Exxon Neftegas to Refurbish the Orlan Platform

Exxon Neftegas Limited, operator for the Sakhalin-1 Consortium, announced that the Orlan platform refurbishment contract has been awarded to Amur Shipbuilding Plant (ASP), a Russian company based in Komsomol'sk-na-Amur in the Russian Far East. The value of the fixed price contract is around $US140 million, with the scope of work including engineering, procurement, construction and platform installation activities. This contract is one of the largest of its type to be awarded to a Russian company, and adds to an already significant proportion of local content in the project. Since the Sakhalin-project began in 1996, the total value of contracts awarded to Russian contractors and suppliers is estimated to total more than $US530 million. Founded in the 1930s, ASP has manufactured hundreds of vessels for commercial and military applications. The company recently expanded its business focus to take advantage of potential oil and gas developments in the region, and has experience fabricating platform foundations and topside modules for other projects in the Russian Far East.

Work is expected to begin on modifying the Orlan in June 2002, with platform installation scheduled for 2004. The Orlan will be used for drilling on the Chayvo field, one of three Sakhalin-1 fields located approximately 11 kilometers (7 miles) off the east coast of Sakhalin Island.

The Orlan is a gravity-based structure and will be set in around 14 meters (45 feet) of water. The platform consists of four basic components: a steel mud base, a concrete mid section, and two steel deck sections which will support a new world-class drilling rig, platform facilities and accommodation quarters. In 2001, the platform was towed from Alaska to the Russian port of Sov Gavan. The platform, now known as "Orlan," was named after a white-shouldered sea eagle, which symbolizes strength, boldness and speed and is indigenous to the Sakhalin Island. The platform was first used in 1984 by ExxonMobil in the Beaufort Sea off Alaska's North Slope, and has proven that it is engineered to operate year-round in difficult Arctic conditions.

According to Neil Duffin, President of ENL, awarding this major contract to a Russian company is tangible proof of the Consortium's commitment to maximizing the Russian content of the Sakhalin-1 project. "We are pleased this contract has been awarded to a Russian company that is well qualified for this type of work. We will continue to seek Russian expertise, and integrate our collective skills and experience to address the many challenges involved in this project."

The Sakhalin I project, the largest foreign direct investment project in Russia, has recoverable resources of approximately 2.3 billion barrels of oil and 17 trillion cubic feet of gas. The Sakhalin I Consortium plans to develop the project in four phases. The first phase, with development costs of around $US4 billion, will focus on planned oil production, with limited gas supplies available to help meet the Russian domestic demand. First oil production from the Chayvo field is scheduled to commence at the end of 2005, and reach a daily plateau rate of around 250,000 barrels. Gas market development and sales remain a high priority for the project and discussions with potential export customers continue, along with a framework for developing commercial gas sales to Russian domestic purchasers.

In addition to ENL (30 % interest, operator), the Sakhalin I 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 %).