Sakhalin-1

Sakhalin-1 Oil and Gas Project Profile

Location and Site Details

The Sakhalin-1 oil and gas development project is situated off the northeast coast of Sakhalin Island in the Russian Far East, within the Okhotsk Sea. The project area spans approximately 1,140 km².

Fields and Production

The project encompasses three offshore fields:

• Chayvo Field: Began production in October 2005 and reached peak production of 250,000 barrels per day in February 2007.
• Odoptu Field: Production started in September 2010.
• Arkutun-Dagi Field: The third and final field, production commenced in January 2015. It is expected to increase the annual production capacity by 32.5 million barrels (4.5 million tonnes) of oil and reach a peak of 85,000 barrels of oil per day by 2019.

Ownership and Partners

The project is operated by Exxon Neftegas Limited (ENL), a subsidiary of Exxon Mobil, which holds a 30% participating interest. However, following the 2022 Russian invasion of Ukraine, Exxon's involvement was significantly altered, and the project's operation was transferred to a new entity, Sakhalin 1 LLC, with the Russian government holding a controlling stake.

Other partners include:

• Sakhalin Oil and Gas Development Co., Ltd. (SODECO): A Japanese consortium holding 30%. JAPEX has a 15.285% investment ratio in SODECO.
• ONGC Videsh: India’s state-owned company, holding 20%.
• Rosneft: Participates through its subsidiaries RN-Astra (8.5%) and Sakhalinmorneftegas-Shelf (11.5%).

Reserves and Production

The Sakhalin-1 project is estimated to hold approximately 2.3 billion barrels of oil and 17.1 trillion cubic feet (Tcf) of recoverable natural gas reserves. In 2018, the project produced over 11.63 million tonnes of oil and condensate, and supplied 2.48 billion cubic meters of gas. The total crude export from the project reached 100 million tonnes by August 2018.

Infrastructure and Facilities

• Offshore Platforms: The Chayvo field is developed with the Orlan platform, and the Arkutun-Dagi field with the Berkut platform, which is the largest ice-resistant fixed platform in Russia. The Odoptu field has an onshore oil and gas treatment facility.
• Drilling Rigs: Parker Drilling’s Yastreb onshore drilling rig and the Krechet drilling rig, the world’s biggest and most powerful land rig, have been used for drilling extended-reach wells. Notably, a 15km-long well from the Orlan platform at the Chayvo field was completed in November 2017, setting a record for the world’s longest well.
• Processing Facility: The oil and gas from the fields are transported through a pipeline to the Chayvo onshore processing facility, which has a capacity of approximately 250,000 barrels of oil and 800 million cubic feet of gas per day.
• Pipeline and Export Terminal: The oil is pumped to the De-Kastri terminal in Khabarovsk Krai, Russia, through a 226-km long and 24-inch diameter pipeline. The De-Kastri oil export terminal has an annual capacity of 12 million tonnes. An LNG export terminal with an expected capacity of 6.2 million tonnes per annum is also planned at the De-Kastri Port.

Technical Challenges and Innovations

The project faced significant technical challenges due to the harsh arctic climatic conditions in the Northern Sakhalin region. Innovations include:

• Extended-Reach Drilling: The use of shore-based, extended-reach drilling to develop the Odoptu and Chayvo fields.
• Concrete Island Drilling System (CIDS): The deployment of the Glomar Beaufort Sea I CIDS for the Chayvo field.
• Earthquake-Resistant Design: The Berkut platform is equipped with friction pendulum bearings to withstand earthquakes of up to magnitude 9.0.

History and Development Phases

• Production Sharing Agreement (PSA): Signed in June 1995 between the Russian government and the participating companies.
• Phase 1: Development of the Chayvo field, started in 2002, with initial production in October 2005.
• Phase 2: Development of the Odoptu field, started in May 2009, with production commencing in September 2010.
• Phase 3: Development of the Arkutun-Dagi field, started in 2014, with production beginning in January 2015.

Economic and Social Impact

The total investment in the project is estimated to be approximately $10-12 billion, making it one of the largest direct foreign investments in Russia. The project has created nearly 13,000 jobs and has contributed significantly to the regional economy by lowering unemployment and improving the tax base.

Current Status

Following the 2022 Russian invasion of Ukraine, production at Sakhalin-1 was halted in May 2022 due to international sanctions. Exxon Neftegas declared force majeure, and the Russian government subsequently transferred the project's operation to a new entity, Sakhalin 1 LLC, with the government holding a controlling stake.