Japan Says to Ensure U.S. Sanctions on Russia LNG Project Won't Harm Supplies

Japan will make sure its energy supplies are not affected by sanctions the United States recently imposed on the Arctic LNG 2 project in Russia in which it has a stake, Industry Minister Yasutoshi Nishimura said on Tuesday.

Japan, the world's second-largest liquefied natural gas (LNG) buyer, relies on LNG as a transition fuel before it reaches carbon neutrality in 2050, and has supply contracts and stakes in projects globally to guarantee imports.

The Arctic LNG 2 project is to be launched next month, with shareholder Japan eligible for 2 million metric tons of LNG per year, or 3% of total imports, once the plant is fully operational in the second half of this decade. 

"A certain degree" of impact from the U.S. sanctions imposed on the Siberian project last week to punish Russia for its war in Ukraine is "inevitable", Nishimura told reporters. 

"We will work with the Group of Seven countries to make a comprehensive judgment and respond appropriately so as not to impair the stable energy supply to our nation," he added. 

The project's full capacity is 19.8 million tons per year, of which 80% are destined for Asia, including for its Chinese shareholders CNPC and CNOOC, which have a combined 20% stake.

Novatek has a 60% stake, and TotalEnergies holds another 10%. Japan has the remaining 10% share.

"We recognize that this is an important project for Japan's stable energy supply in the LNG market, where supply and demand are expected to remain tight for the time being," Nishimura said.

An industry ministry source, who declined to be named as they were not authorised to speak to the media, said Japan was particularly concerned about the stability of its energy imports as Israel's war on Hamas may put supply from the Middle East at risk.

Japan imports the bulk of its oil and over a tenth of LNG from the Gulf region.

Mitsui & Co which owns combined 10% stake in the project together with the state-owned Japan Organization for Metals and Energy Security said last week it would examine the sanctions impact and "take appropriate measures" in cooperation with the government and other stakeholders.

Mitsui, whose exposure to the Arctic LNG 2, including investments, loans and guarantees, was 249 billion yen ($1.7 billion) as of end-September, did not change its full-year net profit guidance because of the sanctions.

Japan is also a shareholder in Russian oil project Sakhalin 1 and the Sakhalin 2 LNG plant. 

($1 = 150.1300 yen)

(Reuters - Reporting by Miho Uranaka, Mariko Katsumura and Yoshifumi Takemoto; Writing by Yuka Obayashi and Katya Golubkova; Editing by Christian Schmollinger, Stephen Coates and Miral Fahmy)

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