• Steve H. Hanke
    05/04/2016 - 08:00
    Authored by Steve H. Hanke of The Johns Hopkins University. Follow him on Twitter @Steve_Hanke. A few weeks ago, the Monetary Authority of Singapore (MAS) sprang a surprise. It announced that a...

Is A Russia-Japan Natural Gas Pipeline Next?

Tyler Durden's picture




 

Submitted by Ankit Panda of The Diplomat,

Following Russia’s historic $400 billion natural gas supply deal with China last week, Japanese lawmakers are looking to revive efforts to tap into Russian natural gas supplies themselves. A Bloomberg report shows that a group of 33 lawmakers in Japan are backing a 1,350 kilometer pipeline that would run between Russia’s Sakhalin Island and Japan’s Ibaraki prefecture, just northeast of Tokyo. The project is estimated to cost $5.9 billion and could yield as much as 20 billion cubic meters of natural gas per year (equivalent to 15 million metric tons of liquefied natural gas). The pipeline would make up 17 percent of Japan’s imports.

The Japanese lawmakers backing the proposal belong mostly to the ruling Liberal Democratic Party and the New Komeito Party. The renewed interest in the pipeline is primarily due to Japan’s own energy shortages following the shutdown of all of Japan’s 48 nuclear reactors following the March 11, 2011 Tohoku earthquake and tsunami, which caused a triple meltdown at the Fukushima Daiichi plant. The Democratic Party of Japan government at the time decided to shut down Japan’s nuclear plants and begin moving the country away from a reliance on nuclear power following a public backlash after the Fukushima crisis.

Based on current plans, natural gas originating on Russia’s Sakhalin Island would be transported via the Sakhalin-Khabarovsk-Vladivostok pipeline where it will be processed into liquefied natural gas for export to Japan. Russia has considered additional undersea and land-based pipelines to deliver gas to China, North Korea, and South Korea in the region, including one pipeline that would deliver gas to South Korea via North Korea.

For Russia, a pipeline deal with Japan would be particularly compelling. Japan is the world’s largest LNG importer, having purchased 87.49 million metric tons of LNG in 2013 according to the Japanese finance ministry. Despite being the largest importer worldwide and its proximity to Russia, Japan only imported 9.8 percent of its LNG from Russia. The proposed pipeline would see that number grow substantially, in part because Japan could import natural gas instead of LNG. LNG is costlier to transport. Naokazu Takemoto, the Japanese parliamentarian heading the group in favor of the pipeline, estimates that “the price of natural gas will be two times lower than the export of liquefied natural gas.” Politically, given Russia’s current isolation with the West over its actions in Ukraine, a pipeline deal would also gain Vladimir Putin some vitally needed political currency. Indeed, Russia’s recent deal with China was likely motivated by the Kremlin’s political concerns — China seems to have won a deal at a very favorable price.

If Japan and Russia formally begin negotiations for a pipeline, Tokyo will likely be able to win a favorable price as well. As Europe tries to reduce its dependence on Russia’s natural gas, Russia will lose a certain amount of leverage in negotiations. The group of Japanese lawmakers will propose the deal to Prime Minister Shinzo Abe, who will study the feasibility of the deal in June. It is likely that Abe will propose the deal to Vladimir Putin when he visits Tokyo later this year.

0
Your rating: None
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Sat, 05/31/2014 - 19:50 | 4813391 Racer
Racer's picture

Sun Tzu

Sat, 05/31/2014 - 19:58 | 4813398 smlbizman
smlbizman's picture

really why is it when i see diplomat , i hang up....

Sat, 05/31/2014 - 20:28 | 4813442 bonin006
bonin006's picture

I diplomat is a person who tells you to go to hell in a way that makes you look forward to the trip.

Sat, 05/31/2014 - 22:05 | 4813623 SafelyGraze
SafelyGraze's picture

japan: I have no money of any lasting value to pay for your gas
russia: is ok

japan: I have no gold, either
russia: is ok

japan: I have no manufacturing base to offer as collateral
russia: really. it's fine

japan: all I have is a bunch of old people who don't pay me taxes any more
russia: not a problem

japan: wow. you're the greatest
russia: we will be needing somewhere to dump our nuclear waste, of course

japan: not a problem
russia: no one will notice

 

Sat, 05/31/2014 - 23:23 | 4813731 knukles
knukles's picture

is OK

Sun, 06/01/2014 - 00:43 | 4813807 HardAssets
HardAssets's picture

If Japan makes that deal - either there will be another nuke reactor 'accident'  or -

Godzilla will emerge from the Pacific and attack Tokyo

 

The anglo-american banksters would Not be pleased . . . and they do have their methods to pressure people.

Just saying.   ;)

Sun, 06/01/2014 - 10:51 | 4814157 Jumbotron
Jumbotron's picture

Of course....we all know from history what happens when bankers go to war......

......we all go to war.

Sat, 05/31/2014 - 23:45 | 4813760 No Zbig Deal
No Zbig Deal's picture

japan: I have no manufacturing base to offer as collateral

As manufacturing is at 19% of GDP on this list, they're doing much better than other 'developed' countries...Including Russia

http://data.worldbank.org/indicator/NV.IND.MANF.ZS?order=wbapi_data_valu...

Sun, 06/01/2014 - 01:41 | 4813845 SafelyGraze
SafelyGraze's picture

ok, so maybe I exaggerate a little bit

hugs,
japan 

Sun, 06/01/2014 - 03:09 | 4813869 stoneworker
stoneworker's picture

Russia gdp by sector industy: 37.6% (2012)

Sun, 06/01/2014 - 03:48 | 4813879 d_taco
d_taco's picture

Japan is worlds biggest creditor country. :-)

They own a large chunck of the worlds liabilities.

Probably THE country that can pull the plug on the USA.

Sun, 06/01/2014 - 05:50 | 4813918 bigkahuna
bigkahuna's picture

I believe there are a few who could pull the plug - but if they try, they underestimate the yellin's ability to print. It is really a catch 22.

They could torpedo the USD, but they would be heavily damaged as well. There is that whole thing about being the first one through the exit though....

Sat, 05/31/2014 - 20:51 | 4813485 CrashisOptimistic
CrashisOptimistic's picture

Because you should hangup.  The Diplomat and Oilprice.com consistently have horrible articles posted here.  I would say the absolute worst of ZH, except for that humiliating error last night about US gasoline consumption.

Undersea pipelines . . . are why LNG carriers were invented.  They are not easy.

And what the hell is this:

"China seems to have won a deal at a very favorable price"

No one has any idea what the terms of the deal were beyond GAZPROM and the Chinese and they aren't talking.  This writer has no idea what the terms were.

Sat, 05/31/2014 - 22:17 | 4813644 Matt
Matt's picture

How do you make an undersea natural gas pipeline resistant to earthquakes? Or just make one-way valves every 100 feet and make it so the sections snap off easily?

Japan really has a terrible geology/geography situation. 

Sat, 05/31/2014 - 23:26 | 4813736 knukles
knukles's picture

What a dumb fucking idea when everybody already knows that all the gas available for transmission is going to be sent by the USofA to France in exchange for caviar, champagne, fois gras and fluer de lis wallpaper for Nazipelousy's lunch and bathroom, FFS

Sat, 05/31/2014 - 22:24 | 4813657 aVileRat
aVileRat's picture

I was just about to post a big argument about this, but you nailed it. The weakest part of ZH is the oil market intelligence which is ironically what often draws the most posts. Oilprice.com is perhaps the worst oil site on the internet. I would strongly suggest use Rigzone, Upstream online... fuck, go hire an oil trader to ghost write the articles if necessary. Market misinformation only drags the site down and discredits the stellar bench trading equity & bond market work ZH does. my 5 cps.

1. Anyone close to the situation knows JapEx and the Japanese trading houses have been treated like absolute dogshit by the Russian Oligarchs and Putin since 2004. Call up a trade shop, you can count on 1 hand how many JV's a Japanese shop has with the Russians and on that same hand the number of realtionships they "enjoy".

2. Putin has made Russian agression over the north isles and drumming up nostalga for the Russio-Sino war a key point in his upgrade of the Russian Sino fleet. Abe has made nationalism and a unified front against Russian / Chinese claims over their territory something he has vowed to stand against. Figure that one out, you don't need a CNN pundit for this one.

3. Russia has taken the side against the Japanese and Viet/Korean's on every issue in the last 7 years on everything from rare metal imports to Pacific trade pacts for lower tariffs. Korea and India have better relations with Rosneft than Nippon Oil at this stage, which is both amusing and sad for Igor's pit crew.

4. Japan's past experiences with Ruble trade. Go ahead, go google it while we wait. Hint: You have to be very very stupid to go ask a Japanese trade house for Russian trade credit. Also, Japan has gone on the record a few times pre-Fukishima to complain about the unfair premiums they paid on UO from Russia vs. the world spot. 

5. Crash is Optimistic is correct: Anyone who speaks of a pipeline through the North China sea has zero idea what they are speaking about.

 

Sun, 06/01/2014 - 03:42 | 4813878 stoneworker
stoneworker's picture

While you do make some good point I think you have to admit that the situation is changing. 1) As far as I know Abe went to the Sochi Olympics( while a lot the "US allies" decided to boycott it). This could just be a simply coincidence , but as you know in politics there is no coincidence. 2) Recently "a UN commission recognized Russia’s claim to 52,000 square kilometers of territory in the Sea of Okhotsk." As I understand it this was done, because Japan relinquished its claims. While they do still have a dispute about some islands this is a huge deal for Russia's arctic ambitions as well as the territory itself which is rich in oil and gas. 3) At the end of the day it all comes down to the price and so far Japan from what I know is paying through the nose. 

Sun, 06/01/2014 - 08:19 | 4813994 BigJim
BigJim's picture

Perhaps Japan relinquished its claim on the understanding they'd get cheap gas from Russia in return? After all.. territory isn't that useful to politicians ruling over a dwindling population.

Sun, 06/01/2014 - 11:17 | 4814206 stoneworker
stoneworker's picture

Exactly what I was thinking...they certainly wouldn't do it out of the goodness of their heart.

Sun, 06/01/2014 - 11:16 | 4814205 KickIce
KickIce's picture

Not to mention this kind of arrangement could get China miffed, something they would more than likely be unwilling to risk.

Sun, 06/01/2014 - 03:21 | 4813873 stoneworker
stoneworker's picture

I keep hearing the estimates from $350-$390 that is the average price for Europe, but my guess is this is only a small part of the actual deal which probably has geopolitical implications(gas, oil, technology-joint airplane development, military-sale of the s-400/sale of the su-35, possible de dollarization agreement).

Sun, 06/01/2014 - 10:15 | 4814094 Peanut Butter E...
Peanut Butter Engineer's picture

Was giving this article a 4 star then realize this is CIA mouth piece something else tells me not to trust them. 1 star.

Sat, 05/31/2014 - 20:34 | 4813453 BlindMonkey
BlindMonkey's picture

Sun who?

Sun, 06/01/2014 - 08:20 | 4813996 BigJim
BigJim's picture

Son Zoo.

Sun, 06/01/2014 - 10:53 | 4814162 Jumbotron
Jumbotron's picture

Shih Tzu

Sun, 06/01/2014 - 12:25 | 4814369 Optimusprime
Optimusprime's picture

Shih Tzu feces?

Sat, 05/31/2014 - 21:06 | 4813512 rubiconsolutions
rubiconsolutions's picture

Why would Japan spend that kind of money to build a gas pipeline when all they have to do is build a geothermal plant at Fukushima? Rumor has it that for the next billion years or so there's gonna be plenty of 'thermal activity' around there. 

Sat, 05/31/2014 - 22:35 | 4813669 Matt
Matt's picture

They'll need the thermal plant to power the frozen wall, so that won't provide power for anything else. 

Sun, 06/01/2014 - 01:02 | 4813819 Silver Bug
Silver Bug's picture

Russia is moving away from the west. They know they need to invest in hard assets, as does Asia. Those of us who are ahead of the game are already there. Those who choose to ignore will simply be wiped out.

 

Keep Stacking.

Sun, 06/01/2014 - 01:12 | 4813828 Rock On Roger
Rock On Roger's picture

Stack On

Sun, 06/01/2014 - 17:54 | 4815195 Volkodav
Volkodav's picture

Sun Tzu was Chine, not Jap

Sat, 05/31/2014 - 20:00 | 4813404 patb
patb's picture

what curency will the deal be brokered in? Dollars, Rubles, yen?

Sat, 05/31/2014 - 20:34 | 4813452 Kayman
Kayman's picture

Russia has raw resources and needs industrial goods  and Japan has industrial capacity and high quality standards. The means of exchange should be a relatively minor issue.

Unless of course, either country believes they need Wall Street to slice and dice some paper mirage set in the infinite supply of USD's. 

Sun, 06/01/2014 - 10:19 | 4814101 Peanut Butter E...
Peanut Butter Engineer's picture

Unless those japs release any claim toward Russia's islands I doubt there will be any deal, remember Russians consider japan to be American's poodle.

Sat, 05/31/2014 - 20:00 | 4813405 goldhedge
goldhedge's picture

Will they pay in $US ;)

 

Sat, 05/31/2014 - 20:04 | 4813413 Goldilocks
Goldilocks's picture

Spirited Away~Always With Me Piano Music Box
http://www.youtube.com/watch?v=pPCku-t_H9A (3:50)

Sat, 05/31/2014 - 20:06 | 4813416 I am Jobe
I am Jobe's picture

Only payment accpeted, Gold and Silver. Fuck the USD 

Sat, 05/31/2014 - 20:17 | 4813424 Goldilocks
Goldilocks's picture

[Itsumo Nando Demo] Relaxing Piano
http://www.youtube.com/watch?v=7GCz7MbBM_U (4:45)

Sat, 05/31/2014 - 20:43 | 4813455 Acidtest Dummy
Acidtest Dummy's picture

The sign over the bar says, "Feel free to ask for credit. Our way of saying no is very polite." Japan can't afford Russian prices.

Sun, 06/01/2014 - 08:37 | 4814008 BigJim
BigJim's picture

As long as there's a carry trade - and a Fed to bail out its allies - Japan can afford anything.

I'm a huge admirer of Kyle Bass, but I was astonished when he was saying the BoJ would lose control of JGBs. Now he's calling for a Yen currency crises. No, mate, the world has changed. The banksters aren't going to allow one of their major allies to go down because it would pull everyone down. The CB's will just keep buying each others' currencies, and sovereigns' debt, to ensure the markets are 'stable' (ie, the plunder can continue unabated).

The more I reflect on this shenanigans, the more I think the only place 'we the people' can frontrun this is by buying PMs. Perversely, I think silver might be better in this regard because I think gold's ever-increasing stock:flow makes it easier to manipulate for a longer period. And, of course, Western Au stackers are relying on the East to continue to stack; if Russia or China go down or get captured by the NWO, the banksters may get their hands on a great deal more phyzz, which they'll leverage up 20:1 to beat the market over the head with.

Whereas... silver is being used up, and if the various pundits are correct, there should be a genuine physical supply crunch... assuming industrial usage doesn't decline. So it depends on your timescales. And if graphene becomes cheap, a lot of silver demand may go out the window.

Wheee! This investing stuff is easy*!

*not.

Sat, 05/31/2014 - 21:00 | 4813501 Joebloinvestor
Joebloinvestor's picture

Russia can provide new reactors to.

Sun, 06/01/2014 - 08:38 | 4814010 BigJim
BigJim's picture

I'm told their graphite-moderated design is going cheap at the moment.

Sun, 06/01/2014 - 11:31 | 4814230 Flakmeister
Flakmeister's picture

There you go, a greenie from me...

Sat, 05/31/2014 - 21:17 | 4813528 limacon
limacon's picture

This is a pipe dream 

japan can produce the energy from Clathrate fields at about 1/10 cheaper .

Sat, 05/31/2014 - 21:23 | 4813541 BlindMonkey
BlindMonkey's picture

If that were true, they would not be the highest importer of Nat Gas in the world.

Sat, 05/31/2014 - 21:30 | 4813553 Goldilocks
Goldilocks's picture

A Few Magnet Motors
http://fuel-efficient-vehicles.org/energy-news/?page_id=976

“Engineers of Hitachi Magnetics Corp. of California have stated that a motor-generator run solely by magnets is feasible and logical but the politics of the matter make it impossible for them to pursue developing a magnet motor or any device that would compete with the energy cartels.”

Sun, 06/01/2014 - 03:08 | 4813868 acommenter
acommenter's picture

Someone must remind them to collect their Nobel price....

Hitachi Magnetics Corp  != Hitachi, Ltd. (TYO:6501)

 

 

Sun, 06/01/2014 - 08:55 | 4814023 BigJim
BigJim's picture

It's funny how many perpetual motion... sorry, 'over unity'... motors there are, but no one seems to be able to replicate them. I see lots of experiments with magnets, but people seem to forget magnets take a lot of energy to magnetise in the first place. Does the energy these gizmos produce exceed the amount that went into them in the first place?

I'm also surprised that if there really is 'free energy' to be harvested, why hasn't a living organism evolved to do so?

Sun, 06/01/2014 - 10:54 | 4814165 Jumbotron
Jumbotron's picture

The Free Shit Army is everywhere.

Sun, 06/01/2014 - 12:09 | 4814335 MrButtoMcFarty
MrButtoMcFarty's picture

Does using brine shrimp to harvest algae for biofuel production count?

Do NOT follow this link or you will be banned from the site!