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Mexico, Russia Sign Long-Range LNG, Energy Cooperation Plan

Mexican President Vicente Fox and Russian officials last week agreed to supply Mexico with liquefied natural gas (LNG) from Sakhalin Island in the Russian Far East. The plan calls for Russia to supply LNG for up to four proposed terminals as part of a long-ranging plan to increase energy cooperation between the two countries.

Russian President Vladamir Putin and Fox oversaw the signing of four bilateral agreements, with one specifically addressing energy cooperation.

The announcement confirms one transaction put together last October by Shell International Gas Ltd. and Sempra Energy LNG, in which Shell said Russia's Sakhalin-2 project would supply the proposed LNG facility in Baja California, Mexico (see NGI, Oct. 18, 2004). Under that deal, about 37 million metric tons of LNG would be shipped to the terminal over 20 years, beginning in 2008.

Fox indicated that the new agreement with Russia would supply more than one proposed LNG facility.

"We discussed a 20-year agreement on the supply of LNG to Mexico, which will be refined at four facilities that need to be built," Fox told reporters. "This will guarantee stable gas supplies at good prices." He added that the LNG transaction demonstrates "the intensity of our cooperation."

Russia apparently is interested in deepwater drilling in the Gulf of Mexico, and Fox said, "We are very interested in Russian participation in this process." Putin added that Russia also would like to cooperate with Mexico to build hydroelectric and nuclear power plants in the future.

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