By Ayano Shimizu,
While some Western countries have been backing away from energy resources from Russia as part of sanctions over its invasion of Ukraine, resource-poor Japan is taking a more cautious approach due to its heavy dependence on energy imports.
The United States announced earlier this month it will ban Russian oil and other energy imports in what is largely a symbolic move to punish Moscow over its aggression as Washington is not a major importer of Russian oil.
Britain also said that it will phase out imports of Russian oil by the end of the year.
But experts said it is not easy for Japan and its companies to follow suit, including giving up their stakes in the Sakhalin 1 and Sakhalin 2 large-scale oil and gas projects in the Russian Far East due to their importance to Japan's energy security.
Japan's energy self-sufficiency rate was as low as 11.2 percent as of fiscal 2020 through March 2021, according to Japan's Agency for Natural Resources and Energy.
Russia accounted for 3.6 percent of Japanese crude oil imports, and 8.8 percent of its liquefied natural gas imports in 2021, data from the Japan External Trade Organization show.
The response of the Japanese government and companies to the Sakhalin 1 and Sakhalin 2 projects has been in focus since oil majors Shell PLC of Britain and American Exxon Mobil Corp. announced ends to their respective involvements in them following Moscow's invasion of Ukraine on Feb. 24.
Japan's Sakhalin Oil and Gas Development Co., invested in by the government as well as trading houses Itochu Corp. and Marubeni Corp. among others, owns a 30 percent stake in Sakhalin 1.
Trading houses Mitsui & Co. and Mitsubishi Corp. hold a 12.5 percent and 10 percent stake, respectively, in the Sakhalin 2 project, in which Russian energy giant Gazprom PJSC has about a 50 percent stake. The joint venture produces most of Japan's gas imports from Moscow.
Hiroshi Hashimoto, head of the gas group at the Institute of Energy Economics, Japan, said he believes it is "unrealistic" for Japan to pull out of the Sakhalin projects in view of the potential blow to the Japanese economy and people's lives.
"Japan is in a different position from oil majors from other countries rich in their own resources," Hashimoto said, stressing the importance of the Sakhalin projects for stable energy supplies to Japan.
Japan has been promoting energy imports from Russia due to its geographical vicinity and the necessity to reduce its reliance on the Middle East. Sakhalin island, which hosts the two projects, is located north of Japan's northern main island of Hokkaido.
The Sakhalin 1 project, from which Exxon Mobil announced its withdrawal, was launched in 1995 and has been supplying Japan with crude oil since 2006.
Meanwhile, the Sakhalin 2 venture, the project exited by Shell, has an annual output capacity of about 10 million tons of LNG, with Japan, China and South Korea among the major importers. It began LNG exports in 2009.
Taisuke Abiru, senior research fellow at the Sasakawa Peace Foundation, said the Sakhalin 2 project is not "simply a corporate venture" for Japan.
"There have been concerns over the project in light of the risk to the companies' reputations. But Mitsui and Mitsubishi seem to recognize its importance in ensuring Japan's energy security," he said.
Both companies have said they will continue discussions about the project with the Japanese government and other relevant stakeholders.
Hashimoto said Japan would have to find alternative energy sources if it pulls out of the projects, which could lead to higher energy prices. The country might need to turn more to renewable energy or nuclear power generation, or ask people to save energy to make up for the loss.
Senior Japanese government officials and business leaders have also underlined the country's difficult position, expressing reluctance to reach a decision immediately.
Koichi Hagiuda, Japan's industry minister, said last week Japan should take a "wait-and-see" approach over joining Western nations in pulling the plug on the energy projects.
Prime Minister Fumio Kishida told a press conference earlier this month that ensuring a stable energy supply is a "national interest that must be protected with maximum" efforts.
He said a decision on the Sakhalin 1 venture, which involves the Japanese government given its stake in Sakhalin Oil and Gas Development Co., must be made following a sufficient assessment of the situation from the standpoint of stabilizing Japan's energy supply and security.
Hashimoto of the Institute of Energy Economics, Japan, said Tokyo must also consider when mulling pulling out of the projects whether companies from other countries would simply take Japan's place in the ventures, rendering the sanctions step ineffective.
As the Ukraine crisis continues, the world faces the issue of how to deal with Russia and how much they should depend on the country, Abiru of the Sasakawa foundation said.
"Russia is one of the largest natural gas and crude oil producers, so it is difficult to completely remove Moscow from the global economy in the short run," he said.
But for Japan, Abiru said, continuing participation in the two Sakhalin projects may bring benefits in the long run.
"The relationship between Japan and Russia has worsened due to the Ukraine crisis. But if the two countries continue energy cooperation, it may be a catalyst for improving ties in the future," he said.
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