Sakhalin-1 Starts Building Pipeline To Dekastri

Exxon Neftegas Limited (ENL), the Sakhalin-1 Project Operator, held a ceremony of welding of the first joint of the pipeline between Sakhalin Island and the Russian mainland.

Critical to the Sakhalin-1 Project, the 225-kilometer pipeline will transport Chayvo crude oil westerly across Sakhalin Island and the Tatar Strait to the DeKastri terminal in the Khabarovsk Krai. The pipeline design capacity is approximately 12 million tons of oil a year (250 thousand barrels per day).

The pipeline was especially designed to meet the challenges unique to Sakhalin. To ensure safe operations, advanced technologies will be used, including directional drilling for subsurface crossing of water bodies, automated shut-off valves for emergencies, and state-of the-art software-based leak detection system, which has been validated by 10 years of extensive use by ExxonMobil and the oil industry world-wide.

Nippon Steel Corporation and its Russian affiliate NS Nephtegazstroy Limited, as well as two Russian companies - LUKoil-Neftegazstroy, and SMU-4 - are involved in the construction of the pipeline, which is scheduled for completion at the end of 2005. More than 80% of the pipe is supplied by the Russian Vyksa Metallurgical Plant.

Speaking at the ceremony, ENL Vice President Jim Flood commented "We are very pleased with the level of participation of the Russian companies in the project. The value of Sakhalin-1 contracts awarded to the Russian companies to-date has exceeded $US 2.9G."

The Sakhalin-1 project, one of the largest foreign direct investment projects in Russia, includes the Chayvo, Odoptu and Arkutun-Dagi fields. The Project will recover approximately 307 million tons (2.3 billion barrels) of oil and 485 billion cubic meters (17.1 trillion cubic feet) of gas. The total investment in full field development is estimated at over US$12 billion (2002 dollars). To date, in excess of US$ 2.6G has been spent on Project activities. In addition to ENL (30% interest, Operator), the Sakhalin-1 Consortium includes 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%).