UNITED METALLURGICAL COMPANY AWARDED LINE PIPE CONTRACT FOR SAKHALIN-1
MOSCOW, November 18, 2002 -- United Metallurgical Company, JSC (UMC) announced today that that it has been awarded a contract to supply a portion of the line pipe for the Sakhalin-1 Project. The Sakhalin-1 Consortium will develop three oil and gas fields offshore Sakhalin Island in the Russia Far East. The project is operated by Exxon Neftegas Limited. The line pipes will be supplied by the Vyksa Metallurgical Plant, a subsidiary of UMC.Under the contract, the Vyksa Metallurgical Plant (VMP) will provide some of the line pipe for onshore and offshore pipelines, that will transfer hydrocarbons between the Sakhalin-1 Project major facilities, as well as output from the Chayvo Offshore Production Facilities across Sakhalin Island and the Tatar Straits to the DeKastri export terminal. The VMP will supply 610 mm (24-inch) diameter normal strain double submerged arc welded (DSAW) pipe for the export pipeline.
The VMP line pipes meet design requirements for the full project life with respect to corrosion prevention and resistance to damages resulting from seismic events plus other operating requirements. The high quality of the UMC line pipe will provide for environmental safety of the Sakhalin-1 hydrocarbons transportation operations. UMC will start supplying line pipes in the 1st quarter of 2003.
According to Eduard Stepantsov, UMC Deputy General Director, "UMC is proud to have been awarded this contract. UMC is one of the first Russian pipe suppliers that have won such a significant international tender. The line pipe contract award to UMC demonstrates the company's highest qualification. The contract award demonstrates the Consortium's commitment to maximizing participation of Russian companies in the Project. We are looking forward to working with Exxon Neftegas Limited and other Sakhalin-1 Consortium members."
The Sakhalin-1 Project, the largest foreign direct investment project in Russia, is expected to recover approximately 2.3 billion barrels of oil and 17 trillion cubic feet of gas. The Sakhalin-1 Consortium plans to develop the project in four phases. The first phase, with development costs of around $US4 billion, will focus on oil production, with limited gas supplies available to help meet the Russian domestic demand. First oil production is scheduled to commence at the end of 2005 and will grow to a rate of around 250,000 barrels per day.
UMC is one of active suppliers of pipes to the Sakhalin Island. This is the second contract awarded to UMC for pipe supply for the Sakhalin-1 Project. The company had won the tender for supply of pile pipes in April of 2002. Under the first contract, the pipe had been supplied by VMP.
Background information
The "United Metallurgy Company" Close Joint Stock Company (ZAO "OMK") is the core company of the newly formed OMK Financial Industrial Group. The group consists of approximately 20 companies, including the Vyksa, Chusovskaya, and Shchelkovo Metal Works, the Almetyev Pipe Mill, the Gubakha Coke Open Joint Stock Company, OMK Technology Center Limited, and several others. The company's plants and other divisions employ approximately 30,000 workers --
The group's plants are Russia's biggest manufacturers of automotive shock absorbers, railroad wheels, ferrovanadium, and other products --
The Sakhalin-1 Consortium members include Exxon Neftegas Limited (30% interest, operator), 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%) --
MC press service Telephone: 231-77-74- *press@omk.ru
More information on the Sakhalin-1 Project, is available on the Sakhalin-1 Project website (www.sakhalin1.ru)