The Authorized State Body Approves the Development Program and Budget for the Sakhalin-1 Project
April 2, 2003 - Moscow, Russia -- Exxon Neftegas Limited (ENL), operator of the Sakhalin-1 project in Russia Far East, announced today that the Authorized State Body approved the Development Program and Budget (DP&B) for the Sakhalin-1 project. The Authorized State Body includes representatives of the Federal Ministries of Economic Development and Trade, Taxes and Levies and Energy, as well as representatives of the Sakhalin Oblast Administration.The DP&B describes the activities required for oil and gas production from Sakhalin-1, the associated development investment, operating expenses, and benefits that the project brings to Russia. The DP&B also describes the environmental protection measures and abandonment requirements for the project.
Project benefits to Russia include direct revenues, estimated at US$40 billion, improvement of infrastructure, and the use of Russian suppliers for contracts and procurement. According to an independent socio-economic assessment of Phase 1 of the Sakhalin-1 Project, over 13,000 direct and indirect jobs will be created for Russian nationals. The value of the Project contracts awarded to Russia companies to date is approximately US$1.7 billion.
According to Neil Duffin, President of ENL, approval of the DP&B is another significant milestone for the Sakhalin-1 Project. Other obtained key project approvals include the Declaration of Commerciality, Chayvo resource approvals, and more recently the Justification of Investment for Sakhalin-1 Project Phase 1. "On behalf of the Sakhalin-1 Consortium, I would like to take this opportunity to convey our sincere gratitude for the strong support that the Project has received from members of the Russian Federation Government and the Sakhalin Oblast Administration. I look forward to the passage of the PSA Chapter of the Tax Code and approval of the Technical and Economic Substantiation of Construction (TEOC) in the nearest future. We welcome the Russian Government's efforts to ensure the project review process is as efficient as possible. Substantial benefits will be gained by all companies, foreign and domestic, as a result of a more streamlined system. It will also be more cost effective, and will accelerate the delivery of the Project's benefits to Russia".
The Sakhalin-1 Project, the largest greenfield foreign direct investment project in Russia, includes the Chayvo, Odoptu and Arkutun Dagi fields. It has potential recoverable resources of approximately 2.3 billion barrels (307 million tons) of oil and 17 trillion cubic feet (485 billion cubic meters) of gas. Capital investment on full field development is estimated at over US$12 billion.
Development of the Sakhalin-1 Project includes four phases. Phase 1 first oil is anticipated at the end of 2005. The first phase investment will total over US$4.6 billion, with more than US$1.2 billion spent on Project activities to date. Phase 1 is focused on oil production from Chayvo and Odoptu Fields, using a combination of extended reach drilling wells, drilled from shore, and horizontal wells, drilled from the Orlan platform. In addition, Phase 1 provides for Russian domestic gas sales. Production will be processed through two Onshore Processing Facilities at Chayvo and Odoptu. A dedicated pipeline and terminal facility at DeKastri will be constructed for transport and export of crude oil product.
Phase 2 is focused on the export of Chayvo gas via pipeline, triggered by securing long-term gas sales contracts. Phase 3 targets Arkutun-Dagi oil development from an offshore platform to maintain oil production plateau. Phase 4 is focused on late-life gas development from the Arkutun-Dagi and Odoptu fields.
In addition to ENL (30 % interest, operator), Sakhalin-1 Consortium members are the Japanese company Sakhalin Oil and Gas Development Co., Ltd. (30 %), Indian company ONGC Videsh Ltd. (20 %) and two Russian companies, Sakhalinmorneftegas-Shelf (11.5 %) and RN-Astra (8.5 %).
For more information on the Sakhalin-1 project, please contact Glenn Waller (Moscow 095 564-8950) or Michael Allen (Yuzhno-Sakhalinsk 4242 46 88 12) or logon to the Sakhalin-1 website (www.sakhalin1.ru)