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Gazprom, Shell Agree To Buy LNG From Sakhalin-2 Project


APRIL 9, 2009, 4:04 A.M. ET

Edited Press Release

MOSCOW (Dow Jones)–Russia’s OAO Gazprom (GAZP.RS) and Royal Dutch Shell (RDSA) late Wednesday signed a series of agreements, under which they will buy liquified natural gas, or LNG, from the Sakhalin-2 project.

Alexey Miller, Chairman of OAO Gazprom’s Management committee, and Jeroen Van der Veer, Chief Executive Officer of Royal Dutch Shell, met at Gazprom Headquarters in Moscow and announced the signing of agreements concerning LNG and pipeline gas supplies.

The agreements include the purchase of LNG by both Shell Eastern Trading LTD and Gazprom Global LNG from Sakhalin Energy Investment Company. Deliveries to Gazprom and Shell begin in 2009 and will last until 2028, totaling 1 million tons a year each to Gazprom and Shell at plateau.

The agreements also include a new pipeline gas agreement for the delivery of an equivalent volume of gas to Shell in Europe. Through this 20-year agreement Shell will be able to strengthen the diversification and flexibility of its supply portfolio and its marketing position in the European gas market.

As part of the transaction, Gazprom affiliates, under long-term assignment from Shell, will take capacity in Sempra’s Energia Costa Azul LNG import terminal in Baja California, Mexico, and pipeline capacity to enable gas to be transported to Southern California.

“This is another important milestone in cooperation between Gazprom and Shell,” said Mr Van der Veer. “We look forward to expanding further our relationship with Gazprom in a variety of activities related to natural gas and LNG developments both in Russia and internationally.”

Alexey Miller and Jeroen Van der Veer also discussed opportunities for further expansion of bilateral cooperation in LNG projects in Russia.

Discussing current situation on oil and gas markets, Alexey Miller also noted that “over the last few weeks markets where the companies operate show certain signs of demand growth.”

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