Regional LNG: Sakhalin II LNG project faces costs increase, delay

Royal Dutch/Shell said on Thursday that first LNG shipment from its Sakhalin II LNG project in Russia was likely to be delayed for six months to mid-2008 and warned that costs for the project was estimated to soar to US$20 billion, doubling the previous estimate.

The company did not give further detail for the delay and costs increase.

Sakhalin II, which has reserves of 17.3 TCF and 1 billion barrels of oil currently has over 75% of its LNG capacity sold under long term contracts and is in negotiation with buyers for the balance of production capacity. Sakhalin buyers are Korea Gas which has signed up to take at least 1.5 million tonnes of LNG annually, Japan's Hiroshima Gas, Tokyo Electric and Shell itself for its Sempra Energy's Mexican terminal.(alex)