Sumitomo plans to build gas plant in Russian Far East

KAZAN, Russia--Japanese trading house Sumitomo Corp. said it plans to build a gas chemical plant in the Russian Far East, making it the first Japanese-affiliated company to do so.

Motoyuki Oka, Sumitomo Corp. chairman, told The Asahi Shimbun that Sumitomo plans to process lower-priced, high-quality natural gas produced in Russia into chemical raw materials at the plant and to export them to Asian countries such as Japan, China and South Korea.

Oka said Sumitomo has already been in negotiations with Gazprom, a major Russian government-affiliated gas company, and they have confirmed a basic outline to build the plant in a coastal area of the Russian Far East.

Sumitomo will provide the Russian side with Japanese gas processing technology, at the world’s top levels, and cooperate in developing new markets for the products.

The two sides will negotiate on Sumitomo procuring gas stably at the lowest price possible, and work toward a basic agreement by autumn.

The total investment is believed to reach tens of billions yen. Ten billion yen is worth about $126 million.

Chemical makers from Japan and Russia will primarily operate the facility, which is expected to be a midsize plant capable of producing hundreds of thousands of tons of chemical materials a year. If future negotiations allow Sumitomo to obtain gas at lower prices, it will consider expanding the plant’s scale, because it will be able to produce products that are more competitive in exporting.

As Russian President Vladimir Putin is calling for Far East development with foreign investments, the plant will be a test case for full-fledged industrial cooperation between the two countries.

Russia has made natural gas a pillar of its resource exports. In September last year, the country opened a 1,800-kilometer pipeline linking the island of Sakhalin, a gas-producing region, with Vladivostok on the Russian coast. Russia was seeking the construction of a plant because higher profits are expected from processed materials than in the exportation of natural gas.

Natural gas prices have dropped to around half the levels of a year earlier due to the development of shale gas fields in the United States, which could also drag down prices of gas produced in Russia. The Russian government is being driven to find regular buyers of the resource.