Regional LNG: Sakhalin II to supply LNG to US, S. Korea: Report

Royal Dutch/Shell Group, Mitsui & Co and Mitsubishi Corp have secured long-term contracts to ship liquefied natural gas from Sakhalin to the US and South Korea, the Nihon Keizai Shimbun reported Sunday, without citing sources.

The companies have been developing oil and gas fields off Sakhalin Island under the project name of Sakhalin II. Estimated to cost more than 1 trillion yen, the firms need to line up stable volume buyers before the project begins commercial production in 2007 to ensure they will recover the huge investment, the report said.

Under the long-term contracts, Royal Dutch/Shell will ship 1.6 million tons of LNG a year to an LNG plant on the US West Coast. In addition, Korea Gas Corp will buy up to 2 million tons of LNG a year, the financial daily said.

Annual LNG output from the Sakhalin II project is estimated at 9.6 million tons. The project has already clinched deals to supply a total of 3.4 million tons of LNG a year to Tokyo Electric Power Co and other Japanese electric companies as well as Japanese gas suppliers.

With the latest contracts to ship LNG to the US and South Korea, the project now has buyers for 70 percent of its gas output. (*)