Consortium developing large gas reserves near Sakhalin

Posted: Tuesday, June 10, 2003

ANCHORAGE (AP) Liquefied natural gas from the Russian Far East may be sold in southern California as soon as 2007.

While many Alaskans think that market should be served by LNG shipped from Alaska, Alaska groups working on a gas pipeline from the North Slope and an LNG plant in southern Alaska believe that liquefied gas from Alaska can compete with LNG from Sakhalin and other sources in Asia and U.S. West Coast markets.

Mitsubishi Corp. is one of the partners in a consortium developing large gas reserves near Sakhalin. The Japanese company has signed a letter of intent with the Port of Long Beach to build a $400 million LNG ''regasification'' facility in southern California, according to the Alaska Journal of Commerce.

Mitsubishi is a partner in Sakhalin Energy Investment Co. along with Mitsui & Co., another major Japanese trading company, and the Royal Dutch Shell Group, which is managing the project to develop gas resources near Sakhalin and build a pipeline and an LNG gasification plant on the island.

Scott Heyworth, a member of a newly-appointed Alaska natural gas authority, said that the Mitsubishi project could be an advantage because while an LNG regasification plant at Long Beach would handle competitive LNG from Sakhalin initially, it could also take LNG from Alaska.

Mitsubishi has asked for a 40-year lease on 27 acres at the Port of Long Beach for the plant. The company will pay the Port of Long Beach $3.7 million a year for the lease.

Mitsubishi's announcement is the first indication that the consortium is now looking at North American as well as Asian markets for Sakhalin LNG. At least some of the LNG for the Long Beach regasification plant could come from Sakhalin, Mitsubishi representatives told Sakhalin regional government officials.

The project would produce 9.6 million tons of LNG per year beginning in 2007.

Sound Energy Solutions, a subsidiary of Mitsubishi, signed the letter of intent on behalf of the parent company. The Long Beach Board of Harbor Commissioner voted May 19 to approve the letter, a procedural step which allows Mitsubishi to apply to the Federal Energy Regulatory Commission for permits to build the facility, said Art Wong, spokesman for the Port of Long Beach.

Under the plan, Mitsubishi would import 5 million tons of LNG yearly into southern California, about 10 percent of the state's demand for gas. The plant would be ready to receive LNG in 2007, when the Sakhalin II LNG plant is ready to begin operations.

Heyworth said studies he has seen indicated that Alaska LNG can be delivered to the U.S. West Coast for $3.25 per million BTUs and to Japan for $3.50 per million BTUs.

Heyworth said Korean utility representatives visiting Alaska earlier this spring told him the prices estimated for Alaska LNG are below those being quoted from seven other prospective Pacific LNG projects, including Sakhalin.



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