Process & Control Today: Sakhalin Energy Signs Deal with Shell: “The landmark deal marks the beginning of Sakhalin Island as a strategic new source of natural gas for both Mexico and the US West Coast markets. It confirms Sakhalin Energy as a world-class player in the LNG market, and firmly places Russia in a new strategic position as a global supplier of natural gas” (ShellNews.net)

22 Oct 04

In a pioneering deal, Sakhalin Energy Investment Company Ltd (Sakhalin Energy) has announced that it has signed an agreement to supply 37 million tonnes of LNG over a 20 year period to Shell Eastern Trading Ltd (Shell) for the North American natural gas market. This represents the first sales of Russian natural gas to North America.

The landmark deal marks the beginning of Sakhalin Island as a strategic new source of natural gas for both Mexico and the US West Coast markets. It confirms Sakhalin Energy as a world-class player in the LNG market, and firmly places Russia in a new strategic position as a global supplier of natural gas.

LNG from Sakhalin Energy will be purchased by Shell to supply the new Energía Costa Azul plant that will be constructed in Baja California, Mexico. Natural gas from the new terminal will be used to satisfy Mexico’s growing energy needs, with excess natural gas exported from the Mexican terminal to California in the US where, as in Mexico, there is an increasing requirement for new natural gas supply sources. The agreement calls for significantly higher volumes of LNG deliveries during the first three years, with a plateau supply of 1.6 million tonnes per annum (approximately 0.2 BCF/d).

“Sakhalin Energy and Russia have created a fundamental shift in global natural gas supplies,” commented Ivan Malakhov, Governor of the Sakhalin Oblast. “Russia has been a reliable supplier of natural gas into the European market via pipeline for many years. Now, with Sakhalin Energy’s decision, in partnership with the Russian Government, to opt for LNG as the most flexible way to export natural gas from the Russian Far East, the traditional supply dynamics for natural gas have been transformed. An exciting chapter in Russian energy supply has been opened”.

Sakhalin Energy and Shell have signed the full Sales and Purchase Agreement (SPA) with first deliveries expected early 2008. Sakhalin Energy will also provide the ships to deliver the LNG to the Baja California terminal.

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