Russia approves Japan's SODECO participation in new Sakhalin 1 oil, gas project operator

The Russian government has approved Japan's Sakhalin Oil and Gas Development Co., or SODECO's participation in the new operator of Sakhalin 1 oil, gas project, Japan's Chief Cabinet Secretary Hirokazu Matsuno said Nov. 15, a move Tokyo sees significant for the country's energy security.

"We are aware about the Russian government's decision to approve SODECO's participation in the new Sakhalin 1 company," Matsuno told a press conference. "We see this decision extremely significant from the perspective of our country's mid- to long-term stable energy supply."

Japan sees an equity stake in the Sakhalin 1 oil, gas project important as it relies around 95% on Middle Eastern oil imports.

Japan, however, recorded no 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.

Matsuno's comments come as a Russian government ordinance has been issued to transfer SODECO's 30% stake to the new Sakhalin 1 operator, according to a Japanese government source.

The new Russian operator, named Sakhalin 1, was added to the Russian register of legal entities 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.

Project moves

The move by Russia comes 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 Oct. 7.

Under the previous shareholder structure, Rosneft held a 20% stake in the project, while SODECO had a 30% stake, with India's ONGC Videsh holding a 20% stake.

Japan's Ministry of Economy, Trade and Industry 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%.

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 about 170,000 b/d.

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

Earlier in 2022, 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 a majority stake in the new operator, with Russia approving Japan's Mitsui and Mitsubishi to retain stakes.