Russia's Sakhalin 2 may double LNG revenue as top buyers stay, despite Ukraine crisis
25/01/2023 10:19
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Long-term Asian buyers secure Sakhalin 2 with 6.5 mln t of
LNG
per year - calculations
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Sakhalin 2 could earn $3.8-$4.5 bln from long-term deals
this
year - analyst
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Spot sales could bring another $7.5 bln - analyst
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Russia's Gazprom controls 50% in Sakhalin 2 project
By Katya Golubkova and Yuka Obayashi
RIGA/TOKYO, Jan 25 (Reuters) - Russia's Sakhalin 2
liquefied natural gas (LNG) project could generate twice the
revenue this year than it did before the Ukraine conflict thanks
to long-term deals with Asian buyers and higher prices,
according to analysts and Reuters calculations.
State-run top shareholder Gazprom stands to benefit from the
boost which comes as Russia ramps up its military spending
almost a year since it sent troops into neighbouring Ukraine.
Moscow has already tapped its rainy day fund, boosted
domestic borrowing and is considering raising taxes.
Shell SHEL.L quit Sakhalin 2 as one of the many Western
firms which pulled out of Russia after Moscow launched what it
dubbed its "special military operation".
Renewed deals with Asian buyers could secure demand for 6.5
million tonnes of LNG annually from Sakhalin 2, according to
contractual volume data from the GIIGNL international group of
LNG importers and Reuters calculations.
That could result in between $3.8 billion and $4.5 billion
in revenue for Sakhalin 2 shareholders this year, according to
Masanori Odaka, a senior analyst on Rystad Energy's gas and LNG
team.
The project could earn another $7.45 billion this year if it
achieves its output forecast and sells 4.9 million tonnes of LNG
on the spot market, according to Alexei Kokin, chief analyst
with Russia's Otkritie brokerage.
The project was forecast to produce 11.4 million tonnes of
LNG last year, a senior official from Russia's Sakhalin region
had said, but the final figure is yet to be released.
In 2021, Sakhalin 2's revenue totalled $5.7 billion and net
profit was $2 billion.
But Asia spot LNG prices LNG-AS jumped 42% in 2022 to
average $38.80 per million British thermal units.
With spot prices in Asia estimated to be higher than
long-term deals, marketing additional volumes could be
challenging, said Rystad's Odaka.
China's Sakhalin LNG imports more than doubled in 2022 to 33
cargoes, Refinitiv Eikon data showed.
It was not immediately clear what would happen to 2.75
million tonnes of LNG previously taken annually by Taiwan's CPC,
whose contract ended last year.
SHAREHOLDERS
After Shell's departure, the Kremlin created a new entity to
run Sakhalin 2, one of the top LNG plants globally.
Japanese shareholders Mitsui & Co 8031.T and Mitsubishi
Corp 8058.T applied to retain their stakes.
They hold a combined 22.5% stake alongside Gazprom, which
has a 50% holding.
Shell's 27.5% stake is now held by Sakhalin Energy. Russia
has yet to name a new shareholder which will replace Shell.
Sakhalin Energy, the managing company for Sakhalin 2, did
not reply to a Reuters request for comment.
Last week, Osaka Gas Co Ltd 9532.T became the latest
Japanese company to renew its deal to buy 200,000 tonnes of LNG
per year from the project - or about 2% of the firm's supply.
South Korea's KOGAS continues to offtake LNG under its
10-year contract, its spokesman said, and Japanese Hiroshima
Gas, JERA, Kyushu Electric, Saibu Gas, Toho Gas, Tohoku Electric
and Tokyo Gas have also renewed their deals, companies have
said.
While the Asian energy firms declined to provide specifics
of their renewed agreements, they have said conditions were
either similar or not much different from the previous deals.
(Reporting by Katya Golubkova and Yuka Obayashi
Additional reporting by Sarah Wu in Taipei, Joyce Lee in Seoul,
Oksana Kobzeva in Moscow, Christoph Steitz in Frankfurt, Emily
Chow in Singapore, Ron Bousso and Marwa Rashad in London
Editing by Florence Tan, Clarence Fernandez and Kim Coghill)
((ekaterina.golubkova@thomsonreuters.com))