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Sakhalin won’t boost LNG project

APRIL 1, 2009

Sakhalin Energy has no plans to enlarge its Sakhalin-2 liquefied-natural-gas venture in Russia’s Far East for now, the company’s chief executive said Tuesday, dashing the hopes of some Russian officials that the project would be expanded.

Ian Craig said the company had decided not to progress to a third LNG train at Sakhalin-2, though there were sufficient natural-gas reserves in the license area to underpin expansion.

Sakhalin Energy was originally controlled by Royal Dutch Shell PLC, in partnership with Mitsui& Co. and Mitsubishi Corp. of Japan. But in 2006 Shell was forced to cede a majority stake to Gazprom. All the other shareholders had to reduce their holdings, and Shell now has a 27.5% share.

The Sakhalin-2 LNG plant was launched with much fanfare in February, and its first LNG cargo is due to arrive in Japan Wednesday. Most of its production has been presold under long-term contracts to Japan, South Korea and the U.S., and is ultimately expected to provide 8% of Japan’s LNG demand and 5% of South Korea’s.

Write to Guy Chazan at [email protected]

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