LNG priority in supplies to Japan and eastern China

June 20, 2012
Interfax reported that Liquefied natural gas is a priority form of Russian gas supplies to Japan and eastern China.

Gazprom already delivers LNG to China and not just to China National Petroleum Corporation but also to Sinopec. Mr Alexander Medvedev Russian gas major's Deputy CEO said "We will discuss exports of pipeline gas to China only after our plans for LNG exports have been determined."

Additional LNG production in the region could total between 10 and 25 million tonnes a year. He said that "Everything depends on the results we get from the feasibility study for the third line at Sakhalin-2 and the LNG plant in Vladivostok."

He added that the third line of Sakhalin-2 could have a capacity of 5 million tonnes a year.

Mr Medvedev said in their present form, Sakhalin-2 reserves are not enough to fully load the line. In order to rectify this issue, the current production sharing agreement needs to be adjusted or the project needs to be implemented in the conditions of the existing tax regime.

Mr Vitaly Markelov another Deputy CEO of Gazprom said that a company delegation held negotiations in Japan ten days ago at which the possibility of constructing a gas pipeline on the island of Honshu and Hokkaido was discussed. However, the parties agreed that the priority is an LNG plant, and that we will return to pipeline construction once the LNG project is implemented. He added that this region is a zone of very high seismicity and that building a gas pipeline there could be very costly.

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