Russia lets Japan retain stake in Sakhalin-1 oil project

Russia has decided to let Japanese companies retain their stake in the Sakhalin-1 oil project in the Russian Far East as Moscow shuffles ownership of national oil and gas projects after a mass exodus of Western companies following the Russian invasion from Ukraine.

“The decision is very important for the stability of our country’s energy supplies in the medium to long term,” Japanese Chief Cabinet Secretary Hirokazu Matsuno said on Tuesday, as quoted by Japan Times.

Earlier this month, the Japanese government asked the Japanese companies that participated in the original consortium to retain their stakes in the new entity that will operate the project.

Russian President Vladimir Putin signed a decree last month to change ownership of Sakhalin-1, with the state creating a new entity to manage the project. Former shareholders such as the Japanese consortium SODECO were offered the possibility of keeping their shares.

SODECO, or Sakhalin Oil and Gas Development Co, includes Itochu, the conglomerate, Marubeni and Japan Petroleum Exploration Co. The Japanese government has a 50% stake in the consortium.

“Sakhalin-1 is extremely important for Japan’s energy security because it is a valuable source outside the Middle East,” Commerce Minister Yasutoshi Nishimura said in early November, as quoted by Reuters.

The Russian government on Monday authorized the transfer of a 20% stake in new operator Sakhalin-1 to India’s ONGC Videsh Limited and 30% to SODECO, Russian news agency TASS reported.

Previously, the Sakhalin-1 oil project was operated by ExxonMobil, but Russia removed the US supermajor from the operatorship earlier this year, amid the company’s full withdrawal from Russia.

Exxon held a 30% stake in Sakhalin-1, but in October Putin signed an executive order that created a new entity to manage operations for the Far East oil and gas project. The decree allowed the Russian government to distribute stakes in the project and expel foreign partners if they saw fit.

Exxon was on its way out anyway. Shortly after Russian troops entered Ukraine in February, Exxon said it would pull out of Russia and no longer invest there.

By Tsvetana Paraskova for Oilprice.com

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