Sakhalin-2 is one of the world’s largest integrated greenfield oil and gas projects developed in the harsh subarctic conditions of the Russian Far East

The project includes three offshore production platforms, two of them listed as the heaviest ever constructed offshore.

Liquefied natural gas plant construction site

Eastern Siberia and the Far East of Russia are considered to be highest priority regions for Gazprom in the long-term perspective development.

The state policy on the gas infrastructure development in the Russian Far East is stipulated in the Development Program for the Integrated Gas Production, Transportation and Supply System with due regard to possible exports to China and Asia-Pacific markets, approved by the Government of the Russian Federation on June 15, 2007.

Sakhalin-2 is the first project executed in Russia which is based on the PSA. Sakhalin Energy Investment Company Ltd. (Sakhalin Energy) is the operator of Sakhalin-2 Project. The shareholders are PJSC Gazprom (50 per cent, plus one share), Shell Sakhalin Holdings B. V. (parent company Royal-Dutch Shell plc, Netherlands, 27.5 per cent minus one share), Mitsui Sakhalin Holdings B. V. (parent company Mitsui and Co. Ltd., Japan, 12.5 per cent) and Diamond Gas Sakhalin B. V. (parent company Mitsubishi Corporation, Japan, 10 per cent).

Sakhalin-2’s aggregated extractable reserves stand at around 150 million tons (more than one billion barrels) of oil and 500 billion cubic meters of gas. 

Phase 1 involved first oil production from an offshore platform Molikpaq installed at the Piltun-Astokhskoye field in 1999. Phase 2 included the installation of two further platforms, 300 km-long offshore pipelines connect all three platforms to shore, more than 800 km of onshore oil and gas pipelines, an onshore processing facility, an oil export terminal and the construction of Russia’s first liquefied natural gas plant.

The Sakhalin-2 project began to perform 24-hour crude oil shipments in December 2008. Russia’s first LNG plant was commissioned on February 18, 2009.

Implementation of the world’s largest integrated oil and gas Sakhalin-2 project accelerated a number of processes of crucial importance for the development of Russia and the Sakhalin Region. The company’s 2016 IFRS financial statements report the revenue of US$ 4.554 billion and net income of US$ 869 million. In 2016, Sakhalin Energy paid over $ 2.02 billion to the Russian Federation (in cash and in kind). This is Russia’s first natural gas liquefaction project, and it marks a a technological breakthrough for Russia, while LNG transportation adds a new segment to the Russian shipping market.

Environmental protection is a major focus of attention for Sakhalin-2 partners. Being a natural resources project, mitigation of potential environmental impacts is number one priority. In the course of design documentation development for both phases of the Sakhalin-2 project, environmental impact assessment was undertaken, including a detailed assessment of all the negative impacts and the development of prevention and mitigation plans. The design documentation has been approved by the State Environmental Expert Review of the Russian Federation.

In 2015, Gazprom and Shell signed a Memorandum to construct the third production train of the LNG plant within Sakhalin II, with target capacity up to 5 million tons of LNG per year. Commissioning of the project is scheduled for 2021. In 2016, Sakhalin Energy began development of project documentation for the implementation of the third LNG production train.

Thanks to the constant optimization of the production systems and equipment upgrades the company achieves performance that exceeds design capacity of the plant, which is 9.6 million tons of LNG per year. In 2016, Sakhalin Energy produced 10.93 million tonnes of LNG and also extracted 3.90 million tons (28.75 million barrels) of oil and 1.61 million tonnes (14.17 million barrels) of gas condensate.

In 2016, Sakhalin Energy also achieved a new record for LNG production — the weekly production volume exceeded 255,000 tonnes of LNG.

The Sakhalin LNG share in 2016 accounted for about 6% of the Asia-Pacific market and about 4.5% of the world LNG market.

Equipment provision goes on: on April 2017 a new ice-breaking platform supply vessel Gennadiy Nevelskoy arrived at Sakhalin, and on August 6, 2017 the new ice-class platform standby vessel Stepan Makarov entered service. The new vessels were assigned an ice class of Icebreaker6 for work in the Arctic conditions.

On September 6, 2017, Sakhalin Energy and Petrofac Facilities Management Limited signed a US$ 700 million contract for the front-end compression station construction on Sakhalin-2 onshore processing facility.