03.04.09

The first tanker loaded with Russian liquefied natural gas (LNG) has sailed for Japan from the Prigorodnyi port on Sakhalin Island. This is the first time Russia has exported a high-tech product, rather than plain natural gas. It is an unprecedented event in the Russian economy over the past fifty years.

Exporting LNG from the Sakhalin shelf frees Russia of its dependence on pipelines and transit countries. Once this project reaches capacity, Russia will account for 5% of global sales of this environmentally friendly fuel.

Russia's revenues from Sakhalin LNG exports could reach $60 billion over the next decade. This is the estimate made by Sakhalin Energy, the international company in which Russia holds a controlling interest; the Auditing Chamber agrees. Up to 60% of Sakhalin's gas has already been purchased (for the next 25 years) by Japan, the USA, and South Korea. Ian Craig, executive director of Sakhalin Energy, says that the first shipments have already started out for Japan. The project is expected to reach full capacity in 2010. Japanese Prime Minister Taro Aso said that Sakhalin's gas will cover over 7% of Japan's consumption.

Gennadi Shmal, president of the Russian Oil and Gas Industry Association, says the United States has signed contracts for Russian gas deliveries to California and Mexico. Special terminals have already been prepared on the US West Coast. Shmal says: "I expect gas deliveries to the USA to start once the second technological line is operational at the Sakhalin plant." This would be in 2010, presumably. Then again, demand for LNG is also growing rapidly in East Asia.

Rostislav Goldstein, deputy chairman of the Duma's Arctic and Far East Committee, says that LNG production is an excellent reason for Russia to feel confident and stable, even during the crisis.

The scale of the Russian-American gas deal is comparable to US grain exports to the USSR, US poultry meat exports to Russia, or Armand Hammer's ammonia exports to the USA.

So Russia is gaining maximal freedom in selling a high-tech form of gas, with demand for this product growing faster than demand for any other commodity. Another LNG plant similar to the Sakhalin plant will be built in the Primorye territory, at an estimated cost of $7 billion. The two plants will be able to meet a fifth of East Asia's demand for LNG.

There are also plans to build another LNG complex at the other end of Russia - close to Murmansk, using gas from the Shtokman field in the Barents Sea. Over the next five to ten years, Russia's LNG export volumes may approach those of the world's leading producers, primarily in Asian markets.

From our files:

According to the US Energy Information Directorate, around 60% of the world's natural gas reserves are located in Russia, Iran, and Qatar; Russia alone has 27.2%. Russian LNG exports to Asia now amount to around 4%, but this figure could grow to 21-30% by 2030. Shipping LNG from Sakhalin to Japan will take three or four days; shipping gas from the Persian Gulf to Japan takes three weeks.

Sakhalin Energy's stakeholders are Gazprom (50% plus one share), Royal Dutch Shell (27.5%), Mitsui (12.5%), and Mitsubishi (10%). The total cost of the project is $20 billion.

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Source: Rossiiskaya Gazeta