Page 2 of
2 Japan covets Russian gas, hot
air By Hisane
Masaki
Japan like Indonesia drops
out of the ranks of major suppliers, Japan’s
energy security could suffer in the long term.
Russia LNG imports LNG imports
from Sakhalin-II, the world's largest integrated
oil and gas project, are also expected to start
early next year, although they were originally
scheduled to begin by the end of this year.
Sakhalin Energy Investment Co, the
operator of Sakhalin-II, has signed up with
customers for almost all of its production
volumes. The biggest customers under long-term
contracts include Tokyo Gas Co and Tokyo Electric
Power Co.
Royal Dutch Shell Plc had
previously led the US$22 billion
project, but the Anglo-Dutch
oil major sold a controlling stake in the project
to Gazprom last April after Russia's environmental
watchdog agency threatened to strip it of
production licenses for breaking ecological rules.
Gazprom purchased a 50%-plus-one-share
holding in Sakhalin Energy for $7.45 billion from
Royal Dutch Shell and two leading Japanese trading
houses, Mitsui & Co and Mitsubishi Corp. As a
result, the stakes held by the three foreign
companies declined to 27.5%, 12.5% and 10%.
Sakhalin Energy has sold more than 90% of
the planned LNG production of 9.6 million tons a
year under long-term contracts, with 60% going to
Japan and the rest going to South Korea as well as
to North America's West Coast.
Japan’s
government and energy industry also hope to see
LNG imports from Sakhalin-I, another of the
world’s major energy resources development
projects.
Reflecting the Kremlin's drive
to bring huge energy assets back under state
control, Gazprom is seeking to buy all of the
natural gas to be produced by Sakhalin-I, in hopes
of taking full control of exports. The project is
led by US oil major Exxon Mobil Corp and involves
Sakhalin Oil and Gas Development Co (SODECO), a
consortium of the Japanese government and private
companies, including Itochu Corp and Marubeni
Corp. SODECO holds a 30% stake. India's public
petroleum company, ONGC, and Russia's state-run
oil producer Rosneft also have stakes in the
project, but Gazprom does not.
In the
autumn of 2006, Exxon Mobil signed a memorandum
with China to export natural gas produced by
Sakhalin-I to China by a pipeline. The accord
could be dropped if Gazprom takes full control of
the exports.
The Russian government has
put pressure on Exxon Mobil, threatening to deny
approval of commercial production at the project
unless a deal is reached with Gazprom to sell all
the gas output.
In the latest significant
development, Gazprom said last week that it plans
to sign a deal with Exxon Mobil between April and
May to buy the entire annual gas output from
Sakhalin-I.
Speaking at a meeting in
Khabarovsk on the Far Eastern development, which
was chaired by Russia’s First Deputy Prime
Minister Dmitry Medvedev, Gazprom’s deputy chief
executive, Alexander Ananenkov, said, "We have
been in talks with Exxon Mobil for a long while to
buy all gas to install gas supply lines to Russian
regions," according to news reports from
Khabarovsk.
"Of late we see positive
dynamics due to the assistance of governmental
officials in the Sakhalin-I project management. We
hope that in April-May we will be able to sign a
binding agreement with Exxon on purchase and sale
of 11 billion cubic meters of gas," Ananenkov was
quoted as telling the meeting by the Itar-Tass
news agency.
Gazprom has said gas from
Sakhalin-I should be used to supply Russian
Pacific regions. But Gazprom is said to be
interested in exporting some of the gas to Japan
after liquefying it at Sakhalin-II’s LNG terminal.
GHGs for environment Japanese
Foreign Minister Masahiko Komura and Russian First
Deputy Premier Sergei Ivanov met in Munich,
Germany on the sidelines of a multinational
security conference at the weekend and agreed to
launch climate talks. The first round of talks
will be held in Tokyo on February 27.
In
addition to Japan’s acquisitions of GHG emission
credits from Russia through such "Kyoto
mechanisms" as emissions trading and joint
implementation, the two countries are expected to
discuss a new international framework to replace
the Kyoto Protocol.
Under the protocol,
Japan is obliged to cut its annual emissions of
CO2 and several other GHGs by 6% on average
between 2008 and 2012 from the 1990 level. But the
nation’s GHG emissions in fiscal 2006, which ended
in March 2007, rose 6.4% from fiscal 1990,
according to preliminary government figures.
In a bid to reach its Kyoto goal, Japan is
hoping to buy a large volume of emission credits
from Russia through emissions trading. It is
widely believed that Russia can easily achieve its
own Kyoto target of keeping GHG emissions at the
1990 level, because of a sharp decline in
emissions in the 1990s due to the economic turmoil
following the collapse of the Soviet Union.
Japan has already reached a basic
agreement with Hungary to purchase some of the 10
million tonne surplus emission credits the East
European country plans to sell to foreign
countries this year. The two countries are now
negotiating the specific amount and price of the
transaction. Japan is also negotiating similar
credit transactions with such countries as Czech
and Poland.
There is strong criticism,
especially from environment groups, that just
buying surplus emission credits, or hot air, from
Hungary and other Eastern European countries as
well as Russia will not result in actual cuts in
GHG emissions.
The Japanese government has
brushed aside such criticism, claiming that the
nation accepted its binding target to reduce GHG
emissions by 6% under the Kyoto Protocol on
condition that each nation can use the Kyoto
mechanisms, including clean development mechanism
as well as emissions trading and joint
implementation, and that it is the nation’s
"legitimate right" to buy hot air through
emissions trading.
Still, Japan is
expected to ask Russia to use the proceeds from
emission credit sales, made through emissions
trading, for domestic environment protection under
the so-called green investment scheme, in hopes of
deflecting criticism from environment groups.
Russia’s energy-efficiency is said to be about a
20th of that of Japan's.
Hisane
Masaki is a Tokyo-based journalist,
commentator and scholar on international politics
and economy. Masaki's email address is
yiu45535@nifty.com
(Copyright 2008 Asia
Times Online Ltd. All rights reserved. Please
contact us about sales, syndication and republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
