The Sakhalin oil and gas projects are potentially among the most ambitious of the 21st century, tapping billions of barrels of reserves in seas that freeze for up to six months.

Following are details of some of the main projects.
The Exxon Mobil-led project, which Russian officials say could cost $17 billion, ranks with Saudi Arabia’s Haradh field and the Baku-Ceyhan pipeline from the Caspian as one of the year’s three-biggest developments helping to meet rising global demand.

Sakhalin-1 will provide the biggest new source of Pacific basin crude in over a decade and, according to Exxon Chief Executive Rex Tillerson, should be producing 225,000 barrels per day by the end of the year.

The venture is developing three oil and gas fields — Chayvo, Odoptu and Arkutun-Dagi. They hold estimated recoverable reserves of 2.3 billion barrels of oil and 17.1 trillion cubic feet of natural gas, according to Exxon.

On Oct. 11 Russian authorities said it may take two months before full operations were allowed. They also said full scale oil production of 250,000 bpd could be delayed to the first quarter of 2007, from the end of 2006.

SAKHALIN-2

Royal Dutch Shell has offered to cede control of the $22 billion Sakhalin-2 project, Russia’s biggest single foreign investment, to state gas monopoly Gazprom after months of government pressure, industry sources said on Dec. 11.

A Royal Dutch Shell -led group has been building what the company says is the world’s largest single oil and gas project on Sakhalin Island, an expansion of Sakhalin-2.

The second phase of Sakhalin-2 will tap the Piltun Astokhskoye oil field and the Lunskoye gas field, which together hold about 1 billion barrels of crude and 500 billion cubic metres of natural gas. The first started up in 1999.

The project is also one of the most environmentally challenging because the oil and gas lies under the feeding grounds of critically endangered whales and must be exported via a new pipeline that will cross 1,100 rivers and streams.

Costs have doubled from an earlier estimate of $10 billion, leading to tension between Shell and the Kremlin, and shipments are set to start later than earlier planned.

Sakhalin-2 aims to export the first cargo of liquefied natural gas in summer 2008, six months later than planned. Operator Sakhalin Energy said in September Russia’s move to revoke ecological approval may delay the project further.

On Dec. 7 Russia’s resources ministry said its water resources agency had suspended 12 water-use licences of Sakhalin’s top contractor Starstroi, a joint venture between Russian firms and Italy’s Saipem. It gave Starstroi two months to put the violations right.

Shell holds 55 percent of Sakhalin-2, which is designed to produce up to 9.6 million tonnes of LNG a year.

Japan’s Mitsui & Co. and Mitsubishi Corp. hold the remaining shares in Sakhalin-2, with 25 percent and 20 percent respectively.

The doubling of costs infuriated Russian gas monopoly Gazprom , which was planning to take a quarter of the project. Analysts have said the pressure was designed to force Shell to cede a stake cheaply, or face further delays.

SAKHALIN-3

Russia’s Rosneft and China’s Sinopec have started drilling the first exploration well on their joint Sakhalin-3 project, news agencies reported on Aug 7.

Rosneft and Sinopec agreed to jointly explore the Veninsky block during a visit of Chinese President Hu Jintao to Moscow in July 2005. It became China’s first energy project in Russia.

Rosneft, which has 49.8 percent in the venture, has estimated the field’s reserves at 168 million tonnes of oil and 258 billion cubic metres of gas. Sinopec, Asia’s biggest refiner, has 25.1 percent.

SAKHALIN-4, -5

BP Chief Executive John Browne and Rosneft’s president, Sergei Bogdanchikov, have signed an agreement on developing the West and East Schmidt blocks, part of Sakhalin-4 and Sakhalin-5 respectively.

“These agreements are the major step in the ongoing cooperation of our companies offshore Sakhalin,” the text of the agreement read, according to a Nov. 22 statement from Rosneft.

Rosneft, which owns 51 percent in both Sakhalin-4 and 5, said investment in West and East Schmidt so far exceeded $80 million and would amount to a further $700 million in the next five years.

East Schmidt is estimated to contain 181 million tonnes of oil and 281 billion cubic metres of gas, while its western neighbour is thought to have 411 million tonnes and 255 bcm.

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