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Tokyo Electric increases purchase of LNG from Sakhalin Energy

Posted: 23 April 2004

The Sakhalin II Project achieved another major marketing success
today, when The Tokyo Electric Power Company, Incorporated (Tokyo Electric) of Japan increased the volume of liquefied natural gas (LNG) that it will purchase from Sakhalin Energy.

In accordance with the procedure contained in the original Heads
of Agreement signed in May 2003, Tokyo Electric has increased the long-term purchase of LNG to 1.5 million tonnes per annum
(mtpa) up from the original volume of 1.2 mtpa. In addition, Tokyo Electric has decided to declare up to 0.7 million tonnes of additional early volumes in 2007 and 2008.

This transaction reinforces Sakhalin Island as the new strategic
source of natural gas for Japan. It also represents the beginning of Russia and Sakhalin as major new players in the worldwide LNG market.

The agreement with Tokyo Electric reinforces the positive investment decision in May of last year to proceed with the development of the Sakhalin II Phase 2 integrated oil and gas project. The Tokyo Electric agreement represents another major success for Russia and Sakhalin Energy in the competitive global
LNG market.

"We are extremely pleased that Tokyo Electric, our largest LNG customer, has strengthened its position with the project. Tokyo Electric is playing a key role as one of the leaders and our partners in opening the closest new source of LNG supply to Japan," said Steve McVeigh, Chief Executive Officer of Sakhalin Energy.

The Sakhalin Oblast Governor Ivan Malakhov commented: "We are pleased that a major Japanese utility company such as Tokyo Electric has increased its confidence in energy supplies from Sakhalin, and is helping to establish the Russian Far East as the new strategic supplier of natural gas to Japan and rest of the Asia Pacific Region. The success of the Sakhalin II Project is bringing tangible benefits to the economy of Russia and in particular the economy of Sakhalin Island."

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Posted by Richard Price, Editor

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