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Russia and Japan to co-build LNG plant

04th September 2012

As global LNG demand soars, BRIC and western countries are teaming up to develop the technology and secure the finance to meet expected demand

Experts predict global demand for LNG will reach almost 370 million tonnes by 2018, against 250 million tonnes in 2011

Russian energy giant Gazprom and a consortium of Japanese companies have agreed to construct a liquefied natural gas (LNG) plant in Russia's Far Eastern port of Vladivostok, it emerged this week.

The agreement is due to be inked at an Asia-Pacific Economic Cooperation summit in Vladivostok on 9-9 September. Gazprom recently shelved plans to launch an LNG project on the back of the huge Shtokman gas field in the Barents Sea.

Gazprom will now secure a preliminary agreement to build the Vladivostok plant with Itochu Corp and Japan Petroleum Exploration.

Japan requires additional sources of energy after the Fukushima nuclear plant disaster in March 2011. Japan is the world's largest LNG consumer, accounting for almost a third of the global frozen gas utilization.

Gazprom, meanwhile, is facing stiff competition from Qatar and Australia in the fast-growing LNG market and is trying to diversify supply routes away from Europe, its traditional market for pipeline gas.

Japan's Nikkei news agency reported earlier that Ichiro Takahara, director-general for the Agency for Natural Resources and Energy, and Alexey Miller, head of Gazprom, are expected to sign the Vladivostok memorandum, with the attendance of Japan's Prime Minister Yoshihiko Noda and Russian President Vladimir Putin.

The companies have yet to work out the details for the plant, which is expected to have annual output of 10 million tonnes (11.02 million tonnes), doubling Gazprom's LNG capacity. According to J.P. Morgan projections, global demand for LNG will reach almost 370 million tonnes by 2018, against 250 million tonnes last year.

Russia currently has only one LNG plant, on the Pacific island of Sakhalin, which Gazprom operates jointly with Shell.

According to some estimates, investment required for the new plant's construction could be in the region of USD7 billion, Reuters reported.

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