Russia's Sakhalin 2 may double LNG revenue as top buyers stay despite Ukraine crisis (updated)

TOHO GAS

26/01/2023 24:44

(Repeats story with no changes to text)

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      Long-term Asian buyers to take 6.5 mln t per year
-calculations
    

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      Those deals worth $3.8-$4.5 bln this year -analyst
    

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      Spot sales could bring in another $7.5 bln -analyst
    

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      Russia's Gazprom holds 50% stake
    

  
    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 that 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 after sending 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 generate $3.8 billion to $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
keeps production in line with 2022 and sells 4.9 million tonnes
of LNG on the spot market, according to Alexei Kokin, chief
analyst at 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, Rystad's Odaka said. 
    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 the 2.75
million tonnes of LNG previously taken annually by Taiwan's CPC,
whose contract ended last year, by Shell and by Gazprom Global
LNG, which was nationalised by Germany last year in its
sanctions stand-off with Russia.
    All three have stopped receiving LNG supplies from Sakhalin
2, their officials said. 
    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 to 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 Sakhalin 2. It will
take 200,000 tonnes of LNG per year, or about 2% of its output.
    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.
    While Asian energy firms have declined to provide specifics
of their renewed agreements, they have said conditions were
either similar or little changed from previous deals. 
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Russia's Sakhalin 2 project in numbers    https://tmsnrt.rs/3GZAipK
Russia's Sakhalin 2 project's LNG sale structure    https://tmsnrt.rs/400FtyB
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 (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, Kim Coghill and Jason Neely)
 ((ekaterina.golubkova@thomsonreuters.com))