Sakhalin Energy wants LNG buyers to pay via Moscow-based bank and change currency

General view of the liquefied natural gas plant operated by Sakhalin Energy in Prigorodnoye on the pacific island of Sakhalin, Russia July 15, 2021. Picture taken July 15, 2021. REUTERS/Vladimir Soldatkin

TOKYO, July 29 (Reuters) – Russia’s Sakhalin Energy Investment Co has asked its liquefied natural gas (LNG) customers to pay for their supplies through a Moscow unit of a European bank, a source close to the government told Reuters on Friday. case.

A second source said the energy company was in talks to change payment currencies to the US dollar for supply contracts. Both sources said no changes had been made to existing contracts.

The changes follow Russian President Vladimir Putin’s June 30 decree to create a new company to take over all rights and obligations of Sakhalin Energy, increasing the threat of gas supply disruptions for Asian customers. Read more

Russia has been hit with a series of sanctions from the United States and its allies following its invasion of Ukraine in February, which it calls a “special military operation”. Using other currencies and a bank in Moscow could help insulate Russia from sanctions aimed at excluding it from financial markets.

Some buyers already pay through the designated bank but those payments are still made in US dollars, added the sources, who spoke on condition of anonymity and did not identify the bank.

There were no updates on the formation of the new company, the sources said.

Among the alternative payment currencies being discussed were the Chinese yuan, Japanese yen and South Korean won, one of the sources said.

The UAE yuan and dirham were used by Chinese and Indian buyers to pay for Russian crude and coal. Read more

Sakhalin Energy could not immediately be reached for comment. Its LNG buyers Tokyo Gas (9531.T) and JERA, Japan’s largest power producer, declined to comment.

Tohoku Electric Power (9506.T) and Kyushu Electric Power (9508.T) confirmed that they were asked to modify the bank account for payment of Sakhalin-2 LNG, and Tohoku said they modified the account as requested . Both declined to provide further details due to the sensitivity of the issue.

An official from Japan’s industry ministry declined to comment on the deals, but said it would continue to communicate with Japanese utilities to ensure a stable LNG supply.

Sakhalin Energy is the joint venture that operates Sakhalin-2, one of the largest LNG projects in the world with a production of 12 million tons, which represents approximately 4% of global LNG production.

State-owned Gazprom (GAZP.MM) has a 50% stake plus one share, while other stakeholders include Shell (SHEL.L) and two Japanese trading companies Mitsui & Co (8031.T) and Mitsubishi Corp (8058.T).

The Japanese government plans to support commercial companies in their attempts to stay in the Sakhalin-2 oil and gas project. Japan imports 10% of its LNG from Russia, mainly from Sakhalin-2. Read more

Analysts said the impact on currency markets would be small and demand likely reflects Russia’s desire to reduce its reliance on the dollar for trade flows.

“It’s very likely that Moscow wants to get as far away from the dollar as possible in everything it does,” said Khoon Goh, head of Asia research at ANZ Bank in Singapore.

Another analyst did not expect a big impact on currency, saying payments in yen would be the easiest.

Japan, a major LNG importer, relies mainly on long-term LNG contracts, which are usually much cheaper, but utilities have been forced into the spot market over the past few years. months to meet summer cooling demand amid above-average summer temperatures and concerns about Russian supply. Read more

Reporting by Yuka Obayashi in Tokyo and Florence Tan in Singapore; Additional reporting by Tom Westbrook; Editing by Jacqueline Wong and Clarence Fernandez

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