Russian President Vladimir Putin and Prime Minister Shinzo Abe met at the Kremlin to discuss the future of Japan's natural gas future last week. Japan imports 100% of the natural gas it consumes, but that may be changing as the two nations hashed out some big plans.
Russia's gas giant Gazprom says it is ready to invest in infrastructure and other joint energy projects with Japan. Russia's first and only to date Liquefied Natural Gas (LNG) plant is a 9.6 million metric ton/year facility on Sakhalin Island, just north of Japan which already sends a good share of production from the facility to service Japanese markets. But before pipelines can be laid or refineries built, the two have some unfinished business from WWII.
Russia and Japan failed to agree on what to do with the islands between the Japanese mainland and Sakhalin Island at the end of the World War II, but it seems energy concerns are a priority, and negotiations are said to have been accelerated.
Japan imported 87.3 million metric tons of LNG in 2012. That is a record 11% above the previous year. As Japan's energy sector continues to repair itself after the 2011 Fukushima nuclear disaster, it would like to move away from nuclear power and into natural gas. Russia's Gazprom may be the solution they are looking for.
Gazprom's board has recently approved a new LNG project in Vladivostok that is expected to come online sometime in 2018 with a production capacity of 15 million metric tons/year, possibly increasing to 25 mmt/year. Russia's largest oil producer Rosneft already has deals in place with Japan and Russian officials say they have more than enough hydrocarbon reserves to fully service Japan's needs without curtailing other exports or domestic consumption.