This agreement, which is effective from June 1, 2003, is expected to lead to the award of a formal contract in the near future, with an estimated value of approximately US$250 million.
The contract requires KCA DEUTAG to carry out platform drilling services for a primary contract duration of 7 years, with immediate effect, on the Molikpaq platform, together with the platform drilling services on the Lunskoye-A ('LUN-A') and Piltun B ('PA-B') platforms, scheduled for 2005 and 2006 respectively.
An additional scope of work requires KCA DEUTAG to provide engineering support to SEIC's design contractor for the LUN-A and PA-B drilling facilities. The focus of this support will be on the operability and maintainability of these new drilling facilities, which include several major safety improvements including the provision of mechanised drill floor handling arrangements and advanced drilling control systems designed to protect personnel from potential safety hazards.
Alasdair Locke, Executive Chairman of Abbot commented: 'Sakhalin Island is a key development area for KCA DEUTAG and we are extremely pleased to continue our operations on the Molikpaq platform, and to expand this scope to include the two new facilities LUN-A and PA-B. The seven year contract term will allow us to invest in the training of our Russian personnel and achieve a level of Russian involvement in excess of 70%.'
'This contract complements our existing contract with Hyundai Heavy Industries (HHI) for the Sakhalin-1 Project in the Russian Far East, announced in late 2002, and further confirms KCA DEUTAG as being a major international drilling contractor for offshore field development projects.'
In May 2003 SEIC announced its positive investment decision for the Lunskoye development with a commitment of approximately US $10 billion to allow for the development of the Phase 2 Project and represents the largest single foreign investment in Russia to date.
SEIC is the Shell-led operating company for the Sakhalin II production-sharing agreement (PSA). The shareholders in SEIC are: Shell Sakhalin Holdings B.V, 55%; Mitsui Sakhalin Holdings B.V., 25% and Diamond Gas Sakhalin B.V., a Mitsubishi company, 20%.
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