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RIA Novosti: Russian, Japanese companies sign deal on LNG deliveries

13:07 | 09/ 02/ 2007 

TOKYO, February 9 (RIA Novosti) – Osaka Gas has signed a preliminary agreement with Sakhalin Energy, the operator of a vast oil and gas project off Russia’s Pacific Coast, on long-term deliveries of liquefied natural gas (LNG), the Japanese company said Friday.

According to the agreement, signed in Moscow Thursday, the operator of Sakhalin II will supply 200,000 metric tons of LNG annually for 23 years, beginning in April of 2008.

LNG will be delivered to Japan’s fourth-largest LNG buyer, from a plant which is in the final stages of construction in the south of Sakhalin Island and which will have a capacity of 9.6 million tons a year.

Ate Visser, commercial director of Sakhalin Energy, said: “Japanese customers represent over 60% of the term sales from Sakhalin LNG. This reflects both the proximity of Sakhalin to Japan, as well as customer confidence in the Sakhalin II project and its shareholders.”

In December, Russian energy giant Gazprom acquired 50% plus one share in Sakhalin Energy for $7.45 billion after months of pressure from Russian authorities, who accused the formerly Shell-led project of environmental damage to the island.

The move was considered by experts as the Kremlin’s attempt to review disadvantageous production-sharing agreements of the 1990s.

Royal Dutch Shell and Japan’s Mitsui and Mitsubishi now hold 27.5%, 12.5% and 10% in the project respectively.

Sakhalin II comprises an oil field with associated gas, a natural gas field with associated condensate, a pipeline, a liquefied natural gas plant, and an LNG export terminal.

Most of the LNG from the project will be exported to Japan, which is seeking to diversify its energy imports. The remainder is contracted for delivery to South Korea and the North American West Coast.

The project’s two fields have estimated reserves of 150 million metric tons (1.1 billion barrels) of oil and 500 billion cubic meters of natural gas.

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