Project Information

General

The Sakhalin-1 Project includes three offshore fields: Chayvo, Odoptu, and Arkutun Dagi. Exxon Neftegas Limited (ENL) is the operator for the multinational Sakhalin-1 Consortium (ExxonMobil interest 30%). Co-venturers include affiliates of Rosneft, the Russian state-owned oil company, RN-Astra (8.5%) and Sakhalinmorneftegas-Shelf (11.5%); the Japanese consortium SODECO (30%); and the Indian state-owned oil company ONGC Videsh Ltd. (20%).

Sakhalin-1 potential recoverable resources are 2.3 billion barrels of oil and 17.1 trillion cubic feet of gas (or 307 million tons of oil and 485 billion cubic meters of gas).

Sakhalin-1 is one of the largest single foreign direct investments in Russia and an excellent example of the advanced technological solutions the industry has to apply to meet the challenges of growing energy demand. Project benefits to Russia include direct revenues to the Russian state estimated at over US$ 50 billion over the life of the Project, major infrastructure improvements, technology transfer, employment of Russian citizens, and the use of Russian suppliers for contracts and procurement. Commercial development brings with it a contribution of US$ 100 million to the Sakhalin development fund over a five-year period. The Project will also bring production bonuses of US$ 45 million. The Russian content of contracts awarded to date for the Sakhalin-1 Project is over US$ 4.4 billion, or about two-thirds of the total.

Another important Project benefit to Russia is the supply of Sakhalin-1 natural gas to customers in the Khabarovsk Krai in the Russian Far East. Deliveries of gas to Khabarovsk Krai started in October 2005 with the production start-up at Chayvo and totaled 76 billion cubic feet (2.2 billion cubic meters) through January 2008. These gas supplies have helped bring fuel stability to the Khabarovsk Krai and are expected to fully satisfy the demand for natural gas in Khabarovsk Krai until 2025.

Opening the valve - 1 October 2005

The Sakhalin-1 Project is being executed in phases. The initial phase develops the Chayvo field. Production from Chayvo started in October 2005. The Project was initially producing up to 50,000 barrels (6,300 metric tons) of oil per day, which were sold to Russian Far East domestic customer before commissioning of the Project export system. Natural gas production also began in October 2005 to meet needs of domestic customers in the Khabarovsk Krai and initially averaged 60 million cubic feet (1.7 million cubic meters) per day.

The Sakhalin-1 Project oil export system was commissioned in August 2006. With the commissioning of the system, the crude produced by the Project is now supplied to international markets, to the greater benefit of the Sakhalin-1 Consortium and the Russian state.

The Onshore Production Facility (OPF) started up in October 2006 and ahead of schedule, allowing ramp-up of oil production to a targeted peak rate of 250,000 barrels (34,000 metric tons) of oil per day in February 2007. Natural gas supplies to Khabarovsk Krai have now grown to a 2007 average supply rate of 115 million cubic feet (3.77 million cubic meters) per day, and reached a peak rate of 200 million cubic feet/day (5.85 million cubic meters/day) in January 2008.

The Sakhalin-1 Project has demonstrated world-class safety performance with the Lost Time Injury Rate, (or LTIR) to date of 0.02/200,000 work-hours being several times better than the international oil and gas construction industry average.

The future phases of the Project involve development of Chayvo gas reserves for exports, as well as development of the Odoptu and Arkutun-Dagi fields, which will be timed to maintain facility/export system capacity. These later Project developments are expected to sustain production from all three fields to 2050. The flexible stepwise development approach with a focus toward capital efficiency that was used during the initial Chayvo development phase will allow Sakhalin-1 to apply experience, lessons learned, and technical enhancements to future phases. This strategy is successfully employed in ExxonMobil projects throughout the world.

Chayvo Development

Chayvo Yastreb land rig

The Chayvo field is developed from both offshore and onshore facilities. The Chayvo Yastreb land rig construction was completed in June 2002. The rig was engineered exclusively for Sakhalin-1 and is the most powerful land rig in the industry. It is designed to drill extended reach wells to offshore targets from land-based locations.

Extended Reach Drilling (ERD) Technology

Use of state-of-the-art Extended Reach Drilling (ERD) technology has reduced the high capital and operating costs of large offshore structures and at the same time has minimized the environmental impact in this sensitive near-shore area. In June 2003, ENL initiated the shore-based ERD program to install wells under the seabed at distances exceeding 11 kilometers (7 miles) to tap the northwestern flank of the main Chayvo oil zone. Fifteen wells have been drilled from Yastreb, setting records by depth, horizontal reach and drilling speed. In February 2008, the Yastreb Z-12 well set a new world record for extended reach drilling by achieving a measured depth of 11,680 meters (38,322 feet). This exceeds by 398 meters (1,306 feet) the prior world record set by the Sakhalin-1 Project's Z-11 well in 2007.

Oil and gas is also produced from an offshore platform, called the Orlan. The 20-well concrete structure serves as the offshore drilling and living quarters and is used to develop the southwestern flank of the main Chayvo zone. Installation of the Orlan platform was completed in July 2005 and drilling operations using the advanced batch drilling process commenced in December 2005. The Orlan drilling rig is operated on the platform year-round. Offshore processing facilities are minimal, with a full well stream sent to shore for further processing at the Chayvo OPF. Eleven wells have been completed on Orlan to date. Most of the Orlan wells are in the 5.5 kilometer range, with the longest well drilled to date being 7.5 kilometers long.

Orlan offshore platform

Production from the Orlan and Yastreb wells is supplied to the Onshore Processing Facility. The OPF is designed to produce at the rate of approximately 250,000 barrels (34,000 metric tons) of oil per day and 800 million cubic feet (22.4 million cubic meters) of gas per day. The OPF produces stabilized crude oil which is shipped by pipeline to the DeKastri terminal for export, and natural gas which is supplied to the Russian Far East or injected back into the Chayvo field.

The Project crude oil export system was commissioned in August 2006. Construction was completed on a 24-inch, 140 mile (225 kilometer) pipeline to transport crude from the OPF across Sakhalin Island and the Tatar Strait to the newly-constructed DeKastri terminal in the Khabarovsk Krai. Tanker loading operations began at the DeKastri export terminal in September 2006.

Single Point Mooring (SPM)

The DeKastri terminal provides storage and a Single Point Mooring (SPM) tanker loading facility that can accommodate year-round crude oil export to world markets. The terminal includes two 650,000 barrel (100,000 cubic meter) storage tanks to hold the Sakhalin-1 crude oil prior to tanker transfer and shipment. Because of its remote location, the terminal is essentially self-sufficient. It has its own electrical power generation, water supply, waste management system and living quarters for the operating staff. The crude is exported via a subsea loading line to the SPM facility, which is located 5.7 kilometers east of the Klykov Peninsula in the Chikhacheva Bay.

A dedicated fleet of double-hulled Aframax-class tankers carrying up to 720,000 barrels (100,000 tons) of crude is used for the year-round export of crude oil from the DeKastri terminal to world markets. The initial tanker began loading at DeKastri in September 2006. Within just one year, the 100th tanker was loaded on September 26, 2007. Up to 250,000 barrels of Sakhalin-1 "Sokol" crude is exported daily with tankers departing every three to four days on average. The Sakhalin-1 Consortium members market the crude individually and the crude is sold on a delivered basis.

In December 2007, the Sakhalin-1 Project met a key milestone when the 100 millionth barrel of crude was produced and delivered.

Major Approvals

DeKastri terminal

Sakhalin-1 Project Commerciality was announced at the end of 2001 and enabled the Project to transition from exploration to development stage.
The Project received the positive conclusion of the State Ecological Expert Review (SEER) in July 2002 for both the Extended Reach Drilling (ERD) Project and the Phase 1 Development Justification of Investment.
In October 2002, Glavgosexpertiza of Russia approved the Justification of Investment (JOI) for the Sakhalin-1 Project. Favorable conclusions had previously been received from the Ministry of Natural Resources in July 2002 and from the Ministry of Economic Development and Trade in August 2002. Approval of the JOI was a key milestone for the Sakhalin-1 Project. It allowed the Project to proceed to the next Technical and Economic Substantiation of Construction (TEOC) stage based on the preferred oil export pipeline route across Sakhalin Island to an export terminal at DeKastri on the Russian mainland.
In April 2003 the Authorized State Body (ASB) approved the Development Program and Budget (DP&B) for the Sakhalin-1 Project. The DP&B is a strategic plan and cost estimate of the activities required for oil and gas production from Sakhalin-1, including the environmental protection measures and abandonment requirements, as well as the benefits that the Project brings to Russia.
In February 2004, the Ministry of Natural Resources of the Russian Federation approved the positive conclusion of the State Environmental Expert Review (SEER) Panel of the Technical and Economic Substantiation of Construction for Phase 1 of the Sakhalin-1 Project. The Review Panel, comprising 49 leading experts from Russian academia, technical and environmental organizations, assessed key Project design solutions, waste management and water protection measures, emergency response preparedness, and the economic and social impact of the Project, as well as the various measures to protect marine and land biological resources during Project Phase 1 construction and production operations.

Tatar Straits

In April 2004 the Russian Federation approved the Technical and Economic Substantiation of Construction for Phase 1 of the Sakhalin-1 Project. Approval of the TEOC was a key Project milestone that allowed the Sakhalin-1 Consortium to commence construction of the Sakhalin-1 Phase-1 facilities, enabling ENL to maintain the schedule leading to first oil production from Chayvo in 2005.
During the Project construction stage, ENL and its contractors received over 1,000 additional approvals, licenses and permits from federal, regional and local district authorities. These approvals include over ten additional SEER positive conclusions. Since 2005, over one hundred agency inspections and audits have been conducted to verify compliance with Russian regulatory and Project documentation.

Local Content

The Sakhalin-1 Project continues to implement a comprehensive Russian content strategy to identify and contract qualified Russian companies and organizations with the skills and experience required to conduct work in a safe and environmentally responsible manner. Key features of the Sakhalin-1 strategy have included: the launch of the Project website to communicate Project information to Russian contractors and suppliers; holding Project seminars in Moscow, Khabarovsk and Yuzhno-Sakhalinsk; encouraging active involvement of Russian design institutes in the Project design; developing a comprehensive Russian contractors' database; and tailoring major contract packages to encourage Russian participation. The Russian content of contracts awarded to date for the Sakhalin-1 Project is over US$ 4.4 billion, or about two-thirds of the total.

Chayvo Onshore Processing Facility

ENL and its contractors currently employ hundreds of Russian nationals. Approximately 350 Sakhaliners work directly for ExxonMobil's affiliate ENL. Many of them have received professional training in Russia, USA, and Canada. The value of these training programs has already 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. During the peak of the Project construction activities at Chayvo in summer 2005, the Project employed approximately 8,000 people, including direct employees and contractors. As Russian national employees are trained and gain experience, the share of Russian nationals working in operations will approach 90% of the workforce within 10 years.

Since 1994, ENL has contributed over US$ 2 million through its 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, as well as the support of Indigenous people. Some of the most recent initiatives include investment of significant funds for needed improvements at the local hospital in DeKastri, including the purchase of an ambulance vehicle and medical treatment and diagnostic equipment, as well as the training of hospital staff. In 2006 ENL invested in the upgrade of the roads, bridges and power plants in the Ulchi Municipal District of the Khabarovsk Krai. In addition, the Project donated US$ 300,000 for the purchase of new surgical and diagnostic equipment to modernize the Central District Hospital Nikolayev's-on-Amur in Khabarovsk Krai. In early 2007, ENL, in cooperation with the Sakhalin Oblast Administration, made significant investments in the modernization of the Yuzhno-Sakhalinsk Women's Clinic.

Another notable initiative launched by the Sakhalin-1 Project is 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 has created or sustained 180 small businesses and more than 500 local jobs.