The deal calls for the supply of up to 0.5 million tonnes per year for a period of 21 years and is the third successful deal signed with a major utility company in Japan. First deliveries are expected in 2010.

This deal brings volumes of natural gas sold from the Sakhalin II Project to more than 2.8 million tonnes per annum for periods in excess of 20 years.

This LNG sales agreement also reinforces Sakhalin Island as the new strategic source of natural gas for Japan, and confirms the wider Asia Pacific Region as a major new market for Russian gas supplies.

"This latest deal with Kyushu Electric from the southern main region of Japan represents a growing chain of commitments from Japan. It is a tribute to both the Sakhalin II project and the Russian Far East that customers are confident and are keen to tap the abundant gas supplies from Sakhalin, which represents the closest possible available supply source to Japan," said Sakhalin Energy chief executive officer Steve McVeigh.

"This agreement with Kyushu Electric keeps our successful momentum in the marketing effort moving forward, and means that we have now presold a significant part of the first train."

The gas will be supplied from Sakhalin's LNG plant, which is planned for construction at Prigorodnoye on the southern tip of the island. Full construction activities on the plant are expected to commence shortly following final approvals from the Russian Government.

The LNG plant is a major part of the Sakhalin II Phase 2 project. It is the first LNG plant to be built in Russia and will have a total capacity of 9.6mtpa. The plant will have two gas liquefaction process trains, each with a capacity of 4.8mtpa, currently the largest LNG trains planned in the world.