Russia & Shell Sign Natural Gas Deal for USA

http://www.businessweek.com/ap/financialnews/D97ES7781.htm

The world's largest natural gas company, Russia's Gazprom, has after years of attempts finally gotten a foothold in the U.S., the world's biggest gas market.

A supply agreement, part of a multipart contract reached with Royal Dutch Shell, was announced late Wednesday.

The contract, signed in Moscow by Gazprom CEO Alexei Miller and his Shell counterpart Jeroen Van der Veer, guarantees the two companies will deliver 1 million tons of Russian liquefied natural gas annually until 2028.

Under the arrangement, Gazprom gets access to a Shell terminal in Baja California, Mexico, that will turn Russian liquefied gas into gas that can be sent through pipelines to the United States. The LNG will be shipped from Sakhalin Island in the Pacific.

In return, Shell gets an equivalent amount of regular pipeline gas for distribution in Europe, a statement by the companies said.

Analysts noted that the U.S. market isn't as lucrative as Europe, since U.S. natural gas prices are lower and there's more competition.

But the deal is still significant because Gazprom has tried for years to get a slice of the U.S. market; until now, most of Gazprom's gas supplies to the United States have been swap deals with other companies.

Gazprom has developed Sakhalin's huge, difficult-to-access gas fields with an eye toward Japan and Western markets. Officials recently celebrated the opening of Russia's first LNG plant on Sakhalin -- a major leap forward for Russia's efforts to be a player in the growing world market for LNG.

Japan -- which will be the largest importer of gas from the Sakhalin projects -- last month received the first tanker shipments from the plant, which is expected to produce about 4.5 million tons this year.