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Kogas proposes to build mini LNG plant in Sakhalin

Interfax cited Mr Chang Seon Lee general director of LLC Kogas Vostok a Kogas subsidiary based in Khabarovsk as saying that South Korea Kogas has made a proposal to Russia to build three mini LNG plants in Primorye, Khabarovsk Territory and Sakhalin Island. Mr Lee is in Sakhalin as part of a business mission that is holding presentations of South Korean companies in three regions of the Far East Federal District from October 17 to 21.

He said that "We are proposing a project to build small LNG plants in three regions of the Far East for gasification of automobile transport and to supply gas throughout the Far East region. The main consumers of gas in the Far East Federal District are dispersed in a large area, and construction of gas pipelines to many consumers does not make economic sense. Mini LNG plants would completely cover the whole region's demand for this fuel."

Mr Lee said "We have so far proposed the construction of such a plant to the government of Khabarovsk Territory. It is now studying this project. We, in turn have sent our proposals to Gazprom and Exxon Neftegas Limited as we will need gas supplies for this project."

There are two options being proposed for such a plant. The first calls for building a plant to produce 300,000 tonnes of DME per year at a cost of USD 354 million. The second calls for a plant with capacity of 1 million tonnes and investment of about USD 700 million. He said that "Capacity of 300,000 tonnes would probably be optimal."

Mr Lee said a similar plant could be built on Sakhalin Island. DME can be used for electricity generation, heating homes and as a fuel for automobiles. It can substitute for natural gas.

He said that such filling stations and mini plants would enable these regions to switch their public transit to gas which would result in major financial savings and improve the environmental situation.

Mr Lee forecast that demand for this fuel in South Korea will total about 1 million tonnes in five years. He said that "If such a plant is built in the Far East, there would be no need to worry about markets. There will be demand for this product."

Mr Lee also said Kogas is interested in participating in all new oil and gas projects in Sakhalin Region. He said that "We are also interested in the possibility of participation in development of hydrocarbon deposits in Yakutia and on the shelf of Magadan and Kamchatka."

The cost of building one mini plant with capacity of 200,000 tonnes of LNG per year would be USD 87 million. The fuel would be delivered to consumers by tanker trucks. The proposal for gasification of motor vehicle transport calls for the construction of 100 gas filling stations in each region where such a mini plant is built.

Another proposal from the company is to build a plant to produce dimethyl ether an alternative fuel. This type of fuel minimizes emissions, and is economical in terms of the cost of transportation, because it is shipped by special trucks and does not require construction of pipelines or other expensive infrastructure.

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