| The operator of the Sakhalin-2 project, Sakhalin Energy, has already sold about 70% of the gas that is planned to be produced within the framework of this project for 20 years in advance. A new agreement with South Korea made it possible to reach this level (about 50% have been contracted so far). Yesterday, the country's Ministry of Trade, Industry and Energy announced that Sakhalin Energy had won a competition to supply 1.5 million tons of liquefied natural gas (LNG) per year, with an additional option to increase purchases by 0.5 million tons annually. Sakhalin Energy has signed the Basic Terms of Agreement with the Korean gas corporation KOGAS, on the basis of which the first long-term contract will be concluded. The first batch of gas is scheduled to be shipped in early 2008. A source at Sakhalin Energy told Interfax that the company expects to receive about $6.5 billion from the implementation of this agreement.
As part of the Sakhalin-2 project, implemented under a PSA, the Piltun-Astokhskoye and Lunskoye fields are being developed, the recoverable reserves of which amount to 150 million tons of oil and 500 billion cubic meters of gas. In addition, a gas liquefaction plant with a capacity of 9.6 million tons per year will be built. The shareholders of Sakhalin Energy are the British-Dutch Royal Dutch/Shell (55%), Japanese Mitsui (25%) and Mitsubishi (20%). Sluggish negotiations are underway about Gazprom's entry into the project. However, we can already say that Sakhalin-2 will break Gazprom’s monopoly on gas exports. It is expected that gas supplies will begin in 2007.
The deal with the Koreans became the sixth for Sakhalin Energy. Last October, a contract was signed to supply 37 million tons of LNG over 20 years to a terminal on the west coast of Mexico. Prior to this, agreements were concluded with Japanese energy companies: Tokyo Electric Power Company will receive 1.5 million tons per year, Tokyo Gas - 1.1 million tons, Kyushu Electric - 0.5 million tons, and Toho Gas - 0 .3 million tons. Thus, about 70% of gas from Sakhalin-2 is already scheduled for the long term. “In the near future, as negotiations with other potential LNG buyers in Japan and the Asia-Pacific region progress, we expect to announce other contracts for the supply of liquefied natural gas,” said Sakhalin Energy Chief Executive Officer Ian Craig.
In 2008, Kogas expires a long-term contract for the supply of 5.6 million tons of LNG from Indonesia (the project operator is the American giant ExxonMobil) per year. The Korean corporation decided to distribute this volume among several suppliers in order to reduce prices and increase the reliability of supply. The geographic proximity of Sakhalin made Sakhalin Energy's offer the most attractive, which made it possible to conclude an agreement for a significant volume. It was reported that the Korean side is negotiating to enter the Sakhalin project as a partner, but they were not successful. Alexey GRIVACHS
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