Japan Mulls Plugging into Sakhalin’s Electricity Grid

Japanese officials have taken a great interest in a project to lay an underwater electric cable running from Sakhalin to Japan’s northernmost main island of Hokkaido, according to the Wednesday edition of Japanese financial newspaper Nikkei. Tokyo hopes that the major project, with an estimated price tag of $6 billion, could be used to help entice Russia to concessions in negotiations on the Kuril Islands.

The cable would connect Sakhalin with the nearby northern Japanese city of Wakkanai, located just 40 km south of the southwestern tip of the Russian island. Power would be supplied by a RusHydro thermal power plant. Russian business media has been equally enthusiastic about the project. Expert magazine pointed out that despite the high cost, Japan would quickly get back its investment, “since Sakhalin energy costs three times less than it does in Japan,” and Tokyo “is vigorously searching for cheaper sources of energy.”

“The project would be beneficial to Russia as well, which is also looking to diversify its electricity customers,” the Russian magazine added. “At the moment, the bulk of Russian energy exports go to Europe.”

The project could be seen as a component of an ‘Asian Supergrid’, a mega energy project connecting not only Russia and Japan, but China and South Korea as well. China’s State Grid Corp. and Korea Electric Power have shown an interest in the latter idea.

As for the Sakhalin-Hokkaido link, the idea was first proposed back in 2011 by Japanese telecommunications firm SoftBank Group president Masoyoshi Son. Russia began showing interest in the idea in 2013. Tokyo, for its part, has been reticent, citing the project’s high cost and the fears of falling into energy dependence on Russia. Attitudes toward the Sakhalin-Hokkaido link changed in May however, after a meeting between Putin and Japanese Prime Minister Shinzo Abe in Sochi. Abe hinted at the time that an agreement on the Kuril Islands could result in large-scale economic cooperation between the two countries. Tokyo agreed to Moscow’s proposal to include the idea in a list of projects on bilateral economic cooperation. According to Expert, the Russian side has already begun preparatory work on the project. “RusHydro, for example, has begun the construction of a power plant on Sakhalin with sufficient capacity to provide electricity to the Japanese market. In October, generators began to be installed. The Japan Bank for International Cooperation is actively involved in negotiations on providing financing for the project.”

The project’s approval will require changes to Japanese law on connections to the energy networks of foreign countries. Tokyo is still worried about the potential for energy dependence on Moscow, Expert noted, but a representative of the Japanese Foreign Ministry told the magazine that the likely benefits are seen to outweigh these concerns. “From a political and symbolic point of view, the connection of Russia and Japan via an electrical cable is of great importance,” the diplomat said.

Nikkei too confirmed that the project has good prospects for success, especially if Moscow and Japan are able to break the deadlock in negotiations on a peace treaty between the two countries next month (Russia and Japan still have no formal peace treaty on the conclusion of the Second World War).

“And the prospects for cooperation in the energy sector are not limited to the laying of an underwater electricity cable, either,” Expert explained. “A group of politicians from Japan’s ruling coalition has proposed the construction of a gas pipeline to supply gas to Tokyo Bay through Hokkaido. The proposal was sent to the government on October 18 by MPs from the Liberal Democratic Party and its coalition partner, the Komeito Party. The group is headed by Liberal Democrat Takeo Kawamura, a close Abe ally.”

The latter project proposes laying a 1,500 gas pipeline, and would cost 700 billion yen (about $6.7 billion US). Part of the pipeline would go underwater between southern Sakhalin and Wakkanai. The Russian gas provided by pipeline would be significantly cheaper than liquefied gas, delivered by ship. Gazprom has accelerated a study of the project’s feasibility. Russian and Japanese officials have been discussing the project, most recently in a visit of representatives of the Japanese Ministry of Economy, Trade and Industry to Moscow on October 21.

Environmental issues, and questions about cost sharing, along with some technical details, remain to be resolved. But in light of the recent upturn in Russian-Japanese relations, Japan’s search for cheap, reliable energy sources, and Russia’s search for new markets, the prospects look good.


Power grid, gas links on the table for Russia-Japan talks

TAKAYUKI TANAKA, Nikkei staff writer


MOSCOW — Russia put a project to lay an undersea cable and bring electricity from Sakhalin island in the Russian Far East to the northern Japanese island of Hokkaido on the agenda of an upcoming meeting between the Russian and Japanese leaders.

The project is likely to figure prominently in discussions between Japanese Prime Minister Shinzo Abe and Russian President Vladimir Putin when the two meet in Japan’s Yamaguchi Prefecture in December.

Japanese officials are intrigued by the project, thinking it may help with negotiations over islands off Hokkaido seized by the former Soviet government at the end of World War II that Japan wants back.

The proposal calls for a high-voltage, direct-current cable to be laid covering the 40km or so between the southern tip of Sakhalin and Wakkanai, a city on the northern tip of Hokkaido. The $6 billion project would deliver electricity from a thermal power plant operated by Russian state-owned company RusHydro.

Power generation costs are only a third as high on Sakhalin as in Japan. That makes importing electricity from Russia an attractive option for Japan, which is trying to find cheaper sources of power as it struggles to restart nuclear power plants that have remained offline since the Fukushima nuclear disaster in 2011.

The project would benefit Russia by helping it diversify its customer base. Most of its energy exports go to Europe at present.

It’s all connected

Feasibility studies are being conducted on extending the cable to create a regional network that would include China and South Korea — an idea proposed by Masayoshi Son, chairman and CEO of Japanese technology company SoftBank Group.

Son first proposed building a network of power grids encompassing Russia, Japan, China and South Korea in 2011, calling it the Asia Super Grid. This included a cable linking Russia and Japan. Russia showed interest in the proposal as early as 2013, but Tokyo has so far remained aloof. It did not want rely too much on Russia for power and balked at the cost.

But the undertaking got a new push when Abe, eager to solve what Japan calls the Northern Territories dispute, told Putin at their May meeting in Sochi in southern Russia that he would work to strike a wide-ranging economic cooperation deal with Russia.

The grid interconnection project finally drew wider attention in Japan after the Russians put it on the agenda of talks for an economic cooperation agreement.

According to Russian media outlets, Alexander Galushka, minister for the development of the Russian Far East, has announced that SoftBank and Russian power company Rosseti are already in talks to set up a joint venture for the power cable project. Rosseti Director General Oleg Budargin met with Son in Tokyo on Sept. 9.

The Russians have already begun laying the groundwork for the project. RusHydro, for example, has started building a power plant in Sakhalin whose output is intended to supply the Japanese market. In October, the company began installing generators at the site.

Talks involving the Japan Bank for International Cooperation are also underway on funding for the project.

Alexei Chekunkov, CEO of the Far East Development Fund, which is operated by the Russian government, has said he believes State Grid Corp. of China, a major Chinese power company, and Korea Electric Power — both proponents of the super grid initiative — will participate in the power cable project.

The project will require changes to the law in Japan, as it does not have provisions covering connections between Japan’s power and those of other countries.

Some officials in Tokyo remain worried about depending on Russia for power, especially as the rift between Moscow and the U.S., Japan’s close ally, has deepened over the conflict in Syria. But a Japanese foreign ministry official said the benefits outweigh risks. “From a political and symbolic point of view, linking Japan and Russia [through the undersea cable] has great significance,” the official said.

Some government insiders said the project may gain momentum, particularly if the two leaders make progress on the Northern Territories dispute in their December meeting.

More than hot air

A group of politicians from Japan’s ruling coalition, meanwhile has proposed building a pipeline that would deliver natural gas to Tokyo Bay via Hokkaido. The proposal was submitted to the government on Oct. 18 by Diet members from the Liberal Democratic Party and its coalition partner Komeito. The group is led by the LDP’s Takeo Kawamura, a former chief cabinet secretary and close ally of Abe.

The proposal envisions laying a 1,500km pipeline at a cost of 700 billion yen ($6.68 billion). The pipeline would go undersea at the southern tip of Sakhalin, come ashore at Wakkanai, pass through Tomakomai in southern Hokkaido, the Tohoku region, southward along the Pacific coast to the Kanto region and finally to Tokyo.

If the project went ahead, a pipeline would probably let Japan get gas more cheaply than it can by ship, given the cost of transport and liquefaction, according to an official at a Japanese trading company. “Its medium-to-long-term profitability would be much higher than that of the undersea cable project,” the official said.

The gas project would benefit Russia by adding Japan to its list of long-term customers. This past summer, Russia’s state-owned Gazprom decided to speed up its feasibility studies on the gas pipeline project.

Russia’s Far East development ministry has included the project on its proposed agenda for a bilateral economic cooperation agreement with Japan. Officials from the ministry and their counterparts at Japan’s Ministry of Economy, Trade and Industry also discussed it at a meeting in Moscow on Oct. 21.

Remaining hurdles include the risk that the pipeline, much of which would be submarine, may damage the environment and fisheries. Other issues would also need to be resolved, including cost-sharing between the two countries and which gas fields in Sakhalin would supply gas to the pipeline.


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