May 19, 2003

Tokyo - Tokyo Electric Power Co. (TEPCO) today concluded a Heads of 
Agreement (HoA) on the purchase of liquefied natural gas (LNG) under 
the Sakhalin II Project with the seller, Sakhalin Energy Investment 
Company Ltd.

The Sakhalin II Project is a green-field project to develop two natural 
gas and oil fields off Sakhalin Island - the Piltun-Astokhskoye field 
and the Lunskoye field. Under the project, construction of an LNG plant 
with two liquefaction trains is planned, with a maximum annual output 
capacity of 9.6 million tons.This is the ninth LNG project from which 
TEPCO will purchase LNG under a long-term contract.

TEPCO is facing various changes concerning LNG procurement due to 
advancements in deregulation in the electric power and gas markets 
and measures to address global environmental issues. The terms and 
conditions of the agreement,including introduction of a buyer's volume 
option and FOB as delivery terms,provide more flexibility and 
competitiveness to respond to these changes than the existing LNG sales 
contracts. 

On the basis of the HoA, TEPCO plans to continue negotiations with 
Sakhalin Energy Investment Company Ltd. with a view to concluding a 
sale and purchase agreement by April 2004.

Basic terms and conditions of the contract under the HoA:

(1) Contracting Parties:Seller - Sakhalin Energy Investment Company Ltd.
                        Buyer  - Tokyo Electric Power Co.
(2) Term:               22 years from April 2007 (FY2007 and FY2008 are 
                        the build-up period.)
(3) Volume:             Base volume is 1.2 million tons per year, plus 
                        buyer's volume option
(4) Delivery terms:     FOB (TEPCO will arrange LNG tankers and 
                        transportation of LNG)

Background Information

Sakhalin II LNG Project
Natural Gas Fields:  Piltun Astokhskoye;
                     Lunskoye
Estimated Recoverable Natural Gas Reserve:  Approximately 500 billion 
                                            cubic meters
LNG Output Capacity:  9.6 million tons/year
                     (2 liquefaction trains, each at 4.8 million tons/year)

Sakhalin Energy Investment Company, Ltd.
Company Name:  Sakhalin Energy Investment Company Ltd.
Established:   April 1994
Head Office:   Yuzhno-Sakhalinsk, Sakhalin, Russia
Business:      Production of natural gas and oil;
               Liquefaction and sale of natural gas; sale of oil
CEO:           Steve H. McVeigh
Shareholders:  Shell Sakhalin Holdings B.V. (55%)
               (Royal Dutch/Shell Group subsidiary)
               Mitsui Sakhalin Holdings B.V. (25%) 
               (Mitsui & Co. Ltd. subsidiary)
               Diamond Gas Sakhalin B.V. (20%)
               (Mitsubishi Corporation subsidiary)