Sakhalin II is the world’s largest integrated, export-oriented oil and gas project as well as Russia’s first offshore gas project. At its peak it will produce some 395,000 boe/day. The LNG plant will have a capacity of 9.6 million tonnes per year from its first two trains. In 2007 Gazprom acquired a majority interest in Sakhalin Energy Investment Company Ltd.
Key facts
| Category: | Integrated LNG |
| Interests: | Shell 27.5%, Gazprom 50%, Mitsui 12.5%, Mitsubishi 10% |
| LNG capacity: | 9.6 mtpa (2 trains) |
| Fields: | Piltun-Astokhskoye (PA) oil field, Lunskoye gas field |
| Peak Production: | 395 kboe/d |
| Fields: | Piltun-Astokhskoye (PA) oil field, Lunskoye gas field |
| Key contractors: | CTSD (LNG plant), Starstroy (onshore pipelines), AMEC (marine facilities) |
Sakahlin is a project of many ‘firsts’: The offshore oil platform Molikpaq was the first to be installed on the Russian shelf – and has just completed its ninth production season. The Lunskoye-A and Piltun-Astokhkoye-B (PA-B) platforms are also the first of their type to be installed on the shelf. And Russia’s first LNG plant will provide the first-ever Russian gas supplies to markets in the Asia-Pacific region and North America.
Markets
Virtually all the gas from Sakhalin II has now been sold under long-term contracts to customers in the Asia-Pacific region and North America. There is potential to expand the project through the Area of Mutual Interest signed with Gazprom in April 2007, which provides opportunities for growth, including the purchase of third party gas by Sakhalin Energy and potential acquisition of exploration blocks in the area. It enhances the prospects for Sakhalin II to become a regional oil and LNG hub. Three long-term charter vessels have been delivered to secure capacity for future LNG shipments.
Current developments
Most of the major engineering work for the project has now been completed. The installation of the Piltun-Astokhskoye-B platform was successfully completed. The first wells are now being drilled from the Lunskoye-A platform. Phase 2 of the offshore pipeline network and all of the onshore pipeline winter river crossings are complete. At the LNG plant, the 805-metre export jetty is finished and the first two cargoes of commissioning gas have been accepted.
Technology
Sakhalin II is technically challenging. It is the equivalent in size of five world-scale projects, located in a hostile sub-arctic environment, and covers a vast area in a region with almost no existing infrastructure. There are also environmental, ecological and social sensitivities to be tackled. The float-over installation of the topsides for the PA-B platform set a world record at some 28,000 tonnes. The previous record was held by the Lunskoye-A platform at 22,000 tonnes. Two 800-kilometre pipelines, which bring oil and gas from the fields in the north of the island to the ice-free export terminal in the south, traverse mountainous terrain in an earthquake zone and cross more than 1,000 watercourses, many of which are ecologically sensitive.
Environment and society
The Sakhalin II project has set new standards in social and environmental performance and transparency in Russia. In 2005 the project accepted the recommendations of the Independent Scientific Review Panel (set up under IUCN) and re-routed the offshore pipelines to avoid whale-feeding areas. In 2006, in cooperation with IUCN, the Western Gray Whales Advisory Panel was established to provide advice to minimise risks from oil and gas developments for the habitat of the whales.
Independent environmental consultants to the lenders (AEAT) published a major report in October 2007 noting a “high level of compliance”. Where instances of non-compliance were identified, AEAT commented that “those were either minor in nature or else Sakhalin Energy had plans in place for their resolution.”
In all, the project adopted more than 800 additional environmental, safety and social commitments. It enhanced its strategy to minimise potential environmental impact with a revised Environmental Action Plan in 2007. As one of the early economic benefits brought by Sakhalin II, there are more than 25,000 jobs on the project – 70% of them filled by Russian citizens. The project has also brought substantial benefits to local communities through social investment
Related press releases
18 April 2007 - Gazprom enters Sakhalin II project
21 Dec 2006- Gazprom, Shell, Mitsui, Mitsubishi sign Sakhalin II protocol
21 Dec 2006- Sakhalin II shareholders reached agreement with Ministry of Energy and Industry of the Russian Federation
12 Jul 2006 - Sakhalin II: New LNG supply deal with Chubu Electric
26 Jun 2006 Russia’s first offshore gas platform installed in the Lunskoye gas field offshore Sakhalin
14 Dec 2005 Sakhalin Energy welcomes EBRD’s announcement Sakhalin II Phase 2 project is fit for purpose
Related links
Shell Exploration & Production
Shell Gas & Power
Shell in Russia (in Russian)
Sakhalin Energy - opens in a new window
International Union for conservation of Nature (IUCN) website - opens in a new window