Russian Federation Approves TEOC for Sakhalin-1 Construction

Exxon Neftegas Limited (ENL), operator of the Sakhalin-1 Project in the Russian Far East, announced that the Russian Federation approved the Technical and Economic Substantiation of Construction (TEOC) for Phase 1 of the Sakhalin-1 Project.

Approval of the TEOC is a key project milestone that allows the Sakhalin-1 Consortium to commence construction of the Sakhalin-1 Phase-1 facilities, enabling ENL to maintain the schedule leading to first oil production from Chayvo in 2005. TEOC approval was preceded by a positive conclusion of the Ministry of Natural Resources State Environmental Expert Review Panel that confirmed environmental feasibility of Phase 1 of the project.

ENL President Steve Terni said, "TEOC approval was an important milestone that the Sakhalin-1 Project needed to undertake the full-scale Phase 1 development activities of the Sakhalin-1 fields. The 41,000-page TEOC review process required approvals from over 40 Russian agencies at the federal, regional and local levels. On behalf of the Sakhalin-1 Consortium, I would like to take this opportunity to convey our gratitude to members of the Russian Federation Government, the Sakhalin Oblast Administration, and the numerous Russian Design Institutes and Russian companies that provided their expertise and support in ensuring an effective review of the project."

The Sakhalin-1 Project, the largest foreign direct investment project in Russia, includes the Chayvo, Odoptu and Arkutun Dagi fields located off the northeast coast of the Sakhalin Island. It has potential recoverable resources of approximately 2.3 billion barrels (307 million tons) of oil and 17 trillion cubic feet (485 billion cubic meters) of gas. Capital investment in the full Sakhalin-1 development is estimated at over US$12 billion.

Project benefits to Russia include direct revenues, estimated at US$40 billion, improvement of the Sakhalin infrastructure, new employment opportunities for Russian citizens, and participation of Russian suppliers and contractors. The value of the Project contracts awarded to Russian companies to date is approximately US$2.8 billion.

In addition to ENL (30 % interest, operator), Sakhalin-1 Consortium members are the Japanese company Sakhalin Oil and Gas Development Co., Ltd. (30 %), Indian company ONGC Videsh Ltd. (20 %) and two Russian companies, Sakhalinmorneftegas-Shelf (11.5 %) and RN-Astra (8.5 %).