Under a draft agreement - which could be reached within a few months - Hiroshima Gas could buy up to 200,000 tonnes of LNG a year from Sakhalin Energy for 20 years starting from early 2008.

This would be the fifth such long-term contract between Sakhalin Energy and by a Japanese utility to import Siberian LNG.

Sakhalin's proximity to Japan gives it a competive edge over LNG suppliers from Indonesia, Australia and Middle Eastern nations.