Regional LNG: Sakhalin eyeing LNG export to California

Russia's Sakhalin Energy Investment Co. is seeking approval from U.S. regulators to begin exporting liquefied natural gas to California and capitalize on expected demand growth on the U.S. West Coast, Dow Jones reported Friday.

The company aims to start exporting LNG in the year 2007 when it will complete construction of two LNG production plants at the port of Prigorodnoye in southern Sakhalin and a 600-kilometer pipeline to transport gas from the Piltun- Astokhskoye and Lunskoye offshore fields to the port, a spokesman at Mitsubishi Corp. said.

Mitsubishi, Mitsui & Co. and Royal Dutch/Shell Group hold equity stakes in Sakhalin Energy Investment.

May 19, Mitsubishi signed a 40-year land lease contract with the Long Beach Port authorities in California to build an LNG import terminal.

Under the plan, Mitsubishi will build a 320,000-cubic meter LNG storage facility, with completion of construction set for the end of 2006.

Construction costs are estimated at Y45 billion, the spokesman said.

"Now we are waiting for an approval from U.S. (regulators) for our LNG facility project,...expecting to receive a go-ahead within the next two years," he added.

Sakhalin Energy is expected to export a total of 5 million metric tons of LNG a year to the U.S., where demand is expected to grow 4% annually over the next several years.

In May, Sakhalin Energy signed a 24-year contract with Tokyo Gas Co. to sell a maximum of 1.1 million metric tons of LNG a year between 2007 and 2031, marking the first time a Japanese firm will import LNG from Russia on a long-term basis.

Shortly after the deal with Tokyo Gas, Sakhalin Energy reached an agreement with Tokyo Electric Power Co. on a 22-year LNG supply contract starting in April 2007.

Under the deal, Sakhalin Energy will export 1.2 million metric tons of LNG to the Japanese leading power utility. (*)