Regional LNG: Shell's Sakhalin to sell LNG to Hiroshima Gas

Royal Dutch-Shell Group's Sakhalin-2 project agreed to sell as much as 210,000 metric tons a year of liquefied natural gas to Hiroshima Gas Co. over 20 years, helping

the Japanese utility diversify its sources of the fuel, Bloomberg reported.

Supplies will start in 2008 under an accord signed with

Hiroshima Gas, Sakhalin Energy Investments Co., operator of the Sakhalin project off Russia's Pacific Coast, said in an e-mailed statement Monday.

Hiroshima Gas reportedly wants to reduce its reliance on supplies of the fuel from the Bontang LNG project in Indonesia, currently its only source of LNG. The relative proximity of the Russian project increased its attractiveness to the Hiroshima-based company, Managing Director Hideo Takeda said.

"The location of Sakhalin and our ability to obtain a

competitive and flexible supply deal made Sakhalin LNG a natural choice for us," Takeda said in a statement.

Hiroshima Gas is expanding its supply of the fuel amid

expectations of increased demand, in particular from Hiroshima Elpida Memory Inc., a branch of the world's fifth-largest memory- chip maker.

Sakhalin Energy is building a 9.6 million-ton-a-year plant to cool natural gas to a liquid state for transportation to markets not reachable by pipeline. Work on the plant is more than 65 percent complete, the company said Monday.

Shell owns 55 percent of Sakhalin-2, Japan's Mitsui & Co. holds 25 percent and Mitsubishi Corp. owns 20 percent. (*)