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Liquefied natural gas (LNG) is a priority form of Russian gas supplies to Japan and eastern China, Gazprom (RTS: GAZP) representatives said at a press conference on Monday. Gazprom already delivers LNG to China - and not just to China National Petroleum Corporation (CNPC), but also to Sinopec. "We will discuss exports of pipeline gas to China only after our plans for LNG exports have been determined," the Russian gas major's Deputy CEO Alexander Medvedev said.

Additional LNG production in the region could total between 10 and 25 million tonnes a year. "Everything depends on the results we get from the feasibility study for the third line at Sakhalin-2 and the LNG plant in Vladivostok," he said.

The third line of Sakhalin-2 could have a capacity of 5 million tonnes a year, he said.

In their present form, Sakhalin-2's reserves are not enough to fully load the line. In order to rectify this issue, the current production sharing agreement (PSA) needs to be adjusted, or the project needs to be implemented in the conditions of the existing tax regime, Medvedev said.

Another Deputy CEO of Gazprom, Vitaly Markelov, said that a company delegation held negotiations in Japan ten days ago, at which the possibility of constructing a gas pipeline on the island of Honshu and Hokkaido was discussed. However, the parties "agreed that the priority is an LNG plant, and that we will return to pipeline construction once the LNG project is implemented," Markelov said. He added that this region is "a zone of very high seismicity" and that building a gas pipeline there could be very costly.

Russia and Japan are discussing the possibility of signing a memorandum between Russia's Energy Ministry and Japan's Economy, Trade and Industry Ministry, with plans to collaborate on the construction of an LNG plant in Vladivostok. The document has already been prepared, and "we are hoping for a successful signing in Petersburg," Medvedev said.