Sakhalin-2 – an overview

Sakhalin-2 is one of the world’s largest integrated, export-oriented, oil and gas projects, as well as Russia’s first offshore gas project. Sakhalin Energy Investment Company Ltd., the project operator, is owned by Gazprom, Shell, Mitsui and Mitsubishi. The project infrastructure includes three offshore platforms, an onshore processing facility, 300 kilometres of offshore pipelines and 1,600 kilometres of onshore pipelines, an oil export terminal and a liquefied natural gas (LNG) plant.

Key facts

Category: Oil and integrated LNG

Interests: Shell 27.5% (minus one share), Gazprom 50% (plus one share), Mitsui 12.5%, Mitsubishi 10%

LNG capacity: 10.93 million tonnes

Fields: Piltun-Astokhskoye and Lunskoye oil and gas fields

Sakhalin-2 is a project of many firsts: the offshore oil platform Molikpaq was the first to be installed on the Russian shelf; the Lunskoye-A (LUN-A) and Piltun-Astokhkoye-B (PA-B) platforms are also the first of their type to be installed on the shelf; and the LNG plant is the first in Russia.

Sakhalin-2 supplies about 4.5% of the world’s current liquefied natural gas (LNG) market. Japan, South Korea and China are the main customers for oil and LNG exports.

Markets

Virtually all the gas from Sakhalin-2 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 the potential acquisition of exploration blocks in the area. It enhances the prospects for Sakhalin-2 to become a regional oil and LNG hub.

Project development

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 February 18, 2009 and the first LNG cargo started its journey to Japan in March 2009. Overall construction work for the project was completed in 2009.

More than 25,000 people worked at the project at the peak of its construction.

Sakhalin-2 lays the foundation for Russia to become a leading energy exporter to the highly competitive energy markets of the Asia-Pacific region.

Technology

Sakhalin-2 is technically challenging. It is equivalent in size to five world-scale projects, located in a hostile subarctic 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-2 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 the International Union for Conservation of Nature) 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 in whale habitats.

The project has also brought substantial benefits to local communities through social investment, which covers safety, education, healthcare, arts and culture, infrastructure development, indigenous minorities, biodiversity and environmental protection.

Sakhalin Energy press releases