Regional LNG: Russia, Mexico talk up LNG

Russia and Mexico plan to work on boosting cooperation, focusing particularly on energy, President Vladimir Putin and his Mexican counterpart, Vicente Fox, said Tuesday in Moscow.

?I am pleased to note that the LNG from Sakhalin Island will be sent to the Mexican coast, and some of this LNG will be destined for your country,? Putin told Fox on Tuesday during a meeting in the Kremlin, The Moscow Times.com quoted the Kremlin web site.

Mexico is among the potential customers for LNG from a plant to be built by Sakhalin Energy, the Royal Dutch/Shell-led consortium that operates the Sakhalin-2 project under a production-sharing agreement.

Last year, Sakhalin Energy said it would ship 37 million tons of LNG from Sakhalin Island fields on Russia's Pacific Coast to Mexico over a period of 20 years, starting in 2008.

?We discussed a 20-year agreement on the supply of liquefied gas to Mexico, which will be refined at four facilities that need to be built,? Fox said at a news conference Tuesday.

Fox is on the first state visit to Russia by a Mexican president since the collapse of the Soviet Union in 1991.

On Tuesday, the Russian and Mexican energy ministries signed a memorandum on energy cooperation.

LNG sales to Mexico and the U.S. Pacific coast are set to be worth a total of $6 billion, according to Sakhalin Energy. Royal Dutch/Shell subsidiary Shell Eastern Trading plans to buy the LNG from early 2008 to supply the new Energia Costa Azul electricity plant in Mexico, with peak supplies reaching 1.6 million tons per year.

The LNG plant under construction on the southern tip of Sakhalin Island will be Russia's first. The entire Sakhalin-2 project, which also involves oil production, has recoverable reserves of 150 million tons of oil and 500 billion cubic meters of gas.

Another major buyer of Sakhalin Energy's LNG is slated to be energy-hungry Japan, which is expected to purchase at least 3.4 million tons of LNG per year. (*)