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ONGC, Shell in talks for Sakhalin gas liquefaction

Oil and Natural Gas Corporation (ONGC), through its consortium partner in the Sakhalin-1 field in Russia Exxon Mobil, is in negotiation with Royal Dutch Shell for liquefying the gas from the fields before it is exported to China, reports Economic Times.

The operator of the field, Exxon Mobil, had on Oct. 19, 2006, signed a preliminary agreement to sell all of the natural gas exports from the field to China National Petroleum Corporation (CNPC).

The agreement has led to a sales and purchase agreement with the Chinese company, the process of which has already begun.

Exxon Neftegas, Exxon`s Sakhalin subsidiary, has already submitted the first draft of the deal to CNPC in Dec. 2006.

ONGC, through its overseas arm ONGC Videsh, owns 20% stake in the Sakhalin-1 field. Exxon holds 30% stake while Rosneft owns 20%.

This plant, located in the block adjoining the Sakhalin-1 field, has a 9.6 million-tonne per annum capacity. The plant, set up under Sakhalin-2, has already contracted to sell more than 7 million tonne of LNG to Japanese and Korean buyers.

The consortium aims to sell 8 billion cubic metres of gas per year to China. Exxon is also in talks with Gazprom to secure access to China via the company`s pipeline network.

Currently, gas from Sakhalin-1 is only sold within Russia. Sales stand at 1.7 billion cubic meters a year. The potential recoverable reserves of Sakhalin-1 are 2.3 billion barrels of oil and 485 billion cubic meters of gas.

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