Sakhalin II inks $40 million pact

Debra Beachy

Petroleum News contributing writer

The Shell-led Sakhalin II oil and gas consortium signed a $40 million service agreement on Aug. 12 with joint venture Sakhalin Shelf Service (3-S), the company said in a press release. The five-year contract covers docks, equipment and facilities at Kholmsk Marine Fishing Port, now called the Sakhalin Western Marine Port. The agreement includes a $16 million 30-month contract for port labor during the construction period of the project’s second phase, which was announced on May 15. Sakhalin II is developing a liquefied natural gas export project to export LNG to markets in Asia and possibly the West Coast of the United States. The Sakhalin II group is developing a an area off Sakhalin Island, in Russia’s Far East, with estimated reserves of 1.1 billion barrels of oil and 17 trillion cubic feet of natural gas. Royal Dutch/Shell holds a 55 percent stake in the group, Mistui & Co. 25 percent and Mitsubishi 20 percent. The project is aiming to start year-round oil shipments by 2006 and shipments of LNG in 2007. Sakhalin Energy has marketed the output of the project to companies using LNG, mainly electric power and gas utility companies in Japan. It recently concluded a memorandum of understanding for long-term sales to Tokyo Gas. The Exxon-led Sakhalin I project will produce gas and some oil. The gas will most likely be shipped by pipeline to northern Japan, the Russian mainland and possibly China.