Japan Responds to Fresh Sanctions on Arctic LNG 2

Japan will ensure stable and steady energy supply to the country even after the U.S. imposed fresh sanctions related to Russia's Arctic LNG 2 project, Japan's Chief Cabinet Secretary Hirokazu Matsuno said on Tuesday.

The Arctic LNG 2 project is operated by Russia's Novatek while Japanese trading company Mitsui & Co and state-owned Japan Organization for Metals and Energy Security (JOGMEC) hold a combined 10% stake.

Mitsui and JOGMEC are set to receive a combined 2 million metric tons of LNG per year from the project.

The latest sanctions are part of several economic measures the U.S., Europe and their allies have taken against Russia in response to its invasion of Ukraine in February 2022. They include a soft price cap on Russian oil and fuel exports and restrictions on Russian access to the global banking system.

"In cooperation with the G7 including the United States, we will make a comprehensive judgment and take appropriate measures to make sure the stable supply of energy to Japan," Hirokazu told a news conference.

He also told reporters that the government was gathering information about the sanctions and its possible impact to Japan.

Resource-poor Japan imports nearly all of its oil and natural gas.

The sanctions do not apply to the project itself nor to its shareholders, but a Japan government source said they could complicate how Mitsui and JOGMEC provide support for the project and could also delay production from Arctic LNG 2.

Mitsui said on Saturday it is committed to complying with the sanctions. JOGMEC has not replied to a Reuters request for a comment.

Novatek plans to start the first production train at Arctic LNG 2 towards the end of the year, which may reach full output by the first quarter of 2024. The project is designed to run three production lines with an annual production capacity of 19.8 million tons.

The U.S. sanctions apply to a number of Russian companies and one UAE firm providing architecture, construction and engineering services for the project, and to a Russian ship construction firm that will operate two LNG floating storage units for Arctic LNG transhipments via the Northern Sea Route and to two storage vessels set to operate on the route.

(Reuters - Reporting by Mariko Katsumura and Yuka Obayashi; Editing by Jacqueline Wong and Christian Schmollinger)