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Sakhalin-Japan gas pipeline: reality or dream?

Japanese business does not hurry with the realization of a tempting idea

Sakhalin-Japan gas pipeline: reality or dream?

Valery Kistanov

Head of the Center for Japanese Studies of the Institute of Far Eastern Studies
In the past two years, political ties between Russia and Japan have become noticeably more active, including at the highest level, centered on negotiations on the territorial problem connected with the claims of Tokyo to the four islands of the southern Kurils. They went over to the Soviet Union after the Second World War. The solution of this problem, that is, in the opinion of the official Tokyo, the receipt by Japan of a different form of these islands, must certainly become a "prelude" to the signing of a peace treaty between the two countries.

The expansion of Moscow and Tokyo economic cooperation, according to Russian and Japanese politicians, can create a favorable atmosphere for finding a mutually acceptable solution to the territorial dispute. However, despite the efforts of governments and business circles of both countries, reality is currently demonstrating a decrease in the importance of Russia and Japan to each other as economic partners. This is manifested in the fall in trade between the two countries in recent years and the decline in Japanese accumulated investment in the Russian economy. And this is with the complete absence of Russian capital in the Japanese economy.

Against this background, in the relations between the two countries, megaprojects that potentially could become breakthrough in the economic ties between Russia and Japan and lead to their qualitative and quantitative growth have been undergoing for several years already. We are talking about the construction of a gas pipeline and energy bridge between Sakhalin and Japan. In the outgoing year, the idea of ​​the Sakhalin-Hokkaido bridge was added to them by the lips of the first vice-premier I. Shuvalov, along with the bridge linking Sakhalin with the mainland. By the present moment, thanks to the efforts of both sides, the most elaborate project is the Russian-Japanese gas pipeline, but here everything is not so simple.

According to Russian and Japanese media, a pipeline of length 1,5 thousand kilometers will run along the seabed, linking Sakhalin with the island of Hokkaido and further with the main island of Honshu. It will cost about 6 billion dollars and will be able to pass through itself up to 25 billion cubic meters of natural gas per year. According to estimates, it could be put into operation already in 2022 year. As a result, Japan, which is the world's largest importer of liquefied gas, would receive gas in natural form 2,5 times cheaper than LNG.

However, judging from everything, from the design of the project to its implementation "lies the distance of a huge size." So far, this project has not received the approval of the main participant from the Russian side - the company Gazprom. The doubt in the expediency of the project was voiced by the mouthpiece of Japanese business circles, the Nikkei newspaper, which published an article in the issue dated 3 August entitled "Japan-Russia gas pipeline mostly a pipe dream." The title is based on the game of English words "pipeline" and "pipe dream", which is not transferable to the Russian language, but the sense is that the Japanese-Russian gas pipeline is almost an impossible dream. Source: Nikkei, 03.08.2017.

As the newspaper writes, the alleged gas pipeline linking Japan and Russia remains in limbo, despite the fact that it was discussed at the summit of Japanese Prime Minister Shizo Abe and Russian President Vladimir Putin in April this year (during the visit of the Japanese Prime Minister to Moscow - EastRussia). The newspaper acknowledges that the two governments are aware of the difficulties faced by the project in terms of profitability and other areas, but they supported the idea to demonstrate, at least outwardly, that they are trying to strengthen bilateral economic ties.

According to Nikkei, a joint study of the project was conducted by a group of MPs from the ruling Liberal Democratic Party and the Japanese National Oil, Gas and Metals Corporation (Japan Oil, Gas and Metals National Corp.). On the Russian side, according to the newspaper, one of the energy companies participated in it (obviously Gazprom - VK). The project envisages the construction of a pipeline length of 1500 km to transport natural gas from the southern tip of Sakhalin, a Russian region rich in natural gas, to the Japanese central Kanto region via Hokkaido, the main island in the north of Japan, and the Tohoku district. The project is estimated at 6 billion dollars.

The article says that although gas-fired power plants currently produce more than 40% of all electricity in Japan, the country relies entirely on expensive liquefied natural gas imports. According to the calculations of Japanese experts, since natural gas can be transported through the pipe without its primary processing, the cost of electricity production in the country can be reduced by 30-40%.

Japanese and Russian experts in the field of energy, like a business publication, for a long time viewed the pipeline as unrealistic. However, some time ago, Russia informed Japan of its readiness to negotiate about it. The gas pipeline attracted attention, as Abe and Putin agreed during the visit of the latter to Japan in December 2016 to confirm mutual interest in him and begin his detailed study. When Abe and Putin met again in April, the two leaders reaffirmed their commitment to the project.

As a result of the agreement reached at the highest level, the energy circles of Russia began to take a more warm view of the project. However, difficulties remain. The newspaper refers to them, for example, the fact that both countries must decide on a gas field where gas will be extracted for it. Deposits on Sakhalin have already been reserved for Asia. The newspaper refers to an unnamed Russian expert in the field of energy, who said that there is no excess gas for the planned gas pipeline.

In the meantime, Japanese experts have warned that the construction of a gas pipeline and a gas supply network can cost much more than originally estimated. The energy companies in Hokkaido have already spent a lot of money on the construction of terminals for LNG, and few of them would welcome the gas pipeline. One of the leaders of the Japanese trading company said that the gas pipeline is an "ultra risky" project, and private companies will avoid it. But Tokyo and Moscow intend to continue its study.

For a show of renewed interest in the pipeline, according to Nikkei, each side hides its political calculations. This will allow the Japanese government to demonstrate progress in the development of economic relations between the countries, hoping that this step will have a positive impact on negotiations on disputed islands next to Hokkaido.

The Putin administration, for its part, considers the planned gas pipeline with its key ally the US as its propaganda victory. She can now say that Russia is gaining diplomatic points against the United States and Europe, which do not show any signs of lifting sanctions, the authoritative Japanese newspaper sums up.

In a recent conversation with the author of these lines, Japanese sources close to Russian-Japanese relations confirmed that the gas pipeline, like the other two megaprojects linking Sakhalin with Japan (energy bridge and railway bridge), is unlikely to provoke interest in Japanese big business, until , until they are convinced of their commercial profitability. Hardly anyone can say when this will happen.
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