Sakhalin
Energy signs its first LNG Sale and Purchase Agreement with
Kyushu Electric
Posted: 09 June 2004
Sakhalin Energy signed its first liquefied natural gas (LNG) sale
and purchase agreement (SPA) with Kyushu Electric Power Company
Incorporated today. This is the first SPA signed with a major
Japanese utility company, and includes an earlier start to
deliveries.
The SPA follows an earlier initial Heads of Agreement (HoA) signed
with Kyushu Electric in July last year, which calls for the supply
of up to 0.5 million tonnes per year for a period of more than
20 years. The SPA completes the full terms and conditions of supply
and purchase based on the initial HoA. As part of the final SPA,
Kyushu Electric decided to accelerate the start of LNG deliveries
to 2009 from an original plan of 2010 for the long term supply
of LNG from Sakhalin.
The finalisation of the deal with Kyushu Electric, including the
earlier start to deliveries, confirms Sakhalin Energy's decision
to opt for LNG as the most efficient way to create a new and dynamic
market in Japan and rest of the Asia Pacific for gas from the Russian
Far East.
Steve McVeigh, Chief Executive Officer, signed the SPA on behalf
of Sakhalin Energy, and President Shingo Matsuo, for Kyushu Electric.
"Sakhalin Energy is glad to welcome Kyushu Electric as our
first
customer to sign an SPA. We would like to pay special tribute to
Kyushu Electric for the remarkable speed we have managed to achieve
together to negotiate the SPA. I am grateful for the confidence
and value Kyushu Electric places on Sakhalin LNG that
has enabled us to achieve this milestone," said Steve McVeigh.
"The fact that Kyushu Electric has decided to accelerate
the start of deliveries reinforces the natural advantages of LNG
from
Sakhalin
for Japan. Our position as nextdoor neighbour and our abundant
reserves gives us a strong foundation to build a lasting relationship
with Kyushu Electric, and the opportunity to become a long-term
core supplier to this key Japanese utility, " added Steve
McVeigh.
LNG will be supplied from Sakhalin Energy's major new LNG plant
in Prigorodnoye on the southern tip of Sakhalin, where construction
has already commenced. With early earthworks at the site virtually
complete, work on the plant has now moved into the next phase
with construction activity on the LNG storage tanks
underway. Work is commencing on the foundations for plant equipment
- such as the two 4.8 million tonnes per annum liquefaction trains,
which are the largest LNG trains currently under construction in
the world. More than 2000 people have been mobilised to the site,
and 80% of equipment for the plant has now been ordered.
Sakhalin Oblast Governor Ivan Malakhov commented: "Russia
already has a reputation of being a stable supplier of gas into
the European market. Sakhalin is now moving Russia from the European
stage to the world stage as a natural gas supplier. We welcome
Kyushu Electric as a key player in opening up this new Russian
energy supply to the Asia Pacific Region, and we are particularly
pleased that this SPA has led to increased supplies of Sakhalin
LNG. We look forward to developing further relations with Kyushu
Electric in the future, and see it as a significant step in further
strengthening ties between Russia and Japan."
Mr. Shingo Matsuo, President of Kyushu Electric, commented: "Kyushu
Electric concluded a full Sale and Purchase Agreement with Sakhalin
Energy today. Kyushu Electric values the Sakhalin-II project as
a new, stable and economic supply source given its abundant reserves
and proximity to Japan. It is expected that the development of
this project will contribute to the economic development of the
Sakhalin Oblast and the increasing energy demand in the East Asia
region."
For more information see www.shell.com
Posted by Richard Price,
Editor Pipeline Magazine
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