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Vladivostok — Russia, China, Japan, South Korea and Mongolia see greater regional cooperation as a way to mitigate rising protectionism, as they continue to adjust to challenges posed by increased US tariffs and sanctions against Russia, the leaders of the five countries said Wednesday during the Eastern Economic Forum in Vladivostok.

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Energy projects to unite key partners in the region

Russian energy flows to Asia surging

LNG, Northern Sea Route priorities

The countries have signed a wide range of agreements on hydrocarbons production and supply, and are pushing for faster development of energy supply infrastructure as well as mulling an increase in non-dollar denominated trade.

"We need to make connectivity a priority, we need transnational infrastructure," Chinese President Xi Jinping said. "Together we should build an open regional economy and create an economic ring in North East Asia."

Japanese prime minister Shinzo Abe directly referenced Japan's growing involvement in shipments of Russian LNG when outlining his plans for Japan to play a link role between economies in the region.

All five leaders called for greater regional cooperation and pointed to a possible peace deal with North Korea as an opportunity to further boost development.

Mongolian president Khaltmaagiin Battulga suggested that Russia should build a gas pipeline to China via Mongolia as well as build an Asian Super Grid to help balance the load during periods of peak demand.

South Korean prime minister Lee Nak-yon, like his Japanese counterpart, mentioned development of the Northern Sea Route across Russia's Arctic waters as a major project for cooperation that will reduce distances and boost energy supplies, primarily LNG, to Asia from the Northern Yamal and Gydan peninsulas.

Finally, the event host Vladimir Putin reiterated that Russia welcomes its neighbors' participation in Russian projects to increase regional energy security to the benefit of all countries.

HYDROCARBONS PROJECTS

Russia has vast hydrocarbons reserves in its Far East and has recently shifted its focus to greater cooperation with the Asian countries to develop them, amid cooling relationship with the West.

A quarter of Russia's overall hydrocarbons reserves are located in the Far East, while until just recently their share was only around 2%, Putin said, noting how actively his country is now looking to the East.

Russia sees development of its Far East resources and energy cooperation with the Asian-Pacific region as a priority, in order to establish development opportunities that would see not only an increase in energy supplies, but also construction of processing facilities to add value, Novak said.

Over the last five years, Russia has doubled crude supplies to 80 million mt or 1.6 million b/d from around 40 million mt/year in 2012, he said, adding that coal deliveries also doubled to 100 million mt/year over the period.

While gas supplies were limited until recently to the only LNG producing project in the region, Sakhalin 2, they are set to jump significantly as the Novatek-led Yamal LNG project comes on stream. Its capacity will reach 18.5 million mt/year of LNG at the end of this year, when the third train is due to be launched.

Yamal LNG reaching its full capacity of 19.5 million mt/year in 2019 will allow Russia to boost its share on the global LNG market to 10% from just around 2% currently, Novak said.

The country will also continue to work towards its target of around 20% of the global LNG market as it develops new LNG projects, with Asia seen as a key market estimated to account for 70% of global LNG consumption by 2035, Novak said.

"We have the resource base and the opportunities for the development of the NSR and icebreaking fleet," Novak told the forum. "We are confident we'll meet the goal because we are competitive, both in production and transportation and ready to develop those projects jointly."

With a whole number of cooperation agreements reached, including on production, transportation and retailing of energy reserves, some other projects may see an impetus in the near future.

Gas supplies to the region may receive further impetus, since during talks in Vladivostok Tuesday Xi ordered companies to finalize talks on the western gas pipeline route, Novak said. This would add 30 Bcm/year from West Siberia. The long-discussed project between Gazprom and CNPC will supplement the Power of Siberia pipeline, which is to deliver first gas from East Siberia in December 2019.

--Nadia Rodova, nadia.rodova@spglobal.com

--Rosemary Griffin, rosemary.griffin@spglobal.com

--Rohan Menon, newsdesk@spglobal.com

--Edited by Jonathan Fox, jonathan.fox@spglobal.com