Project Benefits

Sakhalin-1 Project Benefits to Russia

Sakhalin-1 is one of the largest single foreign direct investments in Russia and an excellent example of industry's solutions to meet the challenges of the growing energy demand. It also brings significant benefits to the people of Russia, particularly those on the island of Sakhalin. The Project is making available new energy supplies for domestic use and for export to Northeast Asia, strengthening Russia's strategic position as an energy supplier to world markets.

The Project benefits will include direct revenues to the Russian state at over US$ 50 billion in taxes, royalty payments and state share of oil over the life of the Project. Commercial development brings with it a contribution of US$ 100 million to the Sakhalin development fund over a five-year period. Russia will also receive US$ 60 million in production bonuses.

Additionally, the Project is investing over US$ 120 million in public-use infrastructure improvements (infrastructure needed for the Project but available for general use). These upgrades include improvements in roads and bridges, airport, port and waste management facilities.

Russian government entities are receiving direct benefits from the Project. Under the terms of the PSA, through August 2008 the Russian government has received approximately US$ 1.1 billion in royalties and the state’s share of production. The Sakhalin Oblast has received an additional US$ 211 million in revenues.

The value of contracts awarded to Russian companies is over US$ 5 billion. Two out of three dollars invested in Sakhalin-1 are spent with Russian companies or joint ventures with Russian participation.

Another important benefit from Sakhalin-1 is the supply of natural gas to customers in the Khabarovsk Krai in the Russian Far East. These supplies have helped bring fuel stability to the Khabarovsk Krai and are expected to satisfy the demand for natural gas in Khabarovsk Krai until 2025.

Notably, Sakhalin-1 and its contractors currently employ hundreds of Russian nationals. Nearly 500 Sakhaliners work directly for ExxonMobil's affiliate Exxon Neftegas Limited. Many have received and will continue to receive professional training in Russia, USA, and Canada; the value of these training programs has exceeded US$ 12 million. A program at the USAID-supported Sakhalin-Alaska College helped 60 Sakhalin welders to enhance their professional skills and obtain international certificates. In the summer of 2005 at the peak of the Project construction activities at Chayvo, the Project employed approximately 8,000 people, including direct employees and contractors. As Russian national employees are trained and gain experience the proportion of Russian nationals working in Project operations will approach 90% of the workforce within 10 years.

Another benefit that the Project brings to the people of Russia is the application of advance technologies pioneered by ExxonMobil. Such technologies allow the development of energy resources in the frontier areas of Russia (such as the Arctic and offshore oil and gas fields).

Wherever ExxonMobil operates, it strives to be a good neighbor. Since 1994, ExxonMobil has contributed over US$ 3.5 million through various charitable small-grant programs to communities in Sakhalin Oblast and Khabarovsk Krai. These contributions have focused primarily on the areas of education and health care and support of the indigenous people.

The Sakhalin-1 Consortium launched a regional small business development program in North Sakhalin with a total budget of over US$ 1 million that is implemented in cooperation with USAID. The program created or sustained 180 small businesses and more than 500 local jobs.

Additionally, almost US$ 6 million has been provided to improve public medical facilities in Sakhalin and Khabarovsk Project areas.

The Project has invested significant resources to ensure the safety of people, the environment and the local community. By way of example, Project spending on environmental safeguards totaled over US$ 700 million through June 2008, including over US$ 40 million spent on various archaeological, ornithological, bathymetric, meteorological, seismic, topsoils, fisheries, stream crossing, waste management, bioremediation, oil spill response and other studies, and US$ 17 million spent on initiatives aimed at preserving the Western Gray Whale population.

As our activities translate into tangible benefits to Russia, the Project continues to enjoy support from the Russian government and the Sakhalin community.