Sakhalin-1 Starts Drilling Program at Chayvo

Exxon Neftegas Limited (ENL), operator for the Sakhalin-1 Consortium, announced the start of drilling from the Chayvo wellsite, located onshore on the north east coastline of Sakhalin Island in the Russian Far East, some 600 km north of Yuzhno-Sakhalinsk.

The start of drilling at Chayvo marks the beginning of the Sakhalin-1 shore-based extended-reach drilling program. Ultimately 34 wells will be drilled from three sites at the Chayvo and Odoptu fields during Phase 1 of the Sakhalin-1 Project development. The Chayvo land-based drilling rig named Yastreb, the Russian word for "hawk", is the largest and most powerful land rig in the industry. It is designed to withstand earthquakes and temperatures as low as 40C degrees below zero. Yastreb will drill down and then horizontally under the sea a total distance of up to 11 km (6.8 miles) to reach the Chayvo field offshore Sakhalin Island, making these advanced "extended reach" wells among the longest in the world.

Speaking at the Chayvo spud ceremony, Stephen Terni, President of ENL, described the ERD technology as a cost-effective and environmentally sound drilling technology capable of reaching subsurface targets miles away from a remote drilling location.

"ExxonMobil spends more than US$ 600 million annually on proprietary research and development, the highest of any company in our industry. Application of leading edge ERD technology for the Sakhalin-1 Project is a significant breakthrough in our ability to develop the resources in the most cost effective, efficient, and environmentally sound way possible, "- said Terni.

The Chayvo field will be developed from both onshore and offshore facilities. The onshore Chayvo well site will support drilling and production operations for ten wells to develop the northwestern flank of the main Chayvo oil zone. The southwestern flank of Chayvo, located too far offshore to be developed from the onshore drilling site, will be developed from Orlan, a concrete structure named after a sea eagle indigenous to Sakhalin Island. Orlan will serve as the offshore drilling and living quarters platform and will support drilling and production for additional 14 wells. Orlan drilling is planned to start in 2005.

Other development activities at Chayvo include construction of an onshore processing facility (OPF) to separate the oil and gas and treat 250 thousand barrels of crude oil per day (40,000 cubic meters per day). Gas not sold into domestic or export market will be re-injected into the reservoir for conservation.