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Russian contractors reap Sakhalin II rewards

Posted: 2 July 2003

Sakhalin Energy has signed a contract worth over a quarter of a billion dollars — around $150m million of which will go directly to Russian industry. The Contract was awarded for the Sakhalin II Phase 2 Project, Onshore Processing Facility (OPF).

BETS, a joint venture company comprised of Russian company Technostroyexport, Enka and Bechtel from Turkey and US respectively, was awarded the $250 million contract for the construction of the Onshore Processing Facility on Sakhalin Island.

Steve McVeigh, Chief Executive Officer of Sakhalin Energy said: “We are extremely pleased to have been able to award another Phase 2 Contract today. This contract emphasises the significant role that Russian industry is playing in the development of the world’s latest energy frontier in the Russian Far East, and in what is probably the largest single integrated oil and gas project ever undertaken.”

“The OPF contract adds to the growing level of work being undertaken by Russian industry for the Sakhalin II Project. Russian industry has already been awarded contracts worth about $2 billion as part of the Phase 1 and Phase 2 projects. We anticipate that Russian enterprises will undertake contracts worth about $4.5 billion during the construction of the Phase 2 project, and then play a continuing major role in supplying materials and services during the operational life of Sakhalin II.”

The signing of today’s contract follows Sakhalin Energy’s May 15, Declaration of Development Date for the Lunskoye Field – an announcement which marked the official launch of the full Sakhalin II Project worth approximately $10 billion.

Chairman of Technostroyexport, Victor Velichko, said: “Technostroyexport is a key member of the BETS joint venture company. We are looking forward to contributing Russian skills and expertise to enable the successful construction of this technologically advanced plant, which will be built in challenging conditions.”

In May, Sakhalin Energy announced its first two sales deals with Tokyo Gas and Tokyo Electric for a total of 2.3 million tonnes per annum of LNG from the Sakhalin LNG plant for periods in excess of 20 years. Sakhalin Energy is in discussions with other potential Customers from Japan and the Asia Pacific Region for the remaining plant capacity

Following on from the Phase 1 Project, which has been successfully producing oil from the Vityaz Complex in the Piltun-Astokhskoye (PA) field offshore Sakhalin Island since July 1999, the Phase 2 Project calls for the installation of a second platform on the PA field and a new platform on the Lunskoye field.

Offshore pipelines will be installed to bring both oil and gas ashore to the onshore processing facility before the oil and gas are transported, via pipelines, to an oil export terminal and LNG plant at Prigorodnoye in the Island’s south.

The project will involve approximately $300 million worth of vital improvements to Sakhalin’s infrastructure – including roads, bridges, railways and Nogliki airport and Kholmsk port. These upgrades are required to enable the Phase II project to be developed, and will be funded by Sakhalin Energy. They are already underway, and will also provide lasting benefits to the people of the island.

Construction activities on the project elements are dependent on final Government approvals, which are expected to be completed within the next few months. Subject to the approvals, year round oil production is expected in 2006. First LNG cargo will be scheduled according to customer requirements, but is currently planned for 2007 in line with current sales agreements.

Posted by Richard Price, Editor Pipeline Magazine

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