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Sakhalin authorities mull second LNG plant by 2020

An expected increase in gas production from the Sakhalin projects in Russia's Far East will make it expedient to build a second liquefied gas production plant in Sakhalin Island by 2020, apart from the planned expansion of the existing LNG capacities, Sakhalin governor Alexander Khoroshavin said Tuesday.

"We believe that with the start of gas production at the Sakhalin 1 and Sakhalin 3 projects it will be [a real possibility] to build a second LNG plant in Sakhalin Island, possibly on the western shore of the island near Ilinskoye," Khoroshavin said at the Sakhalin Oil and Gas conference.

The governor provided no further details on the possible second plant.

He did, however, reiterate local authorities' support for the construction of a third train at the existing LNG plant within the Sakhalin 2 project.

The first step in expanding LNG capacities in the region could be the construction of the third train with a capacity of 5 million mt/year in the near future, he said.

Russia's only LNG plant currently, with a total capacity of 9.6 million mt/year, was launched in 2009 as part of the Sakhalin 2 project.

Earlier this month, the head of Gazprom's upstream department Vsevolod Cherepanov said Sakhalin 2 can produce an additional 4 Bcm/year that could be a source for the third train.

Gazprom owns a 50% plus one share in Sakhalin 2. The other partners are Shell (27.5%), Japanese Mitsui (12.5%) and Mitsubishi (10%).

Gazprom also expects to start production the Kirinskoye gas field, part of the Sakhalin 3 project, in 2012.

SAKHALIN 1 GAS-MARKETING ISSUE

Khoroshavin also expressed hope that a long-lasting issue on the marketing of future gas from the Sakhalin 1 project will be resolved by the end of this year.

"This year we must take the final decision to start gas production, which would increase economic efficiency of the project," he said, supporting Gazprom's push to get agreement on the issue by the end of the year, as expressed in June by Gazprom's deputy CEO Alexander Ananenkov.

The ExxonMobil-led Sakhalin 1 project and Gazprom have been in talks over future gas sales since 2006, but have failed to reach an agreement, with price the key stumbling block.

ExxonMobil holds a 30% operating stake in the project, along with Japanese consortium Sodeco (30%), India's ONGC (20%) and Russia's Rosneft (20%).

ExxonMobil representatives have repeatedly said the Sakhalin 1 consortium is seeking the best price for its future gas and will start production only after a sale-purchase agreement is reached.

OIL REFINERY

Separately, Gazprom is considering building a refinery with capacity of up to 4 million mt/year on Sakhalin Island and may take the final "positive" decision on the issue next year, Khoroshavin said, speaking at the same event, which was organized by Adam Smith Conferences.

"We expect Gazprom to take the positive decision on the construction of the refinery as soon as next year," he said.

The refinery is to help meet demand for oil products in Sakhalin Island and other Russian far eastern regions, Khoroshavin said.

Exports of oil products from the refinery are also possible, as foreign markets in the Asia-Pacific region are growing, he said.

Nadia Rodova

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