Sakhalin Energy Signs LNG Sale Agreement with Tokyo Electric

The Sakhalin II Project achieved another major marketing success with the signing of a Sales and Purchase agreement (SPA) for the supply of 1.5 million tons per year for 22 years to Tokyo Electric Power Company - Japan's largest power company.

In response to Tokyo Electric's requirements, this is the first SPA with Free On Board terms to be concluded by Sakhalin Energy. It follows an earlier Heads of Agreement (HoA) signed with Tokyo Electric in May 2003 and completes the full terms and conditions of LNG supply and purchase.

The finalization of the deal with Tokyo Electric reinforces the successful partnership that is being forged between Russia and Japan through the Sakhalin II Project.

Ian Craig, Chief Executive Officer, signed the SPA on behalf of Sakhalin Energy with Tokyo Electric's President Katsumata at a ceremony in Yuzhno-Sakhalinsk, Sakhalin Island.

"Russia is already a reliable and successful supplier of gas to Western Europe. We are very proud to be supporting the development of Russia's energy policy and strengthening Russia's position as a global energy supplier by tapping into the dynamic markets of the Asia Pacific Region. We look forward to the day that Sakhalin Island and the Sakhalin II Project deliver the first Russian gas supplies to the industries and people of Japan," said Ian Craig.

"Sakhalin Energy continues to work closely and further develop our relations with Tokyo Electric. We are extremely grateful for the commitment that Japan's largest power company has made to Sakhalin LNG," added Mr. Craig.

Tokyo Electric's President Mr. Katsumata said: "We expect that the introduction of LNG from the Sakhalin II Project will contribute not only to the stable supply and diversification of energy sources due to its abundant reserves and proximity to Japan, but also to economical and flexible procurement for us."

Sakhalin's Governor, Ivan Malakhov, commented that: " 'Sakhalin' is becoming well known in the oil and gas industry as a strategic new energy supplier. Agreements such as the one signed between Tokyo Electric and Sakhalin Energy today are playing a very important role in confirming this."

LNG will be supplied to Tokyo Electric from Sakhalin Energy's major new LNG plant, which is under construction at Prigorodnoye on Aniva Bay on the southern tip of Sakhalin, just two and a half day's sailing from Tokyo Bay in Japan. It is the first LNG plant to be built in Russia and will have a total capacity of 9.6 million tons per annum.


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