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Japan, Russia hatch $13-billion liquefied natural gas deal

Gazprom plans to extend a natural gas pipeline from Sakhalin to Vladivostok



VLADIVOSTOK, Russia—Russia and Japan are putting energy co-operation ahead of a longstanding territorial dispute as they move ahead with a long-awaited liquefied natural gas project in this far eastern seaport.

Russian President Vladimir Putin and Japanese Prime Minister Yoshihiko Noda oversaw the signing of a memorandum for the $13-billion project with Japan’s Agency for Natural Resources and Energy, on the sidelines of a Pacific Rim summit, Russian oil and gas giant Gazprom said.

The project “will have a great meaning for developing the eastern part of the Unified Gas Supply System of Russia as well as raising Russian gas supplies to Asia-Pacific markets including Japan,” Alexei Miller, Gazprom’s chairman, said in a statement.

“I would like to emphasize that the Japanese market has an advantageous size and is considered a top priority in the Far East,” Miller said.

Japan used 83 million tons of LNG in 2011, accounting for 14 per cent of its total energy use. Almost all the natural gas Japan uses is in the form of LNG.

Gazprom is the world’s largest producer of gas, but its pipeline gas business has been hard hit by sliding demand for gas while competing liquefied natural gas carried by ship has flooded European markets. Gazprom relies on pipelines and long-term pricing agreements.

Miller forecast that Gazprom’s exports of natural gas to the Asia-Pacific would soon exceed the volume sold to Europe.

Gazprom and its partners have conducted a feasibility study on transmission and marketing of natural gas and chemical products in the Asia-Pacific region.

Japan Far East Gas Co., the consortium participating in the government-backed project, includes Itochu Corp., Japan Petroleum Exploration Co., Marubeni Corp., Inpex Corp. and Itochu Oil Exploration Co.

Gazprom plans to extend a natural gas pipeline from Sakhalin to Vladivostok to a seaside terminal where the gas would be processed for shipment to Japan and other markets. The new project, if completed, would have a capacity of 10 million tons annually, doubling Gazprom’s capacity from its only other plant, also on Sakhalin.

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