Sakhalin Energy chief executive Ian Craig said yesterday that the purchase and sale transaction with Hiroshima Gas - the company's fifth such agreement with a Japanese energy outfit - reaffirmed the capacity of Russia, and of Sakhalin in particular, to become an important long-term energy supplier to Japan.

LNG supplies were expected to start in 2008, with Hiroshima Gas using its own small ice-class craft, with a capacity of 20,000 cubic metres, for transporting LNG to its own regasification terminal in the south of Honshu Island. LNG tankers usually have a capacity of up to 125,000 cubic metres.

A new LNG plant, with capacity of about 9 million tonnes per annum, was currently over 65% complete near the Prigorodnoye settlement on the Aniva Bay coast in Sakhalin's south. It would be Russia’s first LNG plant.

The Sakhalin-II project involves developing the Piltun-Astokhskoye field (mainly oil with some associated gas) and Lunskoye (mainly gas-condensate with an oil fringe) on the north-eastern shelf of Sakhalin, an island off the Siberain coast.

Total commercial reserves for both Sakhalin projects exceed one billion barrels of oil and 18,000 tcf of gas, roughly equivalent to five years of Russian gas exports to Europe.