Regional LNG: Japanese firms may give up some Sakhalin-2 stakes: Report

Japan's Mitsubishi Corp. and Mitsui & Co. may have to give up some of their stakes in Russia's huge Sakhalin gas project as part of project leader Royal Dutch Shell's plan to give a share to Russian gas giant Gazprom, Reuters reported Wednesday.

Mitsubishi said on Wednesday it and Mitsui, would have to give up part of their holdings in Sakhalin-2 if Gazprom decided to take the 25 percent of the project offered under a bilateral deal with Shell signed in July 2005.

Shell holds 55 percent of Sakhalin-2, the world's largest liquefied natural gas (LNG) project. Mitsui holds 25 percent and Mitsubishi 20 percent.

"Shell is still negotiating over details of the deal. But when the details are finalised to let Gazprom join the project, our company may have to release up to 4-5 percent because taking the 25 percent from just Shell would be too much," a Mitsubishi spokesman said.

Under the July deal, Shell was to give Gazprom a share in Sakhalin-2, one of Shell's most valuable gas and oil assets, in return for an interest in Gazprom's West Siberian Zapolyarnoye field, which produces 100 billion cubic meters of gas a year.

The comments from Mitsubishi were the first indication that the deal could also involve the Japanese stakeholders, although the spokesman did not give more details on why they might be required to cede part of their shares as well.

"It really depends on how Gazprom will assess the value of Sakhalin-2," the Mitsubishi spokesman said.

He and a spokesman for Mitsui said they have not started talks about a possible stake sale.

Japanese industry sources said Mitsui and Mitsubishi have been reluctant to release their shares because they see Gazprom's assessment of the value of Sakhalin-2 assets as too low.

Some industry sources have said the swap would not be a good deal for Shell, which is struggling to replace its falling reserves. Instead the deal may reflect the Kremlin's increasing desire to keep valuable natural resources in Russian hands.

LNG is natural gas cooled to liquid form so that it can be transported by ships.

The fuel is expected to play an increasing role in world energy markets mainly because of an expected increase in U.S. demand.

Sakhalin-2 partners aims to ship fuel from the project to the United States across the Pacific.

Gazprom sees LNG as a method by which it can monetise more of its huge gas resources. (*)