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ExxonMobil, Rosneft continue talks on Far East LNG plant despite sanctions

September 23, 2014, 13:18 UTC+3 YUZHNO-SAKHALINSK
Some media reports earlier said that ExxonMobil had withdrawn from the Far East LNG project back in summer
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© AP Photo/Don Ryan, file

YUZHNO-SAKHALINSK, September 23. /ITAR-TASS/. The US energy giant ExxonMobil has not abandoned talks with Russian oil major Rosneft on the construction of a liquefied natural gas (LNG) plant in Russia’s Far East, Rosneft Vice-President Vlada Rusakova said on Tuesday.

“I have not heard about this. We’ll shortly set up working groups jointly with Exxon on this issue,” the Rosneft official said in response to a question about whether the US oil firm had really quit the talks.

Some media reports earlier said that ExxonMobil had withdrawn from the Far East LNG project back in summer.

The Rosneft official said that ExxonMobil would take part in the Far East LNG as a participant in the Sakhalin-I oil and gas project off Russia’s Pacific coast.

A Rosneft source said that Rosneft and ExxonMobil had elaborated a clear-cut position over the past week on participation in the Far East LNG and its integration into the existing Sakhalin-I project.

The sectoral sanctions imposed by the United States against Russian oil and gas companies over Moscow’s stance on developments in neighboring Ukraine prohibit US firms to supply a considerable part of equipment for new projects, including the licenses for gas liquefying.

Russia’s Energy Ministry has said, however, that Sakhalin-I is being implemented on production-sharing terms and the issue of compensation for investors’ costs under the project has not yet been resolved.

The Rosneft vice-president said that the Far East LNG plant project was estimated at $8 billion.

The Sakhalin-I project participants have long been deciding on whether to sell gas to Gazprom or export it independently to the Asia-Pacific region.

Gazprom has suggested supplying natural gas from the Sakhalin-I project for liquefying at an LNG plant under the Sakhalin-II project, which is Russia’s first undertaking for LNG production. Gazprom argues that the Sakhalin Island does not have sufficient gas resources for two LNG projects, especially considering that a second LNG facility is expected to be built under Sakhalin-II.

Rosneft has spoken against it and instead it has been promoting an independent Far East LNG project with ExxonMobil for the construction of the second LNG plant on the island.

Sakhalin-I shareholders comprise ExxonMobil with a 30% stake, Japan’s Sodeco with 30%, Russia’s Rosneft with 20% and India’s ONGC with 20%

The Russian government will decide by mid-2015, which of the two projects, Gazprom’s Vladivostok-LNG or Rosneft’s Far East LNG, will become a priority project, Russian Deputy Energy Minister Kirill Molodtsov said on Tuesday.

“As far as I understand, a decision will be made by mid-2015,” he said, adding “it is necessary to calculate everything, assess and consider all options.”

Earlier reports said that a final investment decision on the Far East LNG project would be taken by late 2015. According to the conceptual designs, the LNG plant, a supply pipeline and offshore facilities are expected to be built and launched into operation in 2018-2019.

Under the project’s first stage, its conceptual design has been elaborated and the plant’s intended site and gas liquefying technology have been agreed.

The Far East LNG plant is expected to have an initial capacity of 5 million tons of LNG annually with the potential to expand it eventually. The LNG plant is expected to liquefy natural gas supplied from Rosneft’s Northern Chaivo and North Veninskoye gas fields in the Far East and the Sakhalin-I project.

Gazprom’s project for building the liquefied natural gas plant in Vladivostok (Vladivostok-LNG) envisages the construction of two facilities with an annual capacity of 5 million tons each with a prospect to boost total output to 15 million tons. The first LNG facility is expected to be launched in 2018 and the second in 2020.

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