April 6, 2009 / 10:12 AM / in 9 years

Japan's first Sakhalin II LNG arrives from Russia

SODEGAURA, Japan, April 6 (Reuters) - Japan’s first imported liquefied natural gas from Russia’s Sakhalin II export project arrived at the Sodegaura terminal on Tokyo Bay on Monday, marking the start of Russia’s entry into the world’s LNG markets in Asia and North America.

The Energy Frontier tanker, operated by Tokyo Gas Co (9531.T) and loaded with 67,000 tonnes (145,000 cubic metres) of LNG, left the Pacific island project on March 29.

The tanker was towed by tugboats and docked to one of the three receiving piers at the Sodegaura terminal at 10:58 a.m. (0158 GMT).

Tokyo Gas and Tokyo Electric Power Co (9501.T) (TEPCO) will each lift half of the cargo and use the energy for power generation and supply of city gas to the greater Tokyo region.

The two firms will also share the second cargo, Cygnus Passage LNG tanker operated by TEPCO, which departed Russia at midnight on April 3 and is scheduled to arrive at the jointly operated Sodegaura terminal around April 14, TEPCO said.

Tokyo Gas expects to receive about 70 percent of its contracted volumes from Sakhalin in the Japanese business year ending next March, taking into account the launch of the second LNG line around mid-2009, the company’s general manager of gas resources department, Kentaro Kimoto, told Reuters.

Tokyo Gas is contracted to buy 1.1 million tonnes of LNG a year plus an option to buy an undisclosed volumes for 24 years.

For table of term deals made between Gazprom and its buyers in Japan and South Korea, click [ID:nSEO111436]

Meanwhile, TEPCO is likely to receive almost all of the contracted volumes in the first year, Mitsuru Kawashima of the company’s LNG fuel department, told Reuters. TEPCO, the world’s biggest LNG buyer, is contracted to buy 1.5 million tonnes of LNG a year plus an undisclosed option.

The Sakhalin-2 project aims to supply 5 percent of world demand for LNG when it reaches full capacity next year, Russian President Dmitry Medvedev said when he launched the plant on the southern tip of Sakhalin island in February.

The project, in which Royal Dutch Shell (RDSa.L) owns a minority stake after ceding control to Gazprom, is the first LNG plant in Russia, the world’s largest gas producer. Japan’s Mitsubishi Corp (8058.T) and Mitsui (8031.T) also own stakes.

Sakhalin Energy has said “practically all” of the 9.6 million tonnes of annual production capacity had already been committed in long-term sales contracts to buyers in Japan, South Korea and other markets.

About 65 percent of the plant’s output will be shipped to eight companies in Japan, the world’s top consumer of LNG, with the rest sold to South Korea and the LNG-hungry North American market via a Mexican terminal, then on to the U.S. West Coast. (Editing by Ben Tan)

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