Special Sneak Preview from The Global Intelligence Report…
SITUATION: In early 2009, Russia inaugurated its first liquefied natural gas (LNG) plant for East Asia at Sakhalin. After ramping up to three times its initial capacity, it will supply roughly 5% of world LNG. It is currently expected that Japan will receive two-thirds of initial exports with the rest going to South Korea and North America.
ANALYSIS:
Sakhalin is a long north-south island in Russia’s Far East close to the mainland. Its southern tip is not far from Japan’s northernmost point. Hydrocarbon deposits around it are estimated to contain 14 billion barrels of oil and 2.7 trillion cubic meters of natural gas. These are being developed by consortia including such major Western energy companies as Royal Dutch Shell and ExxonMobil. The latter operates the consortium that produces from the first of six planned stages of Sakhalin hydrocarbon development.
The Sakhalin-1 development comprises three deposits. The first is under production, the second is under development, and the third is under exploration.
Oil from the Chaivo deposit started to run through a pipeline to the De-Kastri terminal in Russia’s Khabarovsk Krai in September 2006.
Drilling at the Oduptu oil and gas field began in May 2009, and commercial production began in September 2010. The product goes to the Chaivo processing facility and then to the De-Kastri for export.
The Arkutun-Dagi field is yet to be developed, but first oil is expected in 2014; it will also go to De-Kastri via Chaivo.
ExxonMobil and Gazprom disagree over export plans. Partners in Sakhalin-1 are an ExxonMobil subsidiary (30%, consortium operator), the Indian state company ONGC (30%), two affiliates of Rosneft (total 20%), and the SODECO consortium of Japanese firms (20%). ExxonMobil’s subsidiary Exxon Neftegaz is negotiating with China National Petroleum Corporation to export the gas directly to China, while Gazprom needs it to fill the Sakhalin-Khabarovsk-Vladivostok pipeline that it is constructing, because its own volumes from Sakhalin-2 and Sakhalin-3 will not be enough for that.
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