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Reuters: UPDATE 1-Gazprom, Shell further delay Sakhalin LNG exports

Mon Dec 17, 2007 8:12am GMT 

MOSCOW, Dec 17 (Reuters) – Sakhalin Energy, one of the world’s largest liquefied natural gas (LNG) projects, said on Monday it would delay first exports of the fuel to customers in Asia and the United States by at least a few months.

“We aim to complete the main construction and commence LNG plant start-up at the end of 2008. LNG exports are expected to start shortly thereafter,” a Sakhalin Energy spokesman said.

The group, which has signed up customers for almost all of its production volumes, had previously pledged to start exports in the third quarter of 2008.

Sakhalin Energy, which is led by Russian gas export monopoly Gazprom (GAZP.MM: Quote, Profile, Research) and involves Royal Dutch Shell (RDSa.L: Quote, Profile, Research), Mitsui (8031.T: Quote, Profile, Research) and Mitsubishi (8058.T: Quote, Profile, Research), said it was talking to customers but declined to comment on whether it would have to pay fines for delays.

The development is likely to put further pressure on energy-hungry Asian customers, who face peak demand in the winter period.

It also confirms expectations by many analysts that a prolonged battle between Shell and the Kremlin for control over the project last year would lead to delays.

Sakhalin Energy has sold over 90 percent of the planned 9.6 million tonnes per year LNG production under long-term contracts, with 60 percent going to Japan and the rest supplied to South Korea as well as to North America’s West Coast.

The $22-billion project had long been led by Shell but the company agreed to sell control in the project to Gazprom last year after Russia’s environmental watchdog agency threatened to strip it of production licences for breaking ecological rules.

Analysts broadly interpreted the threat as a Kremlin reaction to Shell’s decision to massively increase spending on the project, without seeking permission from the authorities, and Shell’s move to delay the first LNG shipments from 2007. (Reporting by Dmitry Zhdannikov; editing by Anthony Barker)

© Reuters2007All rights reserved.

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