Japan’s Energy Firms Seek Alternatives Amid Russian Supply Fears

A liquefied natural gas tanker behind a port in Yokohama, south of Tokyo, on Sept. 4, 2015. (Yuya Shino/Reuters)

Japanese gas and energy firms are seeking alternate natural gas suppliers amid concerns over potential disruption from Russia, which has been subjected to a barrage of Western sanctions since its invasion of Ukraine, according to reports on Monday.

Russia is Japan’s fifth-largest liquefied natural gas (LNG) supplier, accounting for about 8 percent of the country’s consumption. Russia’s Sakhalin-2 oil and gas project was also one of Japan’s main LNG supply sources, with an annual capacity of 9.6 million tons.

Tohoku Electric Power and Kyushu Electric Power both obtain coal and LNG from Russia, though Tohoku Electric Power reportedly eliminated Russian LNG from its tender, The Japan Times reported on March 25.

Hiroshima Gas, which procures about 200,000 tons of LNG from the Sakhalin-2 project, said it plans to purchase LNG from Malaysia and other countries or tap supply reserves from other Japanese utilities if the Russian supply chain is disrupted, Japanese outlet Kyodo News reported.

“We are keeping close attention on new developments including the impact of economic sanctions on Russia,” the company stated.

Osaka Gas also said that it intends to advance gas procurement from the United States or Australia in anticipation of a potential supply disruption from Russia.

Japanese companies Mitsui and Mitsubishi are major shareholders of the Sakhalin-2 project, with each holding 12.5 and 10 percent stakes. The companies have yet to decide whether to pull out from the project, as they aim to continue talks with the government and other stakeholders on the matter.

The British-Dutch Royal Dutch Shell and U.S.-based Exxon Mobil have announced plans to exit the Sakhalin-1 and 2 oil and gas projects in Russia’s Far East in light of the Russian invasion of Ukraine.

There were concerns that Russia may cut or suspend its natural gas supply in retaliation for Western sanctions. Russian President Vladimir Putin said on March 27 that his country will seek gas payments in rubles from “unfriendly countries,” such as Japan and the United States.

German economy minister Robert Habeck said Monday that the Group of Seven (G-7) major economies rejected Putin’s demand to pay Russian gas in rubles, given that it would be a “clear breach of the existing agreements.”

On March 10, Japan’s industry minister Koichi Hagiuda said the G-7 economies agreed on the need to quickly diversify energy sources, including using nuclear power.

“Several countries expressed the need to quickly reduce reliance on Russian energy,” Hagiuda told reporters, adding that the G-7 nations would restate the effectiveness of nuclear energy.

Most of Japan’s nuclear reactors have been closed since the Fukushima nuclear disaster 11 years ago, with only six operating compared with 54 before the plant was crippled by an earthquake and tsunami.

Reuters contributed to this report.