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Lloyds List: Sakhalin II project sells 98% of its LNG cargoes

By: Martyn Wingrove, Lloyds List
Published: Sep 28, 2006

SAKHALIN Energy has sold 98% of its liquefied natural gas forward cargoes for Russia’s first LNG project and will consider building a third train.

The Shell-led consortium has to formally approve one more LNG contract and then will have almost all of its gas production booked with international buyers.

But the Sakhalin II project in eastern Russia is still under threat from the state, despite assurances from foreign minister Sergei Lavrov that the production sharing contracts will not be scrapped.

The country’s natural resources ministry has started preliminary inspections of Shell’s facilities on the island after revoking environmental approvals. A one-month probe is due to begin in October.

‘We have made good progress in LNG marketing over the past year. A further 1.4m tonnes of LNG per annum were committed during the last 12 months,’ said Sakhalin Energy’s chief executive Ian Craig.

‘With one last contract still to be approved, we have effectively contracted about 98% of the long term capacity. The remaining 2% will be retained for flexibility and spot market sales.’

Sakhalin Energy, which includes Japanese groups Mitsui and Mitsubishi, is looking to increase capacity of these systems and may seek further expansion depending on interest from gas sales.

‘Re-rating of the system and de-bottlenecking of facilities are probable and we continue to study the possibility of a third LNG train,’ said Mr Craig. ‘The project is now approaching 80% complete.’

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