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Sakhalin II at a glance

One of the world's largest oil-and-gas projects

Sakhalin II is one of 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)

Sakhalin 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. When running at full capacity, expected in 2010, Sakhalin II will add 5% to the world’s current liquefied natural gas (LNG) capacity. It will meet almost 8% of Japan’s gas needs and 5% of South Korea’s.

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

workers at Sakhalin

The engineering work for the project is near completion. This includes the building and installation of two offshore platforms, bringing the total to three, an onshore processing facility, 300 kilometres of offshore pipelines and 1600 kilometres of onshore pipelines, an oil export facility and the LNG plant. The first year-round oil export from the new Oil Export Terminal at Aniva Bay took place in December 2008. The LNG plant was officially inaugurated on 18 February 2009 and the first LNG cargo started its journey to Japan in March 2009. This frontier project lays the foundation for Russia to become a leading energy exporter to the highly competitive energy markets of the Asia-Pacific region.

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

Western Gray Whale

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