Updated April 9, 2008

   The Japanese company Mitsui & Co. Ltd. intends to establish an ammonia and methanol production on Sakhalin island at the support of the local authorities. About this reported the general manager of the company gas and chemical department Toshihiro Tanaka at a working meeting in the Sakhalin region administration, which passed in Yuzhno-Sakhalinsk.

   "Sakhalin has the unique conditions to develop the gas and chemistry. Hydrocarbon deposits are located there and gas production continues. The island is closely located to the USA and Asian and Pacific region countries that are the main consumers of gas and chemistry products. Therefore, the region is the optimum place to produce methanol and ammonia we are interested in", Tanaka said. He was quoted as saying that there was the world high demand for these products. "When we were making the master-plan of Sakhalin gas two years ago we took into consideration the ammonia and methanol cost that totaled $150-170 per ton. Now the price is up to $250-300. But we should take into account that the cost of construction has went up, therefore we are mainly interested in the raw material sources, which is of primary importance for us", Tanaka marked.

   As reported the deputy director of oil and gas department of the region administration natural resources committee Valery Pankov, two oil and gas projects Sakhalin-1 and Sakhalin-2 are currently realized in the area. "All gas produced under Sakhalin-2 project is already freighted and there is no reserve. Sakhalin-1 and future projects are left, thus the gas component under Sakhalin-1 project is not developed yet. Moreover, the reserves of the associated gas under Sakhalin-1 project can be used, and 70% are injected into the bed now. It is 5-6 bcm a year", said Pankov. He marked that the percent of heavy hydrocarbons in the associated gas is far more that of the natural gas, and it contains more than 90% methane. The region administration holds negotiates with the head of Sakhalin-1 project concerning gas supplies for gas processing.

   According to the head of investments department of the region administration economy committee Sergey Alekseenko, Sakhalin authorities plan to locate the ammonia and methanol production in the north of the island. The main advantage of this location is that the production will be tied to the Sakhalin-1 project resource base, while the pipelines are already laid in this area and the power base is there. Alekseenko refers the transport expenses to the disadvantages though. The output products will be delivered by the railway to ports located in the south of the island.

   The Japanese party representatives marked that would consider this new information. "The main task is to continue the matter discussion concerning the new options in future", Tanaka said.

   Mitsui & Co., Ltd. is one of the most powerful financial industrial monopolistic groups of Japan. The company occupies the leading positions in such areas as finances, trade, as well as in marine transport, mining, textile and other industry sectors of Japan and Korea also.