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China signs up for Sakhalin-1 gas

China signs up for Sakhalin-1 gas

Houston: ExxonMobil has signed a preliminary agreement to sell all the natural gas it exports from Sakhalin-1 to China National Petroleum, underscoring the importance of the island's oil and gas projects to Asian markets, a spokeswoman said yesterday.

The US company aims to sell 8bn cubic metres of gas per year to China, spokeswoman Dilyara Sydykova said. The preliminary agreement paves the way for a final sale and purchase agreement to be signed with CNPC.

The agreement is believed to cover each party's liabilities and the pricing
principles, and is the result of a memorandum of understanding signed in
November 2004.

Exxon currently supplies from its Sakhalin-1 project 1.7bn cubic metres annually to consumers in the region of Khabarovsk and plans to raise that figure to 3bn cubic meters, Sydykova said.

The Exxon-led project includes several Japanese companies such as Itochu
and Marubeni as well as India's ONGC Videsh, and Russia's Rosneft. The project's offshore fields hold 2.3bn barrels of oil and 485 bn cubic metres of gas, the company said, and oil output will rise to 250,000 barrels per day by the beginning of next year.
Separately, however, there could be bad news for the LNG sector since Sydykova said the Exxon unit that oversees the project was in talks with Gazprom to secure access to China via the company's pipeline network. The company "confirms it is in discussions with Gazprom ... regarding potential options for delivering pipeline gas to Northeast China," Sydykova said. Exxon's partners have previously suggested liquefying a part of its exports.  [24/10/06]