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Asia Pulse: GAZPROM BACK IN TALKS WITH JAPANESE BANK ON SAKHALIN 2 FINANCING

TOKYO, Sept 6 Asia Pulse – Russian natural gas monopoly Gazprom has resumed negotiations with the Japan Bank for International Cooperation (JBIC) to secure financing for the Sakhalin 2 energy project, The Nikkei learned Wednesday.

The development, off the shore of Sakhalin Island, had been led by Royal Dutch/Shell Group, Mitsui & Co. (TSE:8031) and Mitsubishi Corp. (TSE:8058). But amid pressure from the Russian government, such as its ordering that construction be suspended because of environmental concerns, the international consortium sold a majority stake to Gazprom this past spring.

With a total cost of more than 2 trillion yen (US$17.3 billion), financing for the project has been a key issue. The European Bank for Reconstruction and Development, a core member of the planned lending syndicate, pulled out in early August because of concerns about how Gazprom gained control.

Visiting Gazprom Deputy Chairman Alexander Medvedev told The Nikkei on Wednesday that the firm and the three Sakhalin 2 partners have reached a memorandum of understanding for financing from JBIC. In addition to confirming that the EBRD’s withdrawal would not affect JBIC’s lending, the parties agreed to discuss the conditions for moving forward with the process.

A JBIC representative indicated Wednesday that the bank is leaning toward providing funds.

Medvedev also said he has confirmed that JBIC would consider financing not only Sakhalin 2, but also other resource development projects in such areas as eastern Siberia.

The Sakhalin 1 natural gas project, led by Exxon Mobil Corp., may serve as a test case. The U.S. oil company has already reached a basic agreement to export output to China. But noting that ExxonMobil’s plan presents economic issues, Medvedev indicated that progress has been made in negotiations to purchase the gas output. The gas would then be supplied to the Russian market or exported, he said.

(Nikkei)

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