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Russia’s Sakhalin 1 project on time, on budget and pumping oil $12.8 billion ExxonMobil-led project starts up Oct. 1; expected to hit 50,000 bpd by year end Allen Baker Petroleum News Contributing Writer
Oil is flowing from the Sakhalin 1 project, according to Exxon Mobil Corp., with production expected to reach 50,000 barrels daily by the end of this year and 250,000 barrels a day by the end of 2006.
First production from the offshore Chayvo field came on Oct. 1. It was on schedule and within about 10 percent of development cost estimates, according to ExxonMobil, whose subsidiary Exxon Neftegas Ltd. is operator. The cost situation contrasts with the Sakhalin 2 project, where Shell said this fall it was doubling its estimate of development costs there to around $20 billion. Sakhalin 1 is expected to cost $12.8 billion. Oil, gas to Russia Both oil and gas from Sakhalin 1 will initially go into Russia’s domestic market, with oil exports starting when a year-round tanker terminal on the Russian mainland at DeKastri is completed early next year.
Gas sales are expected to start at 60 million cubic feet per day and rise to 250 million cubic feet daily by the end of the decade. The producers had originally expected to send much of the gas to Japan through an undersea pipeline. But Japanese utilities have signed long-term LNG supply contracts, including some with rival Sakhalin 2, and the market for pipeline gas dried up.
With that, the Sakhalin owners have shifted their focus, and ExxonMobil executives said Oct. 2 that talks had begun with China about selling the gas to that country. But a pipeline to move the gas to China wouldn’t be operating for about five years, they said. Two rigs drilling In addition to Chayvo, Sakhalin 1 has licenses for the Odoptu and Arkutun Dagi fields offshore. The current drilling is being conducted with two rigs. One is the world’s largest land-based rig, according to ExxonMobil, with the capacity for extended reach drilling six miles from shore. The other is an offshore platform with capacity for up to 20 wells. The project also includes a 140-mile pipeline and the tanker-loading terminal.
Overall, Sakhalin 1 is projected to hold as much as 2.3 billion barrels of oil and about 17 trillion cubic feet of natural gas.
ExxonMobil holds 30 percent of the enterprise, as does Sakhalin Oil and Gas Development Ltd., a joint venture of Marubeni Corp., Japan Petroleum Exploration Co., and Itochu Corp., all of Japan. Russia’s state-owned Rosneft controls 20 percent, and India’s state-owned ONGC Videsh Ltd. holds the remaining 20 percent.
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