Japan decides to maintain stakes in Sakhalin 1 oil, gas project: METI minister

The Japanese government has decided in principle to maintain its stakes in the Sakhalin oil and gas project in Russia's Far East, Minister of Economy, Trade and Industry Yasutoshi Nishimura said Nov. 1.

"While we are proceeding to verify detailed terms and procedures of Russia's presidential decree so far, the Japanese government has decided in principle to maintain Sakhalin 1's stakes," Nishimura told a press conference in Tokyo.

His comments come after the exit of ExxonMobil, the previous operator and owner of a 30% stake in Sakhalin 1, as Russian President Vladimir Putin ordered a new Russian operator to be established for the project on Oct. 7.

ExxonMobil's decision to pull out from the project was in line with other Western companies' moves to leave Russian assets following Russia's invasion of Ukraine.

Under the previous shareholder structure, Rosneft held a 20% stake in the project, while India's ONGC Videsh and Japan's Sakhalin Oil and Gas Development Co., or SODECO, held 20% and 30% stakes respectively. Foreign partners are yet to finalize if they will stay in the project.

During a meeting with SODECO's chairman Hisato Okubo and President Masao Fujita Oct. 31, Nishimura said he requested the SODECO chief executives to "positively consider agreeing" to participate in a Russian new entity while communicating with private stakeholders.

METI has a 50% stake in SODECO, while Japan Petroleum Exploration holds a 15.285% interest, Itochu 14.456%, Marubeni 12.349%, INPEX 6.08% and Itochu Oil Exploration 1.83%.

The new Russian operator, named Sakhalin 1, was added to the Russian register of legal entities on Oct. 14. Rosneft subsidiary Sakhalinmorneftegaz-shelf has been appointed to manage the new entity.

Foreign partners were given one month to apply to the Russian government to keep their stakes in the project.

Japan's principle decision was made as it sees Sakhalin 1 equity as important for the country's energy security because it relies around 95% on Middle East oil imports, Nishimura said.

Japan however recorded zero Russian crude imports for the fourth consecutive month in September as the country's top two refiners, ENEOS and Idemitsu Kosan, have already suspended signing new Russian crude contracts.

ExxonMobil declared force majeure at Sakhalin 1 in the wake of Russia's invasion of Ukraine, citing concerns about contractual obligations and operational standards. Before the invasion, Sakhalin 1 was producing around 170,000 b/d.

Russian officials have said they aim to restore production at the project by the end of the year.

Earlier this year, another project offshore Russia's Far East, the Sakhalin 2 oil, gas and LNG project, saw similar changes to its shareholder structure. Russia established a new operator for Sakhalin 2 following Shell's departure from the project. Gazprom received the majority stake in the new operator, with Russia approving Japan's Mitsui and Mitsubishi to retain stakes.