Diet members push study of $6.7 billion Russia gas pipeline ahead of Putin visit

Bloomberg

Japanese lawmakers are revisiting a plan to build a $6.7 billion natural gas pipeline from Russia ahead of a visit by President Vladimir Putin to Japan next month.

A group of about 80 lawmakers from the ruling parties will ask the government by the end of this month to carry out a feasibility study on the project, Naokazu Takemoto, the secretary-general of the group, said in an interview. The proposed pipeline linking Sakhalin island with Tokyo is estimated to be as long as 1,500 km and cost about ¥700 billion, a study by the group shows.

Prime Minister Shinzo Abe is seeking to deepen economic ties with Russia in an effort to resolve a 70-year-old row over four disputed islands off Hokkaido.

Expanding energy cooperation can help Japan diversify supply sources as the nation imports almost all its fuel needs, while Russia, struggling to climb out of a recession amid Western sanctions and low oil prices, can gain a market share in Asia’s second-biggest economy.

“As we want the return of all four islands of the Northern Territories, we should offer something that makes Russia happy,” Takemoto said on Nov. 4 in Tokyo regarding the Russia-held islands. “To that end, the Japan-Russia natural gas pipeline plan is one of options. Russia’s economy has recovered a bit, but is still in great difficulty. They want to sell natural resources, particularly natural gas.”

The pipeline may transport about 25 billion cu. meters a year of gas to Japan and generate annual revenue of about ¥200 billion, according to the study. Japan, the world’s biggest buyer of liquefied natural gas, paid ¥5.5 trillion ($53 billion) to import 85 million tons of LNG last year, Finance Ministry data show. Russia accounted for about 8.9 percent of the total, the fourth-biggest supplier after Australia, Malaysia and Qatar.

An official of Jera Co., a joint venture between Tokyo Electric Power Co. Holdings Inc., Japan’s biggest power utility, and Chubu Electric Power Co., indicated interest in the project in a recent meeting with Takemoto, the lawmaker said, without identifying the official. Takemoto wants to hear from other utilities whether they are into pipeline gas, he said.

“Securing energy security and competitiveness is a major premise for construction of an international pipeline,” Jera spokesman Atsuo Sawaki said Nov. 7 in an email response to questions from Bloomberg News. “If those two points can be ensured, we would like to carefully consider the use” of the pipeline, Sawaki said.

Tokyo Gas Co., one of Japan’s major gas importers, sees Russia as a “potential source of pipeline gas to Japan,” Hiroyuki Sagawa, manager of the company’s gas resources department, said in September.

Russia’s Gazprom PJSC, the world’s biggest natural gas exporter, will revisit the possibility of building the pipeline, the Nikkei newspaper reported in September, citing Deputy Chief Executive Officer Alexander Medvedev. It received “strong, repeated requests” from Japanese business and political leaders to reconsider the project, according to the report. Gazprom’s press service declined to comment on the pipeline.