The new plant, located in Prigorodnoye on Aniva Bay, will liquefy natural gas transported from fields off the northeastern coast of Sakhalin through an 800-km pipeline by cooling it to minus 160 degrees. Dedicated tankers will be used to transport the LNG to Japan.
Sakhalin Energy Investment, headquartered in Yuzhno-Sakhalinsk, the largest city on the island, said it is aiming to produce 9.6 million tons of LNG a year.
More than 60 percent of the output will go to Japanese utilities, including Tokyo Electric Power Co. and Tokyo Gas Co., accounting for 7.5 percent of Japan's total natural gas imports.
The remainder will be sold to the United States and South Korea.
The LNG sales are based on 20-year contracts and the company says it is already booked to full capacity.
Oil produced under the Sakhalin-2 project has been exported to Japan since 1999 — when the sea around the island is not frozen. Because an oil pipeline has been constructed to link extraction sites with Prigorodnoye, oil output capacity is expected to reach 150,000 barrels a day throughout the year by this December from the current level of around 80,000 barrels.
While the global economic turmoil unleashed by the U.S. subprime mortgage crisis could dampen demand for oil, Ian Craig, chief executive officer of Sakhalin Energy, plays down the risk, pointing out current oil prices are much higher than those in the late 1990s.
Sakhalin-2 got under way in 1994 funded by Royal Dutch/Shell, Mitsui & Co. and Mitsubishi Corp. Its total cost doubled from an initial projection to about $20 billion, or ¥2 trillion.
The three investors in Sakhalin Energy were forced to cede a majority stake to Russia's gas monopoly Gazprom in April 2007.
Author: Ksenia Kochneva
