Tokyo Boeki Ltd. of Japan and Far East Energy Inc., Washington D.C., have agreed to conduct a feasibility study for the Russian Republic of development of energy resources in eastern Siberia.
Japan's Nihon Keizai Shimbum newspaper reported the study could lead to two natural gas pipelines linking the Yakutsk area to Japan. Gas reserves in the Yakutsk are estimated at 35 tcf.
The feasibility study, to be completed next year, carries preferential development rights leading to a possible $7.5 billion investment package.
Company officials said first gas deliveries to Japan and Korea could be made toward the end of the 1990s.
Japanese trading houses and oil companies are to be invited to participate. Three U.S. firms have expressed interest. Far East Energy also is negotiating with several other U.S. firms and may form ventures with two or three of them, Nihon Keizai Shimbum reported.
The Russian government has asked that South Korea's Hyundai group be included because as one pipeline route for eastern Siberian gas would run through Korea.
The line would run from Yakutsk through Vladivostok and Korea to Yamaguchi prefecture on Kyushu, Japan's southernmost Island. This route also would require approval of North Korea.
The northern route would run through Sakhalin to Hokkaido in northern Japan.
Combined capacity of the two lines would be 4.06 bcfd. That's equal to about 80% of the LNG imported by Japan.
Japanese industry sources said the pipeline imports would need to be competitive with LNG prices. They also said the project would work only if it were run by a combine of international oil companies.
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