US oil major Exxon Mobil has been negotiating with China National Petroleum Corp...
US oil major Exxon Mobil has been negotiating with China National Petroleum Corp., about the possibility of sealing an agreement on a construction of a pipeline linking Sakhalin island and northeastern China via Russia's Pacific coast. Shipments are slated to begin in 2008, a Japanese newspaper reports.
The Sakhalin 1 project had initially planned to sell all of its natural gas output to Japan by building a direct 930-mile pipeline. The total cost of the Sakhalin 1 project is estimated at 1 trillion yen ($9.4 billion) to 1.5 trillion yen.
Japanese participants in the project will still be able to receive their shares of profits even if the gas is sold to China instead of Japan, the Nikkei report said.
Exxon Mobil entered into negotiations with the Chinese firm even before potential Japanese buyers could make up their minds about the deal because it is anxious to ensure that investments in the project can be recovered promptly, the report said.
Construction of the pipeline to Japan has been delayed because talks on compensating the fishing industry have not progressed. In addition, Tokyo Electric Power Co., which was expected to become the largest buyer of the gas, has shown reluctance to make the purchases, citing weakening power demand and the inflexibility of being locked into a long-term contract.
The Japanese government has provided financial assistance through Japan National Oil Corp.
