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. Last Updated: 07/27/2016

Sakhalin Looks to California

TOKYO -- Sakhalin Energy Investment Co. is looking to start exporting liquefied natural gas from Russia to the U.S. West Coast due to expected growth in demand, Sakhalin consortium member Mitsubishi Corp. said Friday.

Sakhalin Energy Investment Co, owned by Mitsubishi Corp., Mitsui & Co. and Royal Dutch/Shell, aims to start exporting LNG in 2007.

A unit of Mitsubishi and the Port of Long Beach earlier this week signed a letter of intent on a site for a $400 million terminal, California's first for LNG, that would feed imported gas to the state's growing fleet of power plants.

Under the agreement, Mitsubishi will invest about 45 billion yen ($385 million) to build the terminal, which will have the capacity to receive 5 million metric tons of LNG per year, close to 10 percent of California's annual consumption.

"We expect gas supplies [in the United States] to be tight in the future," a Mitsubishi spokesman said, adding that the West Coast was potentially a growth market for LNG.

Mitsubishi has invested in several LNG projects across Asia from Sakhalin to Australia, but slow economic growth has weighed down demand in Japan, the largest consumer of LNG.

Construction of the terminal is expected to start next year at the earliest and operations are due to begin in 2007, the spokesman said.

Mitsubishi needs approval from local regulators before starting the terminal project.

Gas demand in the United States is expected to grow 4 percent annually over the next several years.

The Sakhalin-2 project hopes to produce 9.6 million tons of LNG per year. The project has already been producing oil from an offshore platform since 1999.