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Strategy

Eastern Siberia and the Far East are the higher priority regions for Gazprom in a long-term perspective. The state policy on the gas infrastructure development in Russia’s East is stipulated in the Development Program for the Integrated Gas Production, Transportation and Supply System with due regard of possible exports to China and Asia-Pacific markets approved by the Government of the Russian Federation on June 15, 2007 (approved by the Order # 340 of the Ministry of Industry and Energy as of September 3, 2007).

Gazprom was appointed a coordinator of the Program execution. The Program defines the priority order of the regional gas reserves development aimed at achieving the settled goals. The industrial gas production in Eastern Siberia and the Far East will start at the mostly prepared fields for utilization at the Sakhalin Shelf (Sakhalin I and Sakhalin II projects).

Project operator

Sakhalin Energy Investment Company Ltd. (Sakhalin Energy) is operator of Sakhalin II Project.

Shareholders

– OAO Gazprom (50 per cent, plus one share);

– Shell Sakhalin Holdings B.V. (parent company Royal-Dutch Shell plc, the Netherlands, 27.5 per cent minus one share);

– Mitsui Sakhalin Holdings B.V. (parent company Mitsui and Co. Ltd., Japan, 12.5 per cent);

– Diamond Gas Sakhalin B.V. (parent company Mitsubishi Corporation, Japan, 10 per cent).

History

In April 1994, Royal-Dutch Shell plc, Mitsui and Co.  Ltd. and Mitsubishi Corporation established Sakhalin Energy aimed at developing the Piltun-Astokhskoye oil field and the Lunskoye gas field in the northeastern shelf of the Sakhalin Peninsula in the frames of the Sakhalin II Project.

In June 1994, Sakhalin Energy and the Russian side on behalf of the Government of the Russian Federation and the Sakhalin Oblast Administration signed the Production Sharing Agreement (PSA). This was the first PSA signed and the first PSA to go into operation in Russia.

In 1996, Phase 1 was launched.

In 1999, first oil was produced at the Piltun-Astokhskoye oil field.

In 2003, Phase 2 was launched.

In December 2006, OAO Gazprom, Royal Dutch Shell plc, Mitsui &Co., Ltd. and Mitsubishi Corporation signed the Protocol on Gazprom’s joining Sakhalin Energy Investment Company Ltd. (Sakhalin Energy) as the main shareholder.

In April 2007, the shareholders of Sakhalin Energy Investment Company Ltd. (being operator of the Sakhalin-2 project) and Gazprom signed the PSA. In accordance with the Protocol terms, Gazprom will purchase a 50 per cent stake plus 1 share in Sakhalin Energy.

In October 2007, AEA Technology International Consultancy published the Sakhalin II project independent environmental due diligence report. AEA report states that Health, Safety, Environmental and Social Action Plan (HSESAP) developed by Sakhalin Energy for Sakhalin II project generally meets Russian and international legislative requirements related to the environmental and industrial safety.

Fields

The Sakhalin II project stipulates phased development of the Piltun-Astokhskoye and Lunskoye fields located 13-16 km offshore the north-eastern coast of Sakhalin Island in the Sea of Okhotsk.

Reserves

The two fields are estimated to contain recoverable hydrocarbon volumes of more than 1 billion barrels (150 million tonnes) of crude oil and more than 500 billion cubic metres (18 trillion cubic feet) of gas in place.

Sakhalin II project uniqueness:

– First project executed in Russia is based on the PSA. The first PSA signed in Russia.

– First oil and gas producing platforms built-up in Russia.

– First LNG production plant in Russia.

– Russian gas firstly entering the energy markets of the Asia-Pacific Region and North American coast.

Phase 1

Launched in 1996 when the Commencement Date was announced. It consists of the development of the Astokh structure, shaped like a sub-surface dome about 5.5 km by 11.6 km in size. The development involved creation of the Vityaz Production Complex, which includes: 

– Installation of the Piltun-Astokhskoye-A (PA-A) platform/Molikpaq.

– Laying of a 2 km subsea pipeline.

– Installation of a single anchor leg mooring (SALM) buoy.

– Use of a floating storage and offloading (FSO) tanker Okha.

First oil was produced in July 1999.

Phase 2

Launched in 2003 when the Development Date for Phase 2 was announced. It envisages an integrated oil and gas development of the Piltun-Astokhskoye and Lunskoye fields. It involves:

– Further development of the Astokh structure for year round operation including field pressure maintenance programme in the Piltun-Astokhskoye-B (PA-B) platform.

– Installation of the Piltun-Astokhskoye-B (PA-B) platform on the Piltun structure.

– Installation of a single marine gas production platform at the Lunskoye gas field (LUN-A).

– Hydrocarbon preparation at the integrated coastal technological complex where the marine oil and gas pipelines pass from the all three marine platforms.

– Transportation of oil and gas via 800 km onshore pipelines to Prigorodnoye from the north to the south of the Island.

– LNG production at the first LNG plant in Russia located in Prigorodnoye, south of the Sakhalin Island.

– LNG and oil offloading to buyers from offloading facilities in Prigorodnoye, south of the Sakhalin Island.

Sakhalin Energy selected LNG as the best, fastest and most practical opinion to deliver gas to Asia and North America because it enables customers to use existing facilities and at the same time allows Sakhalin Energy to build up sales volumes rapidly across several customers in different countries.

Sustainable development

Sakhalin Energy recognises the role it plays in the development of Sakhalin Island.  That is why its contribution to the sustainable development of Sakhalin Island is a central pillar of its operating philosophy and influences the way it does its business.

Sakhalin Energy is sensitive to the need to minimise adverse environmental and social impacts from the Project, particularly any impact on vulnerable communities and rare or endangered species.  The Company is committed to delivering a world-class oil and gas project that will be safe and environmentally sound, as well as one that maximises the benefits to all those involved. 

Sakhalin Energy recognises its responsibility to the communities and environment in which it works.  Sakhalin Energy is working with communities, governments and independent experts, to achieve a balance between social, economic and environmental factors that will benefit all those who have a stake in the Sakhalin II Project: the Russian Federation, its people, Sakhalin II customers and shareholders.

Sakhalin Energy is facilitating a multi-million dollar infrastructure upgrade project on Sakhalin Island to repair, improve and build infrastructure including roads, bridges, ports and airports.  In total, these works involve over $400 million worth of improvements to Sakhalin Island’s infrastructure.

© 2003–2008, OAO Gazprom

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