Sakhalin II starts year-round oil export

Today Sakhalin Energy marked the commencement of year-round oil export from its new Oil Export Terminal. The terminal is located in Aniva Bay in the south of Sakhalin and forms part of the Prigorodnoye port, which was purpose built for the year-round export of oil and liquefied natural gas (LNG).

The first cargo is oil from Molikpaq, Sakhalin Energy’s first platform, but later this month the Piltun-Astokhskoye-B platform will also begin sending oil into the system. Gas condensate from the third platform in the Lunskoye gas field will further boost production in the coming weeks.

“This first cargo from Prigorodnoye is a key milestone in the commissioning of the facilities,” said Sakhalin Energy CEO Ian Craig. “The construction phase is nearing completion. We are now focused on commissioning of the full production system, with LNG processing starting in the next few weeks.”

“Today’s achievement is the result of dedicated work of tens of thousands of people and it marks a new chapter in the development of the Sakhalin Island,” noted Craig.

Sakhalin Energy has produced over 100 million barrels of the Vityaz crude since 1999. Oil has been exported through an offshore facility, which limited production to about 6 months of the ice-free season. Year-round oil production has become possible due to the commissioning of the TransSakhalin oil and gas pipeline system. The system connects three offshore platforms in the north east with the new terminal and port in Aniva Bay in the south of the Island.

The oil is exported through a tanker loading unit which is installed 4.5 km offshore in Aniva Bay and is connected to the export terminal by an undersea pipeline. In the winter of 2008/2009 oil will be delivered to customers by two specialised tankers, Governor Farkhutdinov and Sakhalin Island.

Year-round production and export of the Sakhalin II oil will significantly enhance energy security in the Asia Pacific and strengthen Russia’s position in the world markets.

Notes for editors

Sakhalin Energy Investment Company Ltd (“Sakhalin Energy”) is the investor and operator of the Sakhalin II Project, which is being developed on the basis of a Production Sharing Agreement signed between Sakhalin Energy and the Russian Federation in 1994. Shareholders of the company are OAO Gazprom (50% + 1 share), Royal Dutch Shell plc (27.5%), Mitsui & Co., Ltd. (12.5%) and Mitsubishi Corporation (10%).

Sakhalin II project develops the two oil and gas fields offshore north eastern Sakhalin – Piltun-Astokhskoye Field, which includes Piltun and Astokh oil and gas areas, and Lunskoye Field. The project involves crude oil and LNG production and export. It is a phased development.

Phase I has been producing oil since 1999 from the Molikpaq platform installed in the Astokh area of the Piltun-Astokhskoye field.

Phase 2 – full development of both fields – was launched in 2003. It includes the construction of:

* Two new offshore platforms – Piltun-Astokhskoye B (PA-B) and Lunskoye A (Lun-A), some 300 km of offshore pipelines and Molikpaq (PA-A) Tie-In;
* Onshore Processing Facility to take gas and crude oil from the Piltun-Astokhskoye and Lunskoye fields and prepare it for transportation;
* The 800 km long TransSakhalin oil and gas pipelines system, running most of the length of the island;
* Oil Export Terminal;
* Russia’s first LNG plant and LNG export facilities; the LNG and oil export facilities are the infrastructure elements of Russia’s first specialized port in Prigorodnoye. Prigorodnoye will at peak serve approximately 160 LNG carriers and 100 Aframax oil tankers per year.

The implementation of the project also required upgrades of the island infrastructure, including roads, bridges, railroads, seaports, airports and health facilities. The construction phase of the Sakhalin II Phase 2 Project employed at peak a total of 25 thousand people, including 17 thousand Russian citizens.