Gazprom will receive 50 percent of a new Russian entity replacing the Sakhalin Energy liquefied natural gas (LNG) project, Russian news agencies have reported, citing a government decree.

Interfax said the new entity will be registered in the city of Yuzhno-Sakhalinsk on the Russian Pacific Island of Sakhalin. The Sakhalin-2 LNG plant is located 60 km (37 miles) south of Yuzhno-Sakhalinsk.

Japanese trading houses Mitsui & Co and Mitsubishi Corp have cut the value of their stakes in the Sakhalin-2 LNG project by 217.7 billion yen ($1.62 billion) after Moscow’s move to seize control of it.

Western countries and their allies, including Japan, imposed tough sanctions on Russia after it sent troops into Ukraine in late February. Moscow retaliated by putting obstacles on Western businesses and investors leaving Russia, including in some rare cases by seizing assets.

Interfax reported that Gazprom will get just over a 50 percent stake and the remaining 49.99 percent will be held by the new company itself until after existing Sakhalin-2 shareholders apply for a stake, which they should do within a month.

If foreign shareholders, who also include Royal Dutch Shell with a 27.5 percent stake, do not apply for a share in the new entity, it will be evaluated and sold by the government to a Russian entity, Interfax said, citing an August 2 decree.

After the reports, Japan’s government reiterated its intention to have the Japanese companies retain their stakes in the project.

“The Sakhalin-2 project is extremely important for stable energy supply to Japan, and we will basically continue to maintain the stakes,” Japanese industry minister Koichi Hagiuda stated. “The government is looking into details of the new entity,” he added.

Mitsui and Mitsubishi, which hold a combined 22.5 percent stake in the project, said separately that they are examining details of the new entity, and they plan to respond by cooperating with the Japanese government and with each other.

The Japanese government has said it plans to support the trading companies in their attempts to stay in the Sakhalin-2 project. Japan imports about 10 percent of its LNG from Russia, mainly from Sakhalin-2.

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8th August 2022