New Russia-Japan deals will crash Jordan Cove reboot

January 5, 2017

Jordan Cove

Russian President Vladimir Putin shakes hands with Japanese Prime Minister Shinzo Abe before their talks in Nagato, Yamaguchi Prefecture on December 15, 2016 [Photo by Sergey Guneev/Sputnik]

Russian President Vladimir Putin shakes hands with Japanese Prime Minister Shinzo Abe before their talks in Nagato, Yamaguchi Prefecture on December 15, 2016  [Photo by Sergey Guneev/Sputnik]

When we last left the Jordan Cove pipeline pipedream on December 9, 2016, the Federal Energy Regulatory Commission (FERC) had dealt the final blow by denying the rehearing on their March denial of an application by Jordan Cove LNG to construct and operate a 232-mile Pacific Connector Pipeline, which would have completed the supply chain of natural gas from the Piceance Basin in western Colorado, and to Jordan Cove in Coos Bay, Oregon. The project would also have boosted capacity on the Ruby Pipeline from Wyoming to Oregon. With the denial of the pipeline project, the FERC also denied the related application to construct and operate the proposed $5.3 billion liquefied natural gas (LNG) export facility known as the Jordan Cove Project.

Jordan Cove backers vowed to fight on and re-apply.

West Slope Oil & Gas Association (WSCOGA) Executive Director David Ludlam sputtered to The Daily Sentinel, “This is last-minute retribution by a disgraceful and despicable administration whose shenanigans to stop infrastructure projects are once again happening on the back of rural Americans. We expect that President-elect Trump will get this fixed in short order.”

Colorado Senator Cory Gardner gave a 7-minute speech on the Senate floor on December 12, railing against the Obama administration for the FERC’s denial saying Japan and other Asian markets have demonstrated a need for LNG shipped from western Colorado via Jordan Cove, and Obama and the FERC were denying access to markets for our natural resources and costing jobs. He said the Jordan Cove “facility is important to Japan.”

On December 15, when Jordan Cove backers in Oregon announced plans to file a new application with the FERC, WSCOGA simultaneously issued a press release applauding “Jordan Cove Application 2.0.”

In his statement, Ludlam continued the drumbeat of Japanese market demand for LNG from the U.S.:

… The association immediately posted social media messages to the citizens in Japan congratulating the Pacific nation for steadfast patience and commitment to securing their energy future by purchasing future natural gas from the Rocky Mountain states. The association also communicated belief that customers of the proposed LNG export project should expect imminent approval pointing to recent commitments from the Donald Trump administration and the President Elect’s commitment to expediting approval of U.S. LNG projects including Jordan Cove LNG.

“President Elect Trump’s first meeting with a foreign head of state was with Prime Minister Shinzo Abe of Japan — a dear friend and ally of our nation,” said David Ludlam the association’s Executive Director. “Alongside Senators Cory Gardner, Michael Bennet, and behind President Elect Trump, the U.S. can reverse last week’s geopolitical slight to Japan and restore our credibility by ensuring this time around Jordan Cove receives fast and fair consideration and that input from Japanese companies is actually taken into consideration.”

Ludlam continued, “after 13 years of permitting efforts, Jordan Cove LNG deserves approval for the benefit of our economy in Western Colorado and for the security of our democratic allies in Japan” …

There’s just one problem with this chest thumping over Japanese demand for LNG — Russia.

While Japan’s Prime Minister Shinzo Abe was meeting with Trump on November 17, he was making other plans with Vladimir Putin. And while Jordan Cove backers were busily rebooting their plan, Putin was in Japan meeting with Abe.

For the past two years, Japanese lawmakers have been pressuring Abe to support construction of an 840-mile pipeline from Russia’s Sakhalin Island to Hokkaido. Japan could cut its energy bill in half with natural gas supplied by pipeline rather than LNG imported on tanker ships. Russia also owns one of the world’s largest LNG processing plants located on Sakhalin Island.

But Russia-Japan relations have been salty on account of Abe’s support for U.S. sponsored sanctions against Russia, on top of a 60-year old territorial dispute between the two countries over the Kuril Islands.

However last September, Abe met with Putin in Vladivostok for what is best described as “preliminary discussions” regarding the Kuril Islands dispute and oil & gas development, sort of laying the groundwork for negotiations during Putin’s planned visit to Japan on December 15 and 16.

On his first visit to Japan in 11 years, Putin displayed all the warmth of a grizzly bear showing up at a panda party. Abe had arranged for Putin to spend the first day in his home town of Nagato, with a schedule that included “relaxing” time in the famous local hot springs and feasts of exotic traditional local foods like fugu (pufferfish), generously yet politely sprinkled with Japanese hospitality. Before the visit, Putin refused a symbolic gift from Abe: a male companion to Putin’s dog Yume, which was a gift from Japan in 2012. Then on the day-of, Putin arrived over two hours late, with no warning and gave no official reason, leaving Abe embarrassed as he was shown on nationwide TV waiting in the rain.

Abe’s eagerness to the point of fawning likely had everything to do with the fact that he thought he had Putin over a barrel. After all, Japan is the world’s largest consumer of natural gas and Russia’s oil & gas industry is in desperate need of customers. Look how the U.S. oil & gas industry and politicians — including Trump — are wooing the Japanese in order to get them to buy our LNG. Except we don’t own 2 islands in the Kurils to offer in return for their LNG contracts — and Putin does.

So initially Putin played hard-to-get, but after a soak in the hot springs his frozen heart must have thawed quickly because their historic 2-day summit resulted in over 80 economic deals. Twenty-three of those deals were energy agreements signed by Russian state-owned oil firm Rosneft and three Japanese companies. The multi-billion-dollar agreements include joint offshore explorations, construction of a second LNG plant in Sakhalin, construction of the Sakhalin-Hokkaido natural gas pipeline, and financing to boot.

Noting Russia’s “reliable” LNG supplies, in excess of 8% of Japan’s needs, Putin said: “Energy is a strategic area of Russia-Japan cooperation. The implementation of these large-scale projects will supply Japanese consumers with additional LNG and power at affordable prices and at the shortest distances.”

Looks like Putin just ate the U.S. oil & gas industry’s lunch. Again.

Funny how Ludlam and Gardner blame the Obama administration for the industry’s failure to make a dent in the oil & gas export market, when all along it was Putin and Abe conspiring against them. These deals didn’t appear out of the mist of Nagato’s hot springs on December 16. Professional deal maker that he is, Putin no doubt arrived with stacks of prepared contracts, which would explain his tardiness.

Anyway with all these well-planned and financially pre-approved oil & gas developments on the horizon to bring Russian gas via pipeline to Japan’s doorstep, it’s hard to imagine that any Japanese companies — or even Korean companies — would be interested in signing long-term agreements for expensive LNG shipped from an invisible plant in Oregon that not only hasn’t been built yet, but is now stuck in reboot. Especially considering that currently Japan’s Jera Co. and Taiwan’s CPC Corp. are only buying 76 percent of LNG supply from producers in Qatar, Australia, and Malaysia. So there’s that.

In case you’re wondering if Prime Minister Abe got back the two Kuril Islands he was hoping for in the deal, he did not. The best he got was a sort of Cuba-like arrangement that included relaxing visa requirements and allowing some future Japanese “economic activities” on the Kuril Islands, possibly maybe.

The parting shot was so over-the-top Putin-esque, he’s becoming a cartoon character of himself. When asked if he was concerned about any opposition to the agreements from representatives of the Diet (Japanese parliament) Putin joked that if the opposition party gave Prime Minister Abe a hard time, he would unleash his dog on them. Obviously this is a man who would meddle in Japanese politics and a U.S. election without hesitation.

Those in the news media are fond of reporting that Putin “turned the other cheek” or “took the high road” by not responding to tightened sanctions and the expulsion of 35 Russian diplomats from the U.S., announced by the Obama administration last week.

But Putin was actually way ahead of the game. With the flick of a pen, when he and Abe signed those 23 energy agreements two weeks earlier, the U.S. oil & gas export market evaporated.


KDNK: Amy Hadden Marsh interview with Peggy Tibbetts about Jordan Cove which aired on December 16, 2016. (About 5 minutes into the newscast)

The DiplomatHow Putin Outplayed Abe in Japan

PlattsRussia, Japan deepen ties with agreements on upstream, LNG cooperation – Natural Gas

ForbesHere’s Why Russia Will Win at Energy and Diplomacy Games in 2017

The Japan TimesIn fresh isle talks, Abe and Putin agree to Japan summit, economic deal in December

ReutersGlobal LNG buyers, sellers meet as Japan probes contract clauses

The News-Review/Roseburg, OR:   Jordan Cove LNG plans to refile with Federal Energy Regulatory Commission 

WSCOGA Press Release

Colorado Senator Cory Gardner’s speech on December 12, 2016

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One Comment on “New Russia-Japan deals will crash Jordan Cove reboot”

  1. Elizabeth K. Burton Says:

    Well, that might go a long way toward explaining all of the current neo-Cold War “the Russians are coming!!!” hysteria. Especially in view of the undermining of the TPP, one of the main purposes of which was to prevent precisely this kind of thing from happening. The other, of course, being to give the multinationals total control over the US.

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