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Wed, Dec 13, 2006 - Page 10 News List

Japan asks Russia to prove `credibility'

TOUGH TALKING Japan's trade minister said it was vital that gas from the Sakhalin-2 project be delivered as scheduled to avoid scaring off foreign investment in Russia


Japan called on Russia yesterday to prove its "credibility" by keeping on schedule deliveries of gas from the Sakhalin-2 mega-project amid reports that Moscow had secured control of it.

Japanese firms, which hold 45 percent of the world's biggest privately financed energy project, said they would follow the lead of consortium leader Shell on whether to give up their majority stake.

Japan is the primary market for gas from Sakhalin-2, which was slated to start delivering gas in 2008.

"It is extremely important that the resources from the Sakhalin-2 project be properly delivered to the final user," Japan's trade minister Akira Amari told reporters.

Amari acknowledged it was "a global trend" for energy-rich countries to try to take control of oil and gas reserves as they are "precious resources for their development."

"But what is important is to guarantee the credibility of contracts between private firms, so that firms will not hesitate in investing in Russia," Amari said.

"It is not in Russia's interest for the project to be delayed. I believe Russia will cooperate for the speedy start of the supply," Amari said.

Russia in September halted all work on the US$20 billion project. It cited environmental concerns but some foreign investors accused Moscow of muscling in to reassert control over its energy resources.

The Financial Times said yesterday that British-Dutch oil group Shell and its two Japanese partners, Mitsui and Mitsubishi, had "succumbed to pressure" and offered majority control to Russia's state-run Gazprom.

The Japanese companies said that Shell, which holds a 55 percent stake in the project, was leading the negotiations.

"As the negotiating right is held by Shell, we are just waiting for the outcome of the talks," said a Mitsui spokesman. "We have not heard that an agreement was reached."

A Mitsubishi spokesman said: "Although we have been informed by Shell on the negotiation process, we are not in a position to give details about it."

The Financial Times, citing unnamed sources and analysts, said Gazprom would pay about US$4 billion to obtain a 50 percent stake in the project.

Shell would reduce its 55 percent stake to 25 percent, while Mitsui and Mitsubishi, who own 25 percent and 20 percent respectively, would sell 10 percent each, the Financial Times said.

It said the foreign investors decided to give up after pressure from Russia, including threats to open criminal investigations over alleged environmental violations.

Japan's Nihon Keizai Shimbun business newspaper reported similar details of the potential stake sales but said the proposal came from Gazprom's chief Alexei Miller and that Shell held off on an immediate response.

However, if Shell agreed to offload some of its stake, the Japanese firms would likely do the same, the Nihon Keizai said.

Gazprom said that on Friday Miller met Shell chief executive officer Jeroen van der Veer who made "a number of proposals concerning the Sakhalin-2 project" that were "being analyzed."

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