Japan May Buy Russian Oil from Sakhalin-2 to Secure LNG Supply -PAJ Head

Yuka Obayashi
Wednesday, February 15, 2023

Japanese oil refiners may buy Russian crude from the Sakhalin-2 oil and gas project, if needed, to secure a stable supply of liquefied natural gas (LNG), the president of the Petroleum Association of Japan (PAJ) said on Wednesday. 

But Russian oil, in general, is not necessary for a stable supply to Japan, and Japanese refiners should instead look for sources in other countries where risks are lower, PAJ President Shunichi Kito said, pointing to the hurdles of securing payment, ships, and insurance for Russian crude. 

"At least, as an individual company, we don't intend to stick to Russian crude," Kito, who is also the president of Idemitsu Kosan Co Ltd 5019.T, told a news conference. 

Still, LNG from the Sakhalin-2 project in Russia's far east is important as a power generation fuel in Japan, and oil imports associated with securing stable LNG from the project may emerge, he said. 

Japan is sounding out major oil refiners about buying Russian ultra-light crude from Sakhalin-2 to ensure that the plant can continue to operate smoothly, two sources with direct knowledge of the talks told Reuters late last year. 

Refiners in the world's third-largest economy, which is heavily reliant on energy imports, have suspended Russian oil purchases since mid-2022 after Tokyo agreed to phase them out with other G7 countries in response to Moscow's invasion of Ukraine. 

They have sought alternatives from the Middle East, such as Saudi Arabia, which boosted Japan's oil dependence on the region to 94%. 

Asked how Japan can lower its reliance to the Middle East, Kito said: "We'd like to diversify our suppliers, but it is difficult to find stable partners or countries." "So it's important to further strengthen the connections with the Middle East in terms of energy security for the time being," he said. 

(Reuters - Reporting by Yuka Obayashi; Editing by Christian Schmollinger)

Categories: Energy Activity Production Asia

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