Tokyo Gas to buy LNG from Rusia?s Sakhalin project: Report

Tokyo Gas Co., the world?s No. 3 liquefied natural gas (LNG) buyer, plans to become the first customer to sign up for LNG from Russia's Far East, advancing Royal Dutch/Shell Group's US$8.5 billion plan to produce the fuel, Bloomberg reported Tuesday.

Tokyo Gas will buy 1 million metric tons a year of LNG from fields in Sakhalin province as early as 2007, company spokesman Akihiro Takase said. That's about 13 percent of purchases this fiscal year by Tokyo Gas, the capital's dominant supplier.

?We may sign a purchase contract by the middle of this year,? said Yoichi Shibata, manager of communications at Tokyo Gas. ?If we sign on, we?ll be the first ones? to confirm buying gas from the project, he said. Tokyo Gas doesn't currently plan to buy a stake in the project, he said.

Japan, which bought 1.5 trillion yen ($12.5 billion) of LNG last year, is keen to diversify its energy supply and could be key to as much as $30 billion of investment in Sakhalin by groups led by Shell, Exxon Mobil Corp. and BP Plc.

Japan, the world's biggest LNG buyer and No. 2 oil user, plans to reduce the risk of supply disruptions from the politically unstable Middle East, which supplied more than fourth- fifths of the country's oil last year.

The Sakhalin gas fields, developed by Shell with investments from Mitsui & Co. and Mitsubishi Corp., provide the nearest alternative source of fuel, in the form of cleaner-burning gas, analysts said.

Oil and gas from the Sakhalin fields ?can be used as a bargaining chip during negotiations with Middle East suppliers,? said Tsutomu Toichi, managing director of the Institute of Energy Economics, Japan, at a panel discussion organized by the institute last week.

Tokyo Gas currently purchases LNG from six producers -- Alaska, Malaysia, Brunei, Indonesia, Qatar and Australia.

Weather conditions in Sakhalin make production and transport of oil and gas from the region expensive compared with fields in Southeast Asia and Australia. (*)