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Japan to receive most Sakhalin-II natural gas

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MOSCOW, May 31. (RIA Novosti) - Sakhalin Energy, which operates the Sakhalin-II oil and natural gas project, signed another long-term contract on the sale of its liquefied natural gas (LNG) on Monday. Vedomosti, a leading business daily, reported today that the company had found a buyer for 70% of the LNG, about half of which would go to Japan.

Sakhalin Energy signed the contract with Hiroshima Gas Co Ltd. This Japanese company will annually receive about 210,000 metric tons of liquefied natural gas for 20 years. The companies are continuing to coordinate the terms of the huge LNG contract. The Japanese company plans to transport the gas on its ice-resistant ship, which can store 20,000 cubic meters of gas.

This is the fifth contract on LNG deliveries to Japan. Past contracts were concluded with Tokyo Gas (1.1 million tons per year for 24 years), Kyushu Electric (0.5 million tons per year for 22 years from 2009), Toho Gas (0.3 million tons per year for 24 years from 2010) and Tokyo Electric (1.5 million tons per year for 22 years). Moreover, Sakhalin Energy and Shell Eastern Trading signed a contract for the annual delivery of 1.6 million tons of LNG to Mexico for 20 years and another contract was signed with Kogas of South Korea on the annual delivery of 1.5 million tons of natural gas for 20 years from 2008. Taiwan's Chinese Petroleum Corp, which would like to diversify gas-supply sources, is studying the possibility of buying Sakhalin LNG.

Sergei Suverov, the head of Gazprombank's market-situation center, does not doubt that Sakhalin Energy will find buyers for its LNG because the product is becoming increasingly popular. Although Sakhalin Energy will attach priority to the Japanese market in the near future, the market is growing slowly and is extremely competitive. Suverov said that those involved in Sakhalin-II should eventually devote more attention to the rapidly growing U.S. and Chinese markets.

The Sakhalin-II project's surveyed deposits contain 150 million metric tons of oil and 500 million cubic meters of natural gas.

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