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UpstreamOnline: Gazprom hints at Sakhalin 1 LNG future

By Upstream staff

Gazprom has been in talks with ExxonMobil regarding possible tie-ups between the US supermajor’s Sakhalin 1 and the nearby Sakhalin 2 development, in which the Russian gas monopoly took the majority stake last year, according to reports.

“Sakhalin 2 can expand business to building new [LNG] facilities and procuring gas produced at neighbouring gas fields,” Gazprom chief executive Alexei Miller told Japan’s Nikkei business daily.

Gazprom was interested in improving the business efficiency of Sakhalin 1 rather than directly investing in the project, Miller said.

Pressure on Sakhalin 1 to shift to LNG from pipeline gas has been mounting.

ExxonMobil-led Sakhalin 1 prefers to export natural gas via a pipeline to China but has not been able to find a customer.

In contrast, Sakhalin 2 has sold almost all of its LNG under long-term contracts with Japan, South Korea and the US, with exports expected to start in 2008.

The governor of Sakhalin, Japanese government officials and ExxonMobil’s project partner India’s Oil & Natural Gas Corporation (ONGC) have all said it would make more sense for Sakhalin 1 to sell gas to an LNG plant in the island’s south, which is being built by Shell as part of the Sakhalin 2 project.

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