SAKHALIN-1 CONSORTIUM DECLARES PROJECT COMMERCIAL
Proposed Energy Project Largest Foreign Direct Investment in Russia
MOSCOW: October 29, 2001 -- Exxon Neftegas Limited (ENL) today announced that the Sakhalin-1 Consortium has declared the Sakhalin-1 project commercial. Capital investment in Sakhalin-1 could reach $US12 billion, making the project the largest foreign direct investment in Russia.
The announcement was made at a meeting of the Foreign Investment Advisory Council in Moscow. Participants included Russian Prime Minister Mikhail Kasyanov; Minister of Economic Development and Trade German Gref; ENL President Neil Duffin; and other government and industry representatives.
Commenting on the decision on behalf of the Consortium, Mr. Duffin stated: "We are pleased to declare the Sakhalin-1 project commercial, which is an important milestone in progressing the project towards development of Sakhalin's world class resources. The Consortium appreciates the Russian government's and the Duma's progress in addressing the legislative, legal and regulatory issues that have enabled the project to progress. We are continuing to work with the Russian government to address the remaining normative documents that are necessary for further project implementation. A long-term, large-scale investment project like Sakhalin-1 can only be possible with the government's commitment to reform regulatory processes and fiscal systems and establish a favorable, internationally-competitive business climate."
Arctic weather, ice conditions and the remote location of Sakhalin present significant challenges for the development of the project. "As a subsidiary of ExxonMobil, ENL will draw upon ExxonMobil's position as the world's premier petroleum company in addressing the challenges of the Sakhalin-1 project, " added Mr. Duffin. "With our industry-leading arctic technology, and commitment to conducting our operations with care for the environment, we are confident that we will be able to design safe and cost-effective producing systems and pipelines for the Sakhalin-1 fields."
The Sakhalin-1 fields are estimated to contain 2.3 billion barrels of oil (307 million tons) and 17 trillion cubic feet of gas (485 billion cubic meters). The area comprises three offshore fields off the East Coast of Sakhalin island in the Sea of Okhotsk. The Odoptu, Chayvo and Arkutun-Dagi oil and gas fields were discovered in 1977, 1979 and 1989 respectively.
The project will yield significant benefits to Russia, including billions of dollars in revenues and thousands of employment opportunities. "The Sakhalin-1 Consortium is committed to maximizing Russian content in the development activities, and will focus effort on involving as many Russian companies and organizations as possible in our operations," said Neil Duffin.
The Consortium recently completed geological, reservoir and development study work to demonstrate that the Sakhalin-1 fields constitute commercial discoveries. The Consortium plans to develop the project in four phases. The first phase, scheduled to begin early next year, will focus on planned oil production, with limited gas supplies available to help meet Russian domestic demand. First production of oil is scheduled to commence at the end of 2005, and reach a plateau rate of around 250 thousand barrels a day (12 million tons per year).
Gas market development and sales remain a high priority for the project. An assessment of gas export markets in Japan and China has been completed and the Consortium has concluded that a pipeline, built to international design standards, would be the most cost-effective method to deliver gas to these export markets. Discussions with potential export customers are under way, along with a framework for developing commercial gas sales to Russian domestic purchasers.
The Sakhalin-1 Consortium members are Exxon Neftegas Limited (30 percent interest, operator), the Japanese company Sakhalin Oil and Gas Development Co., Ltd. (30%), India's ONGC Videsh Ltd. (20%) and two Russian companies, Sakhalinmorneftegas-Shelf (11.5%) and RN-Astra (8.5%).
Cautionary Statement: Estimates, plans, and other statements in this release relating to future events or conditions are forward-looking statements. Actual results, including project plans and schedules, could differ materially due to factors such as changes in market conditions, changes in operating conditions, the outcome of commercial negotiations, and other factors described under the heading "Factors Affecting Future Results" in ExxonMobil's most recent Form 10-K. References in this release to quantities of oil and gas include amounts we expect ultimately to be produced but that are not yet classified as proved reserves.
For a map of the area and additional information, please contact:
Glenn Waller in Moscow at (7-095) 564-8964
Michael Allen in Sakhalin at (7-4242) 468812