Tokyo Gas will buy up to 1.1 million metric tons of LNG a year between 2007 and 2031. It now imports a total of about 7.5 million tons of LNG annually from Malaysia, Brunei, Indonesia, Qatar, Australia and Alaska.
However a number of Australian North West Shelf contracts will come up for renewal in 2009 and the location of the Sakhalin fields indicates a major challenge to those contracts.
There will be massive savings for Japanese companies as even Southeast Asia, which is the closest to Japan, is about 4,600km away, while Sakhalin lies 1,800km away.
This short route will reduce a tanker round trip to 10 days from roughly two weeks for the Japan-Southeast Asia route, helping Japanese utilities cut transportation costs, which constitute about 20-25% of LNG procurement expenses. Currently the NWS venture partners are sprouting the standard line that the deal will not change the way they will approach the market or their customers.
Finding enough LNG buyers is one of the conditions set by the boards of Shell, Mitsui and Mitsubishi before they approve the $US9 billion investment for construction of liquefied natural gas plants and pipelines in summer this year.
Unlocking the $US9 billion investment to infrastructure and terminal for exporting oil from Sakhalin Island would bolster Russia's aim of becoming a key supplier of energy in Asia.
Both Sakhalin Energy, as the Shell-led consortium is known, and Sakhalin 1, a consortium led by ExxonMobil that will begin drilling for oil on the island next month, plan to supply Japan, South Korea, China and Taiwan.
LNG will be supplied from Sakhalin Energy's planned LNG plant at Prigorodnoye on the southern tip of Sakhalin. The LNG plant will have a capacity of 9.6m tons a year, with two gas liquefaction process trains, each with a capacity of 4.8m tons.
