Regional LNG: Kyushu Electric inks deal to buy LNG from Sakhalin

Kyushu Electric Power Co. said Wednesday it has signed an agreement with an international consortium to buy LNG to be tapped at the "Sakhalin 2" gas field in Russia for 22 years from fiscal 2009, Kyodo News reported.

Kyushu Electric is the first major Japanese utility to conclude an LNG purchase accord with the consortium, Sakhalin Energy Investment Co.

The deal calls for the utility to buy 500,000 tons of LNG per year, the company said. Sakhalin Energy Investment is owned 55 percent by the Royal Dutch/Shell Group, with the remainder put up by Mitsui & Co. and Mitsubishi Corp.

A preliminary agreement concluded in July last year with the consortium called for starting LNG deliveries to Kyushu Electric in 2010.

But the utility has decided to move up the start of LNG purchases by one year in view of the larger LNG reserves at the Sakhalin 2 gas field compared with those possessed by its other LNG suppliers -- Indonesia and Australia -- and the shorter distance between Japan and the supply source, utility officials said.

The Sakhalin 2 gas field "will become a new supply source that provides excellent stability and cost effectiveness in supply," a utility official said.(*)