The deal was signed with Shell Eastern Trading Ltd and represents the first sales of Russian natural gas to North America.

In a statement Shell said, “Sakhalin Energy and Shell have signed the full sales and purchase agreement with first deliveries expected early 2008. Sakhalin Energy will also provide the ships to deliver the LNG to the Baja California terminal.”

“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 [and] 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.

“The agreement calls for significantly higher volumes of LNG deliveries during the first three years, with a plateau supply of 1.6 million tons per annum,” it added.

There is still hope for Australian producers to supply the Energía Costa Azul terminal with a second contract for more than two million tonnes per annum from 2011.

According to Shell Gas & Power Director (Americas and Africa) Catherine Tanna, “The sales and purchase agreement signed by the Sakhalin Energy consortium, which operates the Sakhalin-2 project, and Shell is worth US$6 billion.”

“Taking the capacity at Baja California and our rights to future capacity creates an important strategic option for us to ensure future greenfield and expansion projects in the Asia Pacific materialise this decade,” she added.

Sakhalin Energy CEO Ian Craig is, understandably, pleased with the agreement.

“This is a major LNG supply deal [and] we look forward to developing a long relationship delivering Sakhalin LNG to North America, and facilitating Russia’s development as a supplier of natural gas to the region. We knew that we were the closest Asian supplier to the west coast of North America, a potentially huge market waiting to be tapped,” said Craig.

“We are extremely pleased that our three shareholders, Shell, Mitsui and Mitsubishi and the Russian Government strongly support the supply of Russian natural gas to meet North America’s energy needs,” he added.