Sakhalin-1 Oil Project Continues to Achieve Record Production Milestones

Exxon Neftegas Ltd.

The Sakhalin-1 Consortium, operated by Exxon Neftegas Limited (ENL), announced that the Sakhalin-1 Project in eastern Russia continues its record of achievement in commercializing Russia's energy resources to meet growing worldwide energy demand.

More than 20 million tons (157 million barrels) of Chayvo field crude oil have been produced and loaded into over 200 tankers at the De-Kastri Export Terminal in the Khabarovsk Krai. The first tanker of Sakhalin-1 "Sokol" crude oil was loaded in September 2006.

Since 2005, the Sakhalin-1 Project Consortium members have been the key suppliers of natural gas to the Khabarovsk Krai in Russia’s Far East. Consumers there have received over 3 billion cubic meters (105 billion cubic feet) of gas to heat their homes and supply other energy needs. Gas produced by the Project will continue to meet natural gas demand in this region through the year 2025 and beyond.

Since the Sakhalin-1 Project launch, the Russian State has received 28 billion RUB (US $1.1 billion) as royalty and the State's share of the hydrocarbons, and an additional 5.3 billion RUB (US $211 million) has been allocated to the Sakhalin Oblast budget. In addition, the Sakhalin Oblast Development Fund received 2.5 billion RUB (US $100 million), and production bonuses totaling 1.5 billion RUB (US $60 million) will be paid as other phases of the Project are started up. Over the life of the Sakhalin-1 Project, the Russian State is expected to receive more than 1.250 trillion RUB (US $50 billion) in taxes, royalty and the state’s share of hydrocarbons from the Sakhalin-1 Project.

The current value of contracts awarded to Russian companies totals 125 billion RUB (over US $5 billion), which represents two-thirds of the total contracts awarded to third-party vendors. Currently hundreds of Russian nationals are engaged in the Sakhalin-1 Project activities. Nearly 500 Russians are directly employed by the operator, ENL.

"We are proud that the Sakhalin-1 Project continues to demonstrate new accomplishments," said James Taylor, ENL President. "This success provides a solid foundation for the future."

The Consortium's commitment to Sakhalin's communities includes investment of over 3 billion RUB (US $120 million) for infrastructure projects. Facilities such as hospitals, clinics, roads, bridges, ports, airports, water supply and central heating utilities have been upgraded. In addition, ENL has contributed over 85 million RUB (US $3.5 million) to support education, health care and cultural projects.

Phase 1 of the Sakhalin-1 Project produces crude oil and natural gas from the Chayvo field. Future phases of the Project will include developing the Odoptu and Arkutun-Dagi fields, expanding the Chayvo Onshore Processing Facility, and further developing Chayvo gas. This will increase the benefits of the Russian Federation from the Sakhalin-1 Project.

The Project applies cutting-edge technologies engineered specially for arctic operations to develop the Sakhalin Island energy resources with careful regard for the environment, efficiency and costs. Over 17.5 billion RUB (US $700 million) has been invested in environmental projects to help protect wildlife and habitats in the areas of operation.

Exxon Neftegas Limited (30 percent interest) is operator for the Sakhalin-1 project, which includes the Japanese company Sakhalin Oil and Gas Development Co. Ltd., (30 percent); affiliates of Rosneft, the Russian state-owned oil company, RN-Astra (8.5 percent), Sakhalinmorneftegas-Shelf (11.5 percent); and the Indian state-owned oil company ONGC Videsh Ltd. (20 percent).