March 13 (Bloomberg) -- OAO Gazprom, Russia’s largest gas company, is considering investing in Japanese power utilities in a bid to expand fuel sales to the world’s second-largest economy, its chief financial officer said.

“The commissioning of Russia’s first liquefied natural gas plant on Sakhalin Island and sales of the fuel to Japan gives us an opportunity for such investment in utilities, although we have no specific plans yet,” Andrei Kruglov said in an interview in Tokyo today.

Russia, holder of the world’s largest natural gas reserves, last month opened its first liquefied natural gas plant on Sakhalin Island, allowing the gas export monopoly access to markets in Japan, South Korea and the U.S. The new LNG plant, part of the Sakhalin-2 project in the nation’s far east, is just 160 kilometers (100 miles) from the northern tip of Japan’s Hokkaido island.

While Kruglov didn’t identify utilities for potential investment, he said companies with the closest access to gas end-users were attractive to Gazprom. The Sakhalin-2 project has contracts to deliver LNG to nine Japanese power and gas utilities including Tokyo Electric Power Co. and Tokyo Gas Co., as well as a client in South Korea and one in North America.

To diversify its customers away from traditional European buyers into Asia, Gazprom is moving ahead with plans to develop 68 trillion cubic meters of potential reserves in East Siberia and on Sakhalin island, according to a company document distributed at a Tokyo press conference earlier.

Control of Sakhalin-2

In 2006, Gazprom took control of the Sakhalin-2 development from Royal Dutch Shell Plc after regulators threatened to close the $22 billion project on environmental grounds in a move that underscored the Russian government’s increased control over its domestic resources.

Exxon Mobil Corp., the world’s largest publicly listed oil company, said last month it had halted work on two deposits at its Sakhalin-1 oil and gas project after the Russian government failed to approve budgets and work plans for 2008 and 2009.

“The destiny of Sakhalin gas is that the gas we are exporting and that we are planning to export shouldn’t be affected by any conflict of interests,” Kruglov said. “Under Russian regulations, Gazprom takes charge of all natural gas exports.”

Russia has called on Sakhalin-1 investors to sell all natural gas from the project to Gazprom at prices lower than domestic market levels, the Sankei newspaper reported on March 9. Exxon Mobil had planned to construct an export pipeline to China, the report said.

Production Peaked

Production at Sakhalin-1 peaked at 250,000 barrels a day in February 2007 and averaged 193,000 barrels of oil a day last year, according to the Russian Energy Ministry’s CDU-TEK unit. Output may fall by 11 percent in 2009, Exxon said in September.

Irving, Texas-based Exxon said in February it still was discussing with Gazprom whether some natural gas from the Sakhalin-1 venture can be exported, rather than sold locally.

Gazprom’s view is that natural gas from Sakhalin will be transported by a proposed pipeline from the island to the Pacific port city of Vladivostok, Kruglov said.

Exxon owns 30 percent of the Sakhalin-1 project as does Japan’s Sakhalin Oil and Gas Development Co., or Sodeco. OAO Rosneft, Russia’s largest oil producer, and India’s ONGC Videsh Ltd. each own 20 percent.

Kruglov also said Gazprom is seeking global strategic investors who can buy and hold more than a 3 percent of its shares over the long term.

“Conservative investors such as pension funds and companies that can hold our shares for a long period of time must be our strategic partners,” he said. “But speculative investors seeking a short-term return, like hedge funds, may not be desirable partners.”

To contact the reporter on this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net.

Last Updated: March 13, 2009 01:34 EDT