Tokyo Gas in talks to purchase LNG from Sakhalin region of Russia

Tokyo Gas Co. is negotiating to purchase liquefied natural gas from a field being developed in Russia's Sakhalin region, company sources said Tuesday.

The utility hopes to procure up to 1 million tons of LNG a year, beginning as early as 2007, and send its own ships to Sakhalin to transport the LNG back to Japan, the sources said.

This is the first large-lot contract for the Sakhalin 2 project -- conducted by Royal Dutch/Shell Group of the Netherlands, Mitsui & Co. and Mitsubishi Corp. -- and is expected to result in the project's acceleration, industry officials said.

Tokyo Gas currently procures 7.5 million tons of LNG annually from six regions, including Malaysia and Alaska, the company sources said.

The company has been considering LNG imports from Sakhalin as it finds it necessary to diversify its import sources, the sources said.

The Sakhalin 2 project is expected to produce 9.6 million tons of LNG in a peak year. The total project cost is expected to be more than 1 trillion yen.

The Sakhalin 1 energy development project is being conducted by Exxon Mobil Corp. of the United States and other firms.