Japan will not be leaving the Sakhalin-1 oil and gas project in Russia’s Far East because of its significance to the country’s energy supply, the Nikkei newspaper reported on Monday citing Economy, Trade and Industry Minister Koichi Hagiuda.

“For Japan, which depends on the Middle East for about 90% of its crude oil imports, [Sakhalin-1] is a valuable source of purchases outside the Middle East,” he said, commenting on a decree Russian President Vladimir Putin signed in early August regarding foreign shareholders in strategically important Russian companies.

According to the document, transactions with shares in such companies for holders from “unfriendly states” (those that placed sanctions on Russia in connection with Ukraine, including Japan) are prohibited until the end of this year.

Hagiuda said that Putin’s decree means Tokyo “should stop trading interests in Sakhalin-1 with third parties or third countries,” while otherwise “we will maintain our current policy” regarding the shares in the project.

Japanese energy company SODECO owns a 30% stake in Sakhalin-1, along with India’s ONGC (20%) and Russia’s Rosneft (20%). US-based ExxonMobil, which until recently had been the operator of the project with a 30% stake, announced its intention to quit in early March.

The project’s offshore oil and gas field production has dropped significantly following ExxonMobil’s announcement and amid sanctions pressure. By the beginning of July output had fallen from 220 thousand barrels of oil equivalent per day to just ten thousand, according to Russia’s Presidential Envoy to the Far East, Yuri Trutnev.

Japan has supported the US and the EU in placing sanctions on Russia in response to its military operation in Ukraine. However, Tokyo is reluctant to jeopardize its energy supply. Last month, Japanese authorities urged Mitsubishi and Mitsui conglomerates to keep their shares in Russia’s Sakhalin-2 Liquefied Natural Gas project after its transfer to a Russian operator.

Source: Agencies