura Energy Greenlights Wassana Oil Field Redevelopment off Thailand

Scarborough FPU's Topsides and Hull Come Together in Major Engineering Feat (Video)

photo

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com