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Russia, Japan to build $7b LNG plant
Published in The Saudi Gazette on 09 - 09 - 2012

VLADIVOSTOK – Russia and Japan signed an agreement Saturday to develop plans for a $7 billion liquefied natural gas plant on Russia's Pacific coast, potentially delaying gas export pipeline projects to neighboring China and South Korea.
State-controlled Gazprom, Russia's and the world's largest gas firm, is trying to diversify away from dependence on the European export market, where it faces pressure on volumes from weak demand as Western economies slow.
Abundant liquefied natural gas (LNG) is also undercutting the price that Gazprom charges under its long-term supply contracts, which are mainly tied to high oil prices and in most cases only have a small ‘spot' gas pricing component.
Gazprom's average Europe sale price is expected at $405-$415 per 1,000 cubic meters in 2012 - or around four times the average spot price on the US natural gas market, where booming shale gas production has created a major supply glut.
Gazprom CEO Alexei Miller and Ichiro Takahara, director-general for the Agency for Natural Resources and Energy of Japan, signed a memorandum seeking “to expand partnership for (the Vladivostok) project's further development, including financing and gas marketing", Gazprom said.
In attendance were Russian President Vladimir Putin and Japan's Prime Minister Yoshihiko Noda, participants in an Asia-Pacific leaders summit on an island off the Pacific port city.
Japan is seeking new energy supplies as it shifts away from nuclear power following the Fukushima disaster last year. It consumed 83 million tons (91.49 million tons) of LNG in 2011, or almost a third of global demand for the super-cooled fuel shipped by tanker.
Russia currently has only one LNG plant with annual output of 10 million tons, on the Pacific island of Sakhalin, which Gazprom operates jointly with Shell. The planned Vladivostok plant would double Gazprom's capacity.
“The Asia-Pacific market is the world's most sizeable and Gazprom deliveries to it are expected to overtake exports to Europe in the coming years," Miller was quoted as saying in the statement. – Reuters


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