Sakhalin-2

Location and Fields

The project involves the development of two major offshore fields: the Piltun-Astokhskoye (PA) oil field and the Lunskoye gas field, both located in the Sea of Okhotsk, approximately 16 km off the north-eastern coast of Sakhalin Island.

Project Development Phases

The Sakhalin-2 project was developed in two phases:

Phase One

• This phase included the development of the Piltun-Astokhskoye oil field and the Vityaz production complex, which came on stream in 1999.
• The Vityaz production complex consisted of the PA-A platform (Molikpaq) installed in 30m-deep waters, a single anchor leg mooring (SALM) buoy, a subsea pipeline, and the Okha floating storage and offloading (FSO) unit.

Phase Two

• Launched in 2003, this phase involved the installation of the PA-B and Lunskoye-A (Lun-A) platforms.
• It also included the construction of the TransSakhalin pipeline system and the Sakhalin-2 LNG plant.
• The PA-B platform was installed in 32m-deep waters in the Piltun area of the Piltun-Astokhskoye field, 12 km off the north-eastern coast of Sakhalin Island.
• The Lun-A platform was installed on the Lunskoye gas field.

Infrastructure and Facilities

• Offshore Platforms: Three fixed offshore production platforms - PA-A (Molikpaq), PA-B, and Lun-A.
• Pipelines: 300 km of offshore pipelines and over 800 km of onshore pipelines, including gas and oil pipelines with booster stations (BS1 and BS2).
• Onshore Processing Facility: Located near the town of Nysh, this facility processes gas and crude oil from the Lunskoye field.
• LNG Plant: A two-train LNG plant with a capacity of 4.8 million tonnes per annum (Mtpa) each, located at Prigorodnoye in the south of Sakhalin Island. The plant commenced production in February 2009.
• Oil Export Terminal: Located at Prigorodnoye, the terminal includes storage tanks and a tanker loading unit situated approximately 4.5 km offshore in Aniva Bay.

Operational Details

• Production Capacity:
  • The PA-B platform has the capacity to produce 70,000 barrels of oil and 2.8 million cubic meters (Mcm) of associated gas per day. It has a gas production capacity of 51 Mcm per day and an associated condensate production capacity of 50,000 barrels per day (bpd).
  • The cumulative gas production from the PA-B platform exceeded 189 billion cubic meters (bcm) as of December 2020.
• LNG Plant: The LNG plant has two processing trains, each with a capacity of 4.8 Mtpa. The plant includes nitrogen and air production units, instrument air systems, water and wastewater treatment plants, flare units, and LNG storage tanks.

Environmental and Social Considerations

• The project faced significant environmental concerns, including allegations of violating Russian environmental laws. The Russian government claimed that pipeline laying had caused extensive damage to Sakhalin's habitat, leading to a proposed $15 billion complaint against Sakhalin Energy in 2006. The company revised its environmental action plan and negotiated new terms for the production sharing agreement (PSA).

Project Financing

• The total project value is approximately $20 billion, making it one of the largest project financings in the world.
• The financing included a $5.3 billion project finance contract signed by the Japan Bank for International Cooperation (JBIC) and a consortium of international commercial banks in June 2008. The project had a debt-to-equity ratio of 27:73, with $14.7 billion in equity and $5.3 billion in senior debt.

Ownership and Operation

• The project is operated by Sakhalin Energy Investment Company (Sakhalin Energy), a joint venture between Gazprom (50% + 1 share), Shell (originally 27.5%, but Shell announced its withdrawal in 2022 due to Russia’s invasion of Ukraine), Mitsui (12.5%), and Mitsubishi (10%).

Historical Milestones

• Feasibility Study: Initiated in March 1992 by the MMM Consortium (Marathon, McDermott, and Mitsui), later renamed MMMMS with the inclusion of Shell and Mitsubishi.
• Production Sharing Agreement (PSA): Signed in June 1994 between the Russian Federation, the Sakhalin Oblast Administration, and Sakhalin Energy.
• Phase One Approval: Feasibility study approved by GlavGosExpertiza and the Russian State Environmental Review body in April and June 1998, respectively.
• Phase One Production: Started in July 1999 with the PA field.
• Phase Two Completion: The second phase was largely completed by 2008, with the LNG plant starting production in February 2009.

Technological and Logistical Challenges

• The project faced severe weather conditions and complex logistical challenges due to its remote location.
• ABB, along with other partners, provided a total integrated telecommunication solution, electrical power distribution systems, and other critical infrastructure to support the project.

The Sakhalin-2 project is a landmark in the oil and gas industry, marking the first offshore gas project and the first LNG plant in Russia, and it continues to be a significant contributor to the global energy market.