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Gazprom finalizes deal to buy 50% stake in Sakhalin II

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Gazprom [RTS: GAZP] has finalized a $7.45 billion deal to buy 50% plus one share in formerly Shell-led Sakhalin II with the partners in the vast hydrocarbon project off Russia's Pacific Coast.
MOSCOW, April 18 (RIA Novosti) - Gazprom [RTS: GAZP] has finalized a $7.45 billion deal to buy 50% plus one share in formerly Shell-led Sakhalin II with the partners in the vast hydrocarbon project off Russia's Pacific Coast.

"Joint work to complete the project is being carried out very proactively already," said Alexander Medvedev, deputy board chairman of the Russian energy giant.

Shell Russia President Christopher Finlayson said the project was 80% completed.

The partners said at the signing ceremony that liquefied gas (LNG) would be supplied in time and in full volume.

As well as two fields with estimated reserves of 150 million metric tons (1.1 billion barrels) of oil and 500 billion cubic meters of natural gas, Sakhalin II comprises a pipeline, an LNG plant - due to be launched in 2008 - and an LNG export terminal. Most of the LNG from the project will be exported to Japan.

Finlayson said Wednesday that shareholders were considering building an additional, fourth, gas liquefier at the plant, describing the project, implemented under a production-sharing agreement (PSA), as more difficult than any other.

The partners in the project were reported earlier Wednesday to have coordinated the costs of its second stage at $19.4 billion until 2014 following months of pressure last year from authorities over foreign investors' demands to double spending and environmental damage accusations.

Medvedev said Gazprom would appoint a general director of the LNG plant, who would oversee production from the beginning.

Medvedev and Stanislav Tsygankov, head of foreign economic activities in Gazprom, have been nominated as non-executive directors of the project operator, Sakhalin Energy.

"Gazprom, as a shareholder, is taking on the burden under the project as of tomorrow," Tsygankov said, adding it was unclear at the moment who would replace Ian Craig as Sakhalin Energy executive director.

Gazprom acquired the controlling stake in the project in December 2006. The stakes of the other partners, Royal Dutch Shell, Mitsui and Mitsubishi, halved to 27.5%, 12.5% and 10% respectively, as a result of the deal.

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