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Sakhalin Energy wants $5 billion in loans to swing the site into full-fledged production
Sakhalin Energy, the operator of the Sakhalin 2 oil and gas project, wants $5 billion in loans to swing the site into full-fledged production, Vedomosti reported. Ivan Chernyakhovsky, Sakhalin Energy press secretary for Russia, says the partners are negotiating a $4 billion loan with the Japan Bank for International Cooperation and plan to apply to the U.S. EximBank, the European Bank for Reconstruction and Development and the ICGD for the remaining $1 billion. Chernyakhovsky declined to specify the loan terms, but said that the money would be redeemed from energy earnings. The loans, he said, were needed to finalize the project infrastructure, including pipelines and a gas liquefying plant. A deal with the banks is scheduled to be sealed this year. The only example of a Russian company or project getting a large loan, experts say, was Rosneft's attraction of $7.5 billion late last year to buy Yuganskneftegaz, Yukos' main subsidiary. However, Kakha Kiknavelidze, an analyst with Troika Dialog, says this was a politically motivated deal, which makes a difference. But he still expects Sakhalin to get the money only because project partners are international majors. Analyst with MDM Bank Anton Zatolokin says a loan would be less costly than development on the partners' own money and export revenues will secure the loan at a term of no less than five years. Under the 1994 production sharing agreement for Sakhalin 2 (150 million metric tons of oil and 500 billion cubic meters of gas), a share of 55% goes to Royal Dutch/Shell, 25% to Mitsui and 20% to Mitsubishi. The consortium plans to export up to 9.6 million metric tons of liquefied natural gas per year beginning in 2007
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