Regional LNG: Tokyo Gas close to signing deal with Russia's Sakhalin Energy

Tokyo Gas Co. , Japan's largest city gas supplier, will "soon" reach a basic liquefied natural gas supply agreement with Russia's Sakhalin Energy Investment Co., which has been pushing forward with its Sakhalin-2 oil and gas development project, a spokesman for Tokyo Gas was quoted by Dow Jones as saying Wednesday.

Tokyo Gas expects to start receiving 65,000 metric tons a year of LNG in 2007 from Sakhalin Energy through the project's two offshore fields northeast of Sakhalin Island under a 20-year term contract and to increase the import volume to 1 million tons per year by 2014.

"It won't take much time to sign the framework contract," the spokesman added, without further elaborating.

Sakhalin Energy Investment Co., a joint venture between Royal Dutch/Shell Group, Mitsui & Co. and Mitsubishi Corp. , plans this summer to break ground on two LNG plants at the port of Prigorodnoye and 600 kilometers of pipelines, which will transport crude oil and gas from the Piltun-Astokhskoye offshore fields to the southern port of Sakhalin Island.

The move is part of the company's Sakhalin-2 project to develop crude oil and gas in fields off the island's northeast coast.

Under the project, Sakhalin Energy will build two LNG plants, each with a capacity of 4.80 million tons/year, and associated pipelines, with completion scheduled for the autumn of 2005. Gas to be collected from the offshore fields will be delivered through the pipelines to the LNG plants in Prigorodnoye.

Sakhalin Energy aims to begin exporting LNG in 2007, with most of the production slated for the Japanese market, in a bid to capitalize on an expected rise in the country's demand for clean energy over the next decade.

The three companies have agreed to invest Y1.2 trillion over the next five years in the Sakhalin-2 joint oil and gas development project, the Nihon Keizai Shimbun reported Wednesday.(*)