Russia's Sakhalin Oil Output To Rise By 8% In 2016


YUZHNO-SAKHALINSK, Russia, Sept 28 (Reuters) - Russia's Pacific island of Sakhalin is expected to increase oil production by 8 percent in 2016 from a year ago, a regional official said, which would add to the global glut the industry currently faces.

Russia and the Organization of the Petroleum Exporting Countries are gathering in Algeria this week in a second attempt this year to cooperate on global oil markets to stabilise prices. Yet, the task looks hard as hopes are fading that Saudi Arabia and Iran would find a compromise, while production is growing in Russia.

Vera Sherbina, head of Russia's regional government of Sakhalin, told a conference on Wednesday that oil and gas condensate production at the island, which comes mostly from offshore, will climb to 18.1 million tonnes, or about 362,000 barrels per day (bpd), this year, up from 16.7 million tonnes in 2015.

The annual oil and gas conference at Sakhalin has gathered mid-tier officials from Russian and western oil and oilfield services companies to discuss the prospects of the region that accounts for around 3 percent of Russia's total output.

Production of oil and gas at Sakhalin, which is also famous for being the home of one of Russia's largest oysters, comes mostly from two offshore projects - Sakhalin-1 led by ExxonMobil and Sakhalin-2 led by Russia's Gazprom.

Sakhalin-1 shareholders also include Russia's Rosneft , Japan's Sodeco and India's ONGC. Apart from Gazprom, Sakhalin-2 shareholders include Royal Dutch Shell, Mitsui and Mitsubishi.

"Our key task is to maintain production levels we have now," Sherbina told reporters. She did not provide an outlook for oil production for the island for the years to come.

Sakhalin-2 also operates Russia's sole LNG plant, with Sakhalin-1 also looking at building its own LNG facility that could start production after 2023.


Russian oil production is growing despite western sanctions and low oil prices, as previous investments come online. Output is expected to be as high as 547 million tonnes in 2016, or almost 11 million bpd, which would be a new record.

Rosneft, Russia's biggest oil producer, is under sanctions over Moscow's role in the Ukraine crisis, with restrictions both on supporting the firm financially as well as getting access to exploration technology.

In June, Rosneft said it started exploration drilling in the Sea of Okhotsk in Russia's Far East, northeast of Sakhalin, along with Norway's Statoil.

Alexander Zharov, a department head at Rosneft, said that the sea depth at the drilling area was less than 150 metres, which is not covered by the sanctions. He said it was too preliminary to comment on the results.

"Sakhalin remains one of a few places in the world where operations remain profitable even at oil prices of $50 per barrel," said a manager with western oilfield services company, who came to Sakhalin looking for new contracts but declined to give his name.

(Reporting by Katya Golubkova; Editing by Sandra Maler and Christian Schmollinger)

Copyright 2016 Thomson Reuters. Click for Restrictions.


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