Moscow — Russia's Gazprom and Japan's Mitsui and Co. signed a memorandum of understanding on the Baltic LNG project, which will include building an LNG plant on the Baltic Sea coast, the two companies' second joint LNG project, the Russian company said Wednesday.
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Register NowThe MOU was signed during a meeting between Gazpom CEO Alexei Miller and Mitsui Chairman Masami Iijima during the Eastern Economic Forum being held in Vladivostok, Russia.
Japan's Prime Minister Shinzo Abe and Russia's President Vladimir Putin also met during the three-day forum.
Underlining Japan's role as Russia's key LNG buyer, accounting for 36% of the overall sales, Miller said that there was great potential for cooperation between the two countries in LNG production.
"Japanese companies are showing interest ... in Baltic LNG. Today, Gazprom and Mitsui signed a memorandum of understanding, based on which opportunities for cooperation on the project will be considered," Miller said.
The MOU follows Mitsui delegation's visit to Moscow last March for talks with Russian energy ministry officials. That was when the ministry first announced officially Mitsui's interest in Russian LNG projects, especially in Baltic LNG.
The 10 million mt/year LNG project at the Russian port of Ust-Luga is led by Gazprom and Shell and is planned for 2023 launch. The companies have a heads of agreement in place for a joint venture as well as agreements on feasibility studies for the project and on the use Russian technical standards in its implementation.
In June, Gazprom Deputy CEO Alexander Medvedev said that the company expected to make a final investment decision on the project next year. At the time, he called Baltic LNG "one of the most competitive projects in the global LNG market."
Gazprom officials said in 2016 that they considered both Mitsui and Mitsubishi as partners in the Baltic LNG project. Mitsui holds a 12.5% stake in the Gazprom-led Sakhalin-2 consortium, which operates Russia's first LNG plant on the Pacific coast, along with Shell and Mitsubishi as shareholders.
The consortium plans to expand the plant from a nameplate capacity of 9.6 million mt/year with the launch of the third 5.4 million mt/year train in 2023-2024 - an issue that Miller and Iijima discussed on Wednesday, along with cooperation in small and mid-scale LNG projects, according to Gazprom.
Both the Sakhalin-2 plant expansion and the Baltic LNG construction were initially marked for 2021, but were postponed by two years after Gazprom reconsidered the global LNG demand forecast.
The projects are part of Russia's efforts to increase LNG production from 11.8 million mt last year - from Sakhalin-2 and Novatek's recently launched Yamal LNG - to become of a leading producer with a 15-20% share of the global market by 2035, according to the energy ministry.
--Nastassia Astrasheuskaya, nastia.astrasheuska@spglobal.com
--Edited by E Shailaja Nair, shailaja.nair@spglobal.com