Tokyo Gas refuses to cut liftings at Sakhalin-2: press

City fuel supplier Tokyo Gas has no plans to stop taking gas batches from Gazprom's Sakhalin-2 LNG facility in Russia's Far East, Reuters reported April 27.

The newswire cites comments from Tokyo Gas chief financial officer Hirofumi Sato, who argues there are few paths to sufficient gas coverage to support cutting ties with the Russian LNG facility. Sakhalin-2 currently supplies around 10% of Tokyo Gas's fuel imports, Sato said.

"It is difficult to quickly find alternative supply for Russian LNG as it accounts for about 10% of our fuel imports," said Tokyo Gas CFO Hirofumi Sato.

Japan is one of the world's biggest LNG customers, though it faces significant competition for cargoes in the Far East from China and others. Japanese LNG imports were 6.9% up year/year in the first half of 2021, as the economy recovered from the COVID-19 pandemic.

Tokyo Gas has six long-term LNG contracts with producers in six countries, according to S&P Global. Market volatility over the past year has led the utility to pursue new leads for diversifying its global LNG import network. This includes focusing more on short and medium-term supply deals, to spread its exposure to LNG prices more over time, and also linking forthcoming term contracts to LNG prices on European and US gas hubs

The 9.6mn metric tons/year Sakhalin LNG project is operated by Gazprom, which has a 50% equity stake plus one share. Shell has 27.5% in the project, but it is offloading its shares in response to Moscow's actions in Ukraine. Media outlets have named Chinese majors CNOOC, Sinopec and CNPC as possible buyers of Shell's shares, and a Chinese deal could reduce access for Japanese buyers over time, as more LNG cargoes are diverted to China. The other shareholders at Sakhalin-2 are Japan's Mitsui and Mitsubishi, which own 12.5% and 10% stakes respectively.