Yahoo News: Shell-led Sakhalin signs Tokyo Electric LNG deal: "TOKYO, (Reuters) - Tokyo Electric Power Co, Japan's biggest utility, has signed a deal to buy 1.5 million tonnes a year of liquefied natural gas from a Shell-led project in Russia's Far East..." (ShellNews.net) Posted 6 Nov 04

TOKYO, (Reuters) - Tokyo Electric Power Co. (TEPCO), , Japan's biggest utility, has signed a deal to buy 1.5 million tonnes a year of liquefied natural gas from a Shell-led project in Russia's Far East, TEPCO said on Friday.

The 22-year deal seals an agreement struck earlier this year that increased the amount of LNG that TEPCO will buy from Shell-led Sakhalin Energy's huge Sakhalin II project.

"In response to Tokyo Electric's requirements, this is the first Sales and Purchase Agreement with Free On Board terms to be concluded by Sakhalin Energy," Sakhalin said in a statement.

Located in frozen seas near Russia's remote eastern Sakhalin island but only two days by tanker from Tokyo, Sakhalin II is one of Russia's most challenging and ambitious projects.

Sakhalin Energy has spent over $1.5 billion on phase one of the Sakhalin II project and will spend a further $10 billion on phase two, which involves two offshore platforms, pipelines, the world's largest LNG plant and an export terminal.

The group has sold five million tonnes a year of the 9.6 million it will produce from 2007.

Japanese companies have bought 3.4 million tonnes of that, and Sakhalin has set aside another two million tonnes a year for Korea, where it is on the shortlist for a tender from Korean firm KOGAS .

Last month, the group clinched the first deal to export Russian liquefied natural gas to North America in a $6 billion agreement to supply 37 million tonnes of supercooled gas to a plant in Mexico over 20 years from 2008.

Royal/Dutch Shell Group owns 55 percent of Sakhalin Energy Investment. Japanese trading houses Mitsui & Co. and Mitsubishi Corp. own 25 percent and 20 percent, respectively.

(Additional reporting by Richard Ayton in Moscow)

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