As Japan continues to woo Russia for its natural gas exports, China closing a deal with Moscow on Wednesday to buy from its natural gas supply may seem like it holds the advantage over its East Asian neighbor. Japan knows that diversifying its energy sources is critical, especially as all 50 of its nuclear reactors remain offline and restarting them has been a slow and tedious process. But Tokyo also has to accommodate the concerns of its ally, the United States, which remains adamant over Russia’s takeover of Crimea in the Ukraine.
In a prime example of Japan’s dilemma, the Japanese government is a partner with Russian outfit OAO Rosneft in an energy venture called Sakhalin-1 in the Russian Far East. But U.S. sanctions on Russia for the Crimean issue has affected Rosneft’s chief, Igor Sechin. Japan also now relies on the nearby Sakhalin-2 field in Russian waters for 10% of its natural gas supply. This puts Tokyo at risk as the U.S. heaps more and more pressure on Moscow. Observers in Japan’s energy industry say it may be too late to pull back from Japan’s investements with Russia now, especially because of the strong demand for fossil fuels sources in the wake of the 2011 nuclear accident, and the incoming summer peak energy season, where utilities are barely making the required amount of surplus energy when the peak season arrives and the demand for electricity increases dramatically.
“Russia is looking even more to Asia than before. If Japanese companies hesitate to do business, it would be China that picks up the windfall gains,” said Nobuo Tanaka, a former executive director of the International Energy Agency, a professor at Tokyo University. Japan imported a total of 8.6 million metric tons of LNG from Russia in 2013, with almost all of that amount coming from Sakhalin-2. Sakhalin-1, with projected yields of at least half the natural gas from Sakhalin-2, might become one of Japan’s primary sources of natural gas, if the partners could agree on how to transport it – Tokyo has clearly said that it wants the gas to be liquefied and shipped to Japan.
[via The Wall Street Journal]
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