Sakhalin-II
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The Sakhalin II (Сахалин-2) project, like its sister project Sakhalin-I, is a consortium to locate and produce oil and gas on Sakhalin Island and immediately offshore, in the Sea of Okhotsk, from two fields: Piltun-Astokhskoye and Lunskoye. Piltun-Astokhskoye is primarily an oil field, and Lunskoye is primarily a gas field. The project has been met with heavy criticism over the potential environmental impacts, which could include driving the world's last 100 remaining western pacific grey whales to extinction.
Marathon, McDermott and Mitsui formed MMM Consortium in 1991, Shell and Mitsubishi joined in 1992, to make it MMMMS. The consortium formed Sakhalin Energy Investment Company Ltd. (Sakhalin Energy) in April 1994 to develop and manage the Sakhalin II project.
The first ever Production Sharing Agreement (PSA) was completed with Russia in 1994, with the signing of the Sakhalin II project consortium. The consortium is managed and operated by Sakhalin Energy Investment Company Ltd. (Sakhalin Energy). McDermott sold its share to the other partners in 1997, and in 2000 Marathon traded its share to Shell for other properties (the BP operated Foinaven field, near the Shetland Islands, and an eight block area in the Gulf of Mexico-including: the Ursa field) and Marathon’s expenses in Sakhalin-II for that year.
In the Piltun-Astokhskoye field in July of 1999 production began from the Molikpaq platform, Vityaz Complex, and in September of 1999 the first crude was exported.
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[edit] Consortium partners
- 55% - Shell Sakhalin Holdings B.V. (Shell - UK/NETHERLANDS)
- 25% - Mitsui Sakhalin Holdings B.V. (Mitsui - JAPAN)
- 20% - Diamond Gas Sakhalin (Division of Mitsubishi - JAPAN)
The two field total project cost until 2014 was by Shell originally estimated at between $9 and $11 billion US dollars. However, the costs turned out to be substantially underestimated and in July 2005 Shell revised the estimate to $20 billion, causing much consternation among analysts and Russian business partners alike. There are six main phases to the project: field development in the Piltun-Astokhskoye oil field, field development in the Lunskoye gas field, upgrading infrastructure on the island (IUP — Infrastructure Upgrade Project) which includes a building pipeline to Prigorodnoye on Aniva Bay, building an onshore processing facility (OPF), building an oil export terminal (OET), and building a liquid natural gas (LNG) plant and terminal.
The two fields contain an estimated 1.2 billion barrels (190,000,000 m³) of crude oil and 500 billion cubic meters (18 trillion cubic feet) of natural gas, 9.6 million tonnes of liquefied natural gas a year and about 180,000 barrels per day (29,000 m³/d) of oil will be produced.
[edit] LNG
This will be the first ever LNG plant built in Russia. Shell estimates that the LNG plant will have the ability to meet eight percent of the world’s current LNG demand, 9.6 million tonnes of LNG per year, at the new plant, which will be in Prigorodnoye (Prigorodnoe) on Aniva Bay on the southern tip of Sakhalin, 13 kilometers east of Korsakov, on 4.9 km². Two trains will have an annual capacity of 4.8 million tones each.
The LNG plant will have two LNG storage tanks of 100,000 cubic meter net capacity each and LNG will be exported via an 805-metre jetty in Aniva Bay. The jetty will have two loading arms and one boil-off gas return arm, with ship loading expected to take between six and sixteen hours depending on the size of the cargo.
An important step for the project has been to have LNG contracts in place with major customers. The first shipments of LNG are projected to be summer of 2007.
So far Sakhalin Energy has signed up three LNG agreements:
- Tokyo Gas : 1.1 million t/year - 24 years (May 2003)
- Tokyo Electric Power Company: 1.5 million t/year - 22 years (May 2003)
- Kyushu Electric Power Company: 0.5 million t/year - 21 years (2003).
The LNG plant construction consortium is awarded to two Russian companies, OAO Nipigaspererabothka (Nipigas) and the KhimEnergo consortium, together with two Japanese companies Chiyoda Corporation and Toyo Engineering.
[edit] Oil export terminal
Located on Aniva Bay, 500 meters east of the LNG plant. Total storage capacity will be 1.2 million barrels (190,000 m³) in two tanks (about six days pipeline throughput). Subsea pipeline to a tanker-loading unit (TLU), which is located about five kilometers offshore in the bay can load oil at a rate of 50,000 barrels per hour (8,000 m³/h).
[edit] Platforms
- The Molikpaq Platform (PA-A)
- Originally a drilling rig from Arctic Canadian waters
- Built to operate in severe ice conditions
- 16 km offshore
- 120 m wide
- Weight 37,523 t
- 150 personnel
- Ballast 278,000 m³ sand
- Temperatures offshore: down to -70 °C wind chill
- Piltun Astokhskoye Platform (PA-B)
- Four legged concrete gravity substructure engineered and constructed by Aker Kværner Technology AS and Quattrogemini OY
- Construction began - 4Q 2003
- Start of production expected – 4Q 2007
- Water depth 32 m
- Living quarters for 100 permanent & 40 temporary personal
- Capacity:
- Oil approximately 70,000 barrel/d (11,000 m³/d)
- Associated gas 100,000,000 ft³/d (2,800,000 m³/d)
- Lunskoye Platform (LUN-A)
- Four legged concrete gravity substructure that will be engineered and constructed by Aker Kvaerner Technology AS and Quattrogemini OY
- Construction began - 3Q 2003
- Start of production expected – 1Q 2007
- 15 km offshore
- Water depth 48 m
- 90 permanent & 36 temporary personel
- Capacity:
- Gas approximately 52 million m³/d (1,800,000,000 ft³/d)
- Peak liquids and condensate about 8,000 m³/d (34,000 barrel/d)
- Peak oil 2,500 m³/d (16,000 barrel/d)
[edit] Onshore processing facility
- 7 km inland inline with Lunskoye
- Construction: BETS joint venture:
- Technostroyexport (Russia)
- Enka (Turkey)
- Bechtel (US)
- Cost: $250 million (US)
- Construction commenced 2nd half 2003
- Production start-up - Q4 2005 to Q4 2006.
- 100 MW power plant
- Capacity
- Gas: 1,800 million standard cubic feet per day (51,000,000 m³/d)
- Condensate/oil: 60,000 barrels per day (9,500 m³/d)
[edit] Pipeline
Phase two in the project is the construction of two 800 km pipeline systems from the fields on the northeastern edge of the island to a Liquefied Natural Gas (LNG) and an Oil Export Terminal (OET) at the south end. The $1.2 billion (US Dollars) pipeline was awarded to a consortium of two Russian companies Starstroi and LUKoil-Neftegazstroi together with two European companies Saipem SA and AMEC Spie Capag. The project is estimated to employ between 5,000 and 6,000 people from design to completion in December 2006.
- Stats:
- 126 km of swamp crossings
- 110 km over mountainous routes
- 1,000-plus (mainly small) river crossings
- 18 rail crossings
- 10 road crossings.
- Trench buried (with 0.8 to 1 m cover on top of pipe)
- Block valves: 51 gas; 108 oil; 6 multiphase (all remotely operated)
[edit] Offshore pipelines
- Total overall length - 165 km
- Two 42 km x 356 mm pipelines from Piltun-Astokhskoye B platform (PA-B) to shore.
- Two 17.5 km x 356 mm pipelines from Piltun-Astokhskoye A platform (PA-A or Molikpaq) to shore.
- Two 13.5 km x 114 mm pipelines from Lunskoye Platform (LUN-A) to the shore.
- One 13.5 km x 762 mm pipeline from shore to LUN-A to provide gas to the facility.
- One 5.5 km x 752 mm tanker loading line from the OET (Oil Export Terminal) to the TLU (Tanker Loading Unit) in Aniva Bay.
[edit] Infrastructure upgrade projects
Sakhalin II will create permanent work for up to 2,400 people and jobs for an estimated 10,500 more during the construction period. Together with Sakhalin-I, unemployment should remain low and island improvements greatly expanded. To complete the plants and pipeline, Sakhalin Energy will spend $300 million (US) to upgrade the islands infrastructure: roads, bridges, waste management sites, airports (including one at Nogliki), railways and ports, at more than 50 construction sites.
- Sakhalin Western Marine Port: To allow for the inbound receipt of Phase 2 construction materials including pipeline and Onshore Processing Facility cargo, the Port of Kholmsk, on the southwest part of the island, has been upgraded. Work includes: dredging works, quayside works, installation of rail sidings, access roads, 4 x 20 t and 1 x 32 t gantry cranes erected, Berth 5 has been refurbished, final works at the port including office and warehouse upgrades are currently ongoing.
- Federal Roads and Bridges: 39 bridges & bridge approaches, bridge and culvert construction, 16 km of federal roads are being reconstructed, and a further 12 km of federal carriageway is being asphalted.
- Onshore Processing Facility (OPF) Site Works: Temporary site works at the Onshore Processing Facility (OPF) site, including construction of an 115,000 m² Site Construction Camp Area and a 70,000 m² Temporary Works Area, 6 km Beach Access Road (BAR) and an 11,000 m² Beach Laydown Area (BLA) at near-by Lunskoye beach.
- Onshore Processing Facility Southern Access Road (SAR): 76 km of access roads to the OPF facility. Including the SAR (0-57 km) project, involving redesigning and upgrading 57 km of road including 13 bridges, the SAR (57 to 76 km), involves the construction of 20 km of new road.
- Railways: Railway upgrades, 9 separate rail sidings, and 2 new passing loops on the main line (west coast).
- Phase 2 Project Office: 250-person, 3-story project office facility in Yuzhno-Sakhalinsk
- Phase 2 Accommodation Facility: 13 two-story apartment buildings (104 units), accommodation facilities near Zima Highlands, a multi-use recreation facility, a mechanical and electrical building and a free-standing security building.
- LNG Site Works: general site clearance, archaeological works, demolition works and the removal of submarine cables from Aniva Bay.
- Municipal Works: Road and bridge upgrades for 7 Island’s Municipalities: Dolinsk, Kholmsk, Korsakov, Makarov, Nogliki, Poronaysk and Yuzhno-Sakhalinsk.
[edit] Environmental impacts
The project has been dogged by environmental and social criticism and opposition from numerous environmental groups including Sakhalin Environment Watch, World Wide Fund for Nature, Friends of the Earth, Bankwatch, Pacific Environment, IUCN, as well as from residents of Sakhalin and independent scientists.
One key concern is that the project, the NGO's argue referring to an International Scientific Review Panel (ISRP) report on Sakhalin II project impacts to the critically endangered Western Gray Whale, will push the world's last 100 or so western pacific grey whales into extinction.
Other concerns are that the project will destroy the marine environment, threaten the livelihood of tens of thousands of fishermen, destroy the key salmon fishing area off the island by dumping one million tons of dredging spoil waste into the sea, and finally imply a permanent threat of a large oil spill in the Okhotsk and Japanese seas.[1]
The key NGOs demands in this regard are:
- Pipeline crossings across all spawning rivers and streams on Sakhalin Island must be made with a bridge over the river, on specially designed suspension systems, to avoid damage to the streambed and water channels.
- The new proposed platform for the Piltun-Astokhskoye field for Sakhalin-2 Phase 2 must be moved at least 12 nautical miles from shore in order to ensure that the platform does not harm the habitat of the critically endangered western grey whale.
- Discharge of any wastes into Aniva Bay is categorically impermissible.
- Shell, Mitsubishi, Mitsui and Gazprom, must take full financial liability for any oil spill within Russia (including Aniva Bay and the La Peruse strait) from tankers and compensate all expenses for liquidating and cleaning polluted areas, and pay compensation to injured people. The international financial institutions should financially guarantee that the clean up funding and compensation is available after the accident.[1]
Criticism has also come from other sides. In 2003, the European Bank for Reconstruction and Development, a potential financier of the project deemed Sakhalin-II 'unfit for purpose' due to environmental concerns. The project, many argued, was in direct violation of the Equator Principles, a set of voluntarily guidelines adopted by the world’s leading banks, and a number of Equator Principles banks have already indicated that they will not fund Sakhalin II.
Shell has responded to these concerns saying that the project meets lenders' policies and that environmental and that social issues have been met.
[edit] Recent developments
In 2005, Shell agreed to swap 25% of Sakhalin-II to Gazprom, in exchange for 50% of a natural gas field in the Russian Arctic, plus cash. Several days after the deal was signed, Shell doubled its cost estimates for Sakhalin-II to $20 billion. This move is reported to have highly angered Gazprom and the Russian government, since this implied lower potential profits for them.
On September 18, 2006, Russian regulators withdrew an environmental permit for Sakhalin-II, citing damage to salmon streams. This was widely interpreted as a move by the Russian government to force a renegotiation of the Sakhalin-II deal.[2]
[edit] References
- ^ a b Sakhalin Environment Watch. Sakhalin-II Oil and Gas Project - Introduction. Retrieved on 2006-09-20.
- ^ Kramer, Andrew E. (2006). "Russian oil reversal stirs outcry". International Herald Tribune.
[edit] External links
- Sakhalin-2 Project website
- The Sakhalin II Project: Latest News and information @ Shell.com
- Sakhalin Factsheet @ the Department of Energy's Energy Information Administration
- Yuzno.com: Sakhalin Projects News (English)
- Sakhalin Environment Watch An NGO campaigning against the Sakhalin-II
- World Wide Fund for Nature
- Sakhalin II problems postpone liquid gas supplies to the USA
