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Tokyo denies report on Moscow's proposal to build undersea gas pipeline to Japan

Highlights

The Japanese government Wednesday denied a newspaper report which said Russia has proposed building a pipeline to transport natural gas to Japan.

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The Nikkei reported earlier Wednesday that Russia has proposed the plan to connect the gas-rich Russian island of Sakhalin with the northern Japanese island of Hokkaido, and presented it last month, citing diplomatic sources.

The Nikkei said an offer apparently aimed at strengthening economic ties between the two countries amid stiff economic sanctions imposed on Moscow by the West.

But a senior official at the Japanese Ministry of Economy, Trade and Industry denied the newspaper report.


"Japan has not received any such reported proposal [from Russia]," Ryo Minami, METI's Director, Petroleum and Natural Gas Division, told Platts. Russian gas giant Gazprom declined immediate comment Wednesday.

Russian President Vladimir Putin and Japanese Prime Minister Shinzo Abe could discuss the proposal when they meet on the sidelines of the Asia-Pacific Economic Cooperation summit in Beijing over November 10-11, the Nikkei said.

By dangling low-priced Russian gas to Japan, Russia seems to be trying to drive a wedge between Group of Seven members as they turn up the pressure on Moscow over Ukraine, the Nikkei said.

But some in the Japanese government are cautious about entering into a new energy deal with Russia as relations continue to worsen between Moscow and Washington, a key ally of Tokyo, the Nikkei reported.

"Construction of a pipeline will depend on the Ukraine issue and negotiations over the Northern Territories," the Nikkei quoted a senior official in the Japanese foreign ministry saying, referring to the Russian-controlled islands claimed by Japan.

In the past Russian gas giant Gazprom has indicated that it is not interested in building a pipeline to Japan, and saw its planned Vladivostok LNG plant as its priority project, as it would guarantee greater export flexibility.

In recent days, however, the company has said that it now sees increased pipeline supplies to China as an alternative to the Vladivostok LNG project, which it was aiming to launch in late 2018-early 2019 with a final capacity of up to 15 million mt/year.

It is unclear whether Gazprom is planning to stall or cancel the LNG plant and what this could mean for supply plans to Japan.

--Takeo Kumagai, takeo.kumagai@platts.com
--Rosemary Griffin, rosemary.griffin@platts.com
--Edited by Maurice Geller, maurice.geller@platts.com