Cablegate: Jbic Inks Loan for Sakhalin 2

VZCZCXRO2018
PP RUEHFK RUEHKSO RUEHNAG RUEHNH
DE RUEHKO #1674 1700816
ZNR UUUUU ZZH
P 180816Z JUN 08
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC PRIORITY 5193
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 3974
RUEHMO/AMEMBASSY MOSCOW PRIORITY 2375
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RUEHUL/AMEMBASSY SEOUL PRIORITY 9969
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RUEHNAG/AMCONSUL NAGOYA PRIORITY 6707
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RUEHOK/AMCONSUL OSAKA KOBE PRIORITY 2162
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RHHJJPI/PACOM IDHS HONOLULU HI PRIORITY
RHMCSUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 0387
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RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY

UNCLAS TOKYO 001674

SENSITIVE
SIPDIS

USTR FOR CUTLER/BEEMAN
FOR EAP/J AND EEB/IEC
DOE/PI FOR DPUMPHREY, JNAKANA
PACOM FOR D. VAUGN

E.O. 12958: N/A
TAGS: ENRG EPET PREL EFIN RS JA
SUBJECT: JBIC INKS LOAN FOR SAKHALIN 2

REF: TOKYO 1552

Sensitive but unclassified - not for internet distribution.

1. (U) The Japan Bank for International Cooperation (JBIC)
signed a loan agreement June 16 with the Sakhalin Energy
Investment Company Ltd. to provide up to $3.7 billion in
financing for the second phase of the Sakhalin 2 natural gas
project according to a JBIC press release. A syndicate of
private sources will provide an additional $1.6 billion,
bringing total financing for the project to $5.3 billion.

2. (U) Sakhalin 2, in which Mitsui & Company Ltd, Mitsubishi
Corporation, Shell Oil and Russia's state-owned Gazprom have
equity shares, is expected to yield 9.6 million tons of
liquid natural gas (LNG) annually. More than 50% of this
amount will be delivered to Japan, accounting for 8% of the
country's total LNG imports. In addition, according to the
press release, Japan will receive a "substantial percentage"
of the 150,000 barrels of crude oil per day pumped from the
project. The loan will be used to construct a marine
platform, oil and gas pipelines and an LNG plant.

3. (SBU) Comment. Japan imports nearly 80% of its energy
needs and energy security is a long-standing and high-profile
issue. The JBIC financing of Sakhalin 2 is part of the
long-term energy strategy the GOJ announced in 2006 to reduce
Japan's overwhelming exposure to global energy markets by
pursuing ownership of overseas projects. Despite numerous
delays, cost overruns and environmental challenges, Sakhalin
2 will help Japan lock-in a steady supply of LNG and, to a
lesser extent, crude oil.
SCHIEFFER

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