Posted on 10/16/2006 2:29:34 PM PDT by thackney
YUZHNO-SAKHALINSK, Russia, Oct 16 (Reuters) - U.S. oil major Exxon Mobil still wants to export gas from Russia's Sakhalin island to China by pipeline, but its partner Rosneft says it may make more sense to liquefy gas for tanker shipments.
Exxon had long planned to supply gas to Japan by pipeline, but when that plan failed it switched to the Chinese idea, which was initially raised by Russian company Rosneft.
The idea to liquefy gas comes amid opposition from Russian state gas monopoly Gazprom to the plan to pipe gas to China, as Gazprom has its own rival pipeline project.
"It was a Rosneft proposal to start considering LNG (liquefied natural gas) options," Lev Brodsky, head of Sakhalin projects at Rosneft, told reporters. "The operator will make some assessments of LNG exports during 2006," he added.
Exxon leads the Sakhalin-1 project with 30 percent, while Rosneft has 20 percent. Other partners include Japanese consortium Sodeco with 30 percent and India's ONGC with another 20 percent.
The group will start full scale oil production of 250,000 barrels per day early next year as part of its 10-year old production sharing agreement with Russia.
Under the deal, it was also obliged to start exports of gas in 2008 but has so far managed to sell only small volumes to continental Russia.
As talks on gas exports are still not concluded, the group has come under pressure from the government as part of a broader move by the Kremlin to limit foreign involvement in the strategic energy industry.
The neighbouring Sakhalin-2 project, led by Royal Dutch Shell, has come even under bigger pressure and faces withdrawal of ecological permits. It is building one of the world's largest LNG plants in the island's south.
Experts have long said it may make more sense for Exxon to using capacity at Shell's LNG plant to freeze its gas, but Exxon says it is sticking so far to supplies by pipeline.
"All options are possible but we are focusing on talks with (China's) CNPC," said Michael Allen, head of government and public affairs relations at Sakhalin-1. "We are working as quickly as possible to conclude a gas sales deal".
Under the deal, Sakhalin-1 could sell up to 10 bcm of gas to China over 20 years.
Brodsky said Rosneft's options included joining Shell's plant or building an LNG plant in the continental port of De Kastri, the final point of the group's oil pipeline, which is due fully on stream in a few weeks.
Brodsky says the plant could produce 5.6 million tonnes of LNG per year. By comparison, Shell wants to produce 9.6 million tonnes of LNG at its plant on Sakhalin and says its capacity could rise by 50 percent in the long-term.
"We expect proposals on the second phase, including on the gas export phase, to go to the government in early 2007," Brodsky said.
Pretty amazing project really. I saw a show about it on the Discovery channel a while back. Good images of in on google earth as well.
Whoever delivers the most money to Putin & Co will get the Chinese pipeline built.
Stalin invaded the islands AFTER the big ones were dropped, in order to claim that the mighty soviet army was also involved in the Pacific war. Putin and company are no less the thieves for continuing the sham.
In 1855, Russia and Japan signed the Treaty of Shimoda, which declared that both nationals could inhabit the island: Russians in the north, and Japanese in the south, without a clear boundary between. Following the Opium War, Russia forced the Qing to sign the unequal Treaty of Aigun and Convention of Peking, under which China lost claim to all territories north of Heilongjiang (Amur) and east of Ussuri, including Sakhalin, to Russia. Russia and Japan signed the Treaty of Portsmouth of 1905, which resulted in the southern part of the island below 50° N reverting to Japan; the Russians retained the other three-fifths of the area.
Japan renounced its claims of sovereignty over southern Sakhalin (but not the Kuril Islands) in the Treaty of San Francisco (1951). However, Japan has been granted mutual exchange visas for Japanese and Ainu families divided due to Russian occupation.
Sometimes when you go to war to gain more territory, you lose. Sometimes when you fight against an invader, you gain territory. Japan lost, Russia was on the winning side.
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