By Antoni Slodkowski and James Topham
TOKYO, April 19 (Reuters) - Russia and Japan are in intensetalks on expanding gas-supply agreements ahead of a summit laterthis month, moving ever closer to a breakthrough that couldredraw the East Asia energy map, sources involved in thediscussions told Reuters.
The talks between the second largest gas producer and thebiggest liquefied natural gas importer could receive officialsanction on April 29 when Prime Minister Shinzo Abe visitsPresident Vladimir Putin in Moscow. Any official approval onincreasing sales would come at the expense of other LNGsuppliers, such as Australia, Qatar and Malaysia.
Russia, soon to face the competitive threat of cheap U.S.shale gas exports, wants to lock down more customers as itsmonopoly gas exporter Gazprom is being undercut inEurope by LNG imports. It also sees further LNG sales to Asia asa key component to its plan to send East Siberian gas down apipeline to China -- if it can ever agree on pricing with thenation that is potentially its biggest customer.
"The talks have picked up steam dramatically," said a seniorgovernment official. "I think the rules of the game are about tochange big time. Gazprom, which until now has had the monopolyand has been elusive, is getting a move on."
Japanese trade ministry officials are downplayingexpectations for the Abe-Putin meeting. Japan and Russia havebeen close to expanding oil and gas ties before, only to have adispute over islands in the North Pacific derail progress.
Gazprom representatives, however, came to Japan last week tomarket gas from its $38 billion Vladivostok LNG project toJapanese energy buyers, three sources with the knowledge of thematter said. It was their first tour of the Japanese client basefor this project and no agreements have been reached.
Gazprom's CEO Alexei Miller also met with Trade MinisterToshimitsu Motegi in Tokyo on Wednesday, and held talks withJapanese plant constructors interested in the project, ChiyodaCorp and JGC Corp, according to sources withknowledge of the talks.
"Especially after Putin very clearly said that he wants toboost the share of LNG (exports to Asia) many people are cominghell for leather to (convince) Japan," the government officialsaid.
Gazprom competitor Rosneft, also looking to securebuyers for liquefied gas exports, on Wednesday signed apreliminary agreement on joint oil and gas developments withMarubeni Corp. And other Japanese and Russian industryand government officials wound up meetings this week in Fukui onJapan's west coast.
"The Russians are under a lot of competitive pressure," saidJohn McCreery, Asian head of oil and gas at Bain & Co. "Theurgency is on the Russian side to make something happen."
Projects being promoted besides Gazprom's LNG terminal inthe eastern Siberian port of Vladivostok include furtherdevelopments of oil and gas fields off Sakhalin island and gasprojects in Yamal in northern Russia.
The Fukushima nuclear crisis of 2011 spurred Japan's energycompanies to scour the world for supplies. The country nowconsumes a third of global LNG shipments, which helped to pushit to a record trade deficit in January.
Russian gas lies on Japan's doorstep and already makes upabout 10 percent of its LNG imports. In 2012, Russia was thefourth largest supplier of LNG to Japan, behind Australia, Qatarand Malaysia.
TENTATIVE STEPS
As the Fukushima crisis was unfolding two years ago, Putininvited the CEOs of Mitsubishi Corp and Mitsui & Co to Sakhalin to discuss closer cooperation on energyties, according to sources directly involved in the discussions.
The offer was rebuffed due to the sensitivity of thesituation, the sources said. But those early contacts and otheroffers of support as Japan grappled with energy shortages, maycome to fruition when Abe meets Putin in Moscow at the end ofthe month, the first summit between the countries in 10 years.
"Energy talks between Tokyo and Moscow have been going onsince the 1970s, but this time they're for real," said NobuoTanaka, former head of the International Energy Agency and asenior adviser at a government-affiliated research centre.
First, though, Putin and Russia will have to decide whetherto make an exception to Gazprom's exclusive gas export rights,to give Rosneft and Novatek, which has plans forextracting gas from the peninsula of Yamal in northern Russia, achance at exports.
Rosneft, despite the agreement signed with Marubeni and aproposal to build a $15 billion LNG plant at Sakhalin-1 north ofJapan with Exxon Mobil Corp, has no rights to exportgas.
Russia now ships gas to Japan from its only LNG terminal,Sakhalin-2, where Mitsubishi and Mitsui are junior partners withGazprom and Royal Dutch Shell.
The Japanese partners have been pressing for an expansionthere and the existing terminal does present the cheapest,quickest way to increase Russian LNG sales. That and aVladivostok project built on pipeline sales of East Siberian gasto China and LNG shipments to Japan, may be enough to giveGazprom an edge in the efforts to open a new LNG front in theRussian Far East.
Still weighing on many minds are Japan's claims on islandsthat Russia seized at the end of the Second World War. The issuehas previously disrupted improving commercial relations, but theAbe administration is keen to resolve the dispute, and someJapanese officials are considering pairing further economiccooperation with a deal on the contested islands.
"If we think about the islands and energy as a package, as abroader deal it's a completely different calculation," said asenior government official.
