Moscow Teams With Japan on Energy Project

A group of Japanese firms is working in tandem with the Soviet Union to tap massive oil and natural gas deposits off the coast of Sakhalin, a project that could turn out to be the largest multinational venture ever undertaken by Moscow.

Sakhalin island lies between the Sea of Japan and the Sea of Okhotsk, just north of the strategic Soya Strait. The narrow, sub-Arctic finger of land hosts three Soviet airstrips, the major port of Korsakov and an estimated 20,000 Russian troops.

The value the Kremlin places on this piece of real estate was brought grimly home on Sept. 1, 1983, when a Soviet fighter shot down a Korean Air Lines jumbo jet with 263 people aboard after it crossed the southern tip of Sakhalin.

Opened to Participation

The oil and gas project, which will require an estimated $3.8-billion capital investment, will probably be opened to participation by overseas firms, officials said.

Exploratory drilling, costing about $180 million and financed by the Sakhalin Oil Development Cooperation Co. (SODECO) a consortium formed by the Japan National Oil Corp. with major Japanese petroleum importers and trading houses, began at two sites off northeastern Sakhalin in 1977.

Drilling was completed at one site, off the Chaivo coast, last year. The probe revealed an estimated 4.94 trillion cubic feet of gas and 26 billion gallons of oil under the normally frozen waters.

“Japan has invested a lot of money in exploratory drilling and this is the first time such a large field of oil and gas has been found so close to Japan, so we place a rather high priority on the project,” said Jun Oriyama, a deputy director for trade policy in the Ministry of International Trade and Industry.

Officials said one reason the Soviets would like to open the project to international bidding is that they lack expertise in large-scale all-weather offshore oil and gas development.

A SODECO spokesman said the group has not received any formal inquiries from overseas firms regarding the project, although Japanese steel, chemical and marine engineering firms have shown a keen interest.

Obvious Advantage

Japan’s proximity to Sakhalin, the Chaivo fields lie about 975 miles north of Tokyo, give Japanese companies an obvious advantage, but Alaska-based American firms would also have a clear shot at the project should Moscow decide to throw open the bidding.

Although the Ministry of International Trade and Industry supports the project, officials express concern on several points. Ironically, the foremost concern in re source-poor Japan is that production will exceed demand.

Under a tentative agreement, the Soviets will ship 54.5 million tons of gas, 2.64 billion gallons of oil and another 1.32 billion gallons of volatile crude oil to Japan over 20 years in return for Japanese capital, manpower and technical expertise.

“The project was initiated 10 years ago when Japan was facing a severe energy problem,” Oriyama said. “The situation has changed over the years. The industrial structure in Japan has slowly changed and the growth of need for natural resources has declined.”

Another worry is that restrictions on the export of Western technology to the Soviet Union may impede the project.

“It is our understanding that the export of plants and machinery in the development phase will not violate export restrictions,” Oriyama said. But further restrictions imposed in response to developments in the international sphere--like those imposed after the Soviet invasion of Afghanistan--and unforeseen technological hurdles may tie up the project.

Oriyama said concerns that Japan’s energy security might be endangered by the alliance have also “been a source of discussion,” but he added, “Even if Japan is able to import all that the project produces it will only comprise a small percentage of total imports.”

Despite the worries, Oriyama stressed that the project will be “a tremendous boost to both economies.”

The Soviets, who are seeking to initiate similar projects in eastern Siberia, are particularly eager to see it succeed, he said.