Sakhalin II Gears Up for Full Production

The last major offshore gas well is being completed at the Lunskoye platform in Russia's sub-Arctic Sea of Okhotsk preparing the way for full production capacity of liquefied natural gas (LNG) at Sakhalin II, one of the world's largest integrated oil and gas projects.

Production at Sakhalin II's first LNG unit got under way in March 2009 with a flawless start-up program. Completion of the final gas well -- Russia's largest -- is a vital step towards starting operations at its second LNG unit. Full capacity of 9.6 million tonnes a year is expected to be reached in 2010.

Sakhalin II is one of the most challenging engineering feats ever achieved. It operates amid some of the world's harshest conditions in Russia's far east, an area prone to earthquakes.

The project on Sakhalin Island exports LNG and oil to the fast-growing energy markets in the Asia-Pacific region and the west coast of North America. It will meet nearly 8% of Japan's gas needs and 5% of South Korea's. The first Sakhalin II LNG cargo delivered arrived in Japan's Tokyo Bay in April 2009, the first time Russia has exported gas from its eastern borders and the first time it has supplied gas to Japan. Shell is a partner and lead technical adviser to the project’s operator, Sakhalin Energy.

Sakhalin II has total resources of some four billion barrels of oil equivalent. At full capacity, the LNG plant would add up to 5% to the world’s current LNG capacity.

Offshore platforms in an icy sea

The platforms that produce Russia's first offshore oil and gas, 15 kilometers off Sakhalin Island, stand in water up to 50 meters deep in the stormy Sea of Okhotsk. They are the Piltun-Astokhskoye A platform (also known as "Molikpaq"), Piltun-Astokhskoye B and Lunskoye A platforms.

In this region, temperatures can drop to -45 degrees Celsius (-49 degrees Fahrenheit) in winter. Arctic winds combine with high humidity for a wind-chill factor of -70 degrees C (-94 degrees F). At such temperatures, people can work outside only in short shifts despite steel cladding on the outer sides of the platforms that breaks the wind, offering some protection.

Frozen seas and earthquake zone

Ice poses serious technical challenges too. From December to May, a thick layer of ice surrounds the platforms in the Sea of Okhotsk, preventing tankers from reaching them to load oil and gas. Instead, a 300-kilometer network of underwater pipelines takes the hydrocarbons ashore year-round.

Two major earthquakes of 6.4 and 7.6 on the Richter scale have struck the Sakhalin region in the past 15 years. The platforms are designed therefore to resist the kind of enormous earthquake that occurs perhaps once in 3,000 years. The topsides, or upper parts, of two of the platforms are connected to their concrete legs by sliding joints. If an earthquake strikes, they can move independently from the legs in a pendulum motion, preventing damage.

Ridges of compressed ice can carve deep gashes in the seabed and could damage pipelines. A thick concrete coating protects them, however, and they are buried five meters beneath the seabed wherever the sea is less than 30 meters deep. As an extra safeguard, electronic leak-detection systems including valves halt the flow of oil and gas if the pressure drops.

Protecting western gray whales Western gray whales, a species brought to near extinction by commercial whaling early in the twentieth century, feed in the waters off Sakhalin Island. Sakhalin Energy re-routed the offshore pipelines 20 kilometers to the south to avoid the feeding grounds following advice from an independent panel of scientists set up under the International Union for Conservation of Nature (IUCN). In recognition of its western gray whale protection programme, Sakhalin Energy won the 2008 Environmental Project of the Year award from Russia’s Ministry of Environment and Natural Resources.

To protect the whales, sound levels in the area are constantly monitored and work such as drilling and pipe laying is suspended when the noise exceeds levels recommended by scientists. Buoys with acoustic monitors positioned along the edge of the feeding grounds track sound levels. The large-scale research programme is jointly financed by Sakhalin Energy and ExxonMobil, the operator of the Sakhalin I project.

Pipelines crossing seismic faults and salmon rivers

Once the hydrocarbons are pumped ashore, a processing plant treats gas and condensate, a natural gas liquid, from the Lunskoye-A platform, along with oil and some gas produced by the Molikpaq and Piltun Astokhskoye-B platforms. From there, the gas is sent through two parallel 800-kilometer pipelines to the Prigorodnoye complex at Aniva Bay in the south of the island, which includes an LNG plant, an oil export terminal and a port which is virtually ice-free during winter.

As long as the distance from Paris to Berlin, the pipelines cross seismic faultlines at 19 places and more than 1,000 of Sakhalin Island's 60,000 rivers and streams. The 8,000 construction workers who built them could only start work after unexploded munitions from World War Two had been cleared.

Engineers planned the onshore pipeline route to avoid most of the active faults where even low levels of seismic activity could cause ruptures. If no alternative route existed, they used pipeline segments made of steel that can bend up to four meters without breaking.
Sakhalin Energy planned the route to create the least disturbance to vulnerable species, such as the Steller's sea-eagle and Siberian spruce grouse, and to the island's rich vegetation. Laying the pipelines beneath streams where salmon spawn -- a highly sensitive operation -- mainly took place in winter when the water was frozen.

Harnessing the cold to produce LNG

The gas arrives at Prigorodnoye port after a day-long journey from the platforms. There Sakhalin Energy has built Russia's first LNG plant, designed to produce 9.6 million tonnes a year of LNG. That is enough to generate electricity for around 24 million European homes. Almost all the production capacity is committed in long-term contracts to supply customers in Japan, Korea and North America.

Shell developed an energy-saving process for sub-Arctic conditions that takes advantage of the low ambient temperatures to cool the gas and turn it into a liquid.

The new oil export terminal next to the LNG plant has the capacity to store 1.2 million barrels of oil -- six days of pipeline supply. Heating elements fitted inside the roofs of the storage tanks ensure that snow in winter does not build up into a heavy load. Instead, it melts and slides off. A pipeline on the seabed takes the crude oil to tankers waiting to be loaded at an offshore installation 4.5 kilometers from Prigorodnoye.

"Sakhalin II will be a model for future projects," said Sakhalin Energy Chief Executive Officer Ian Craig. "We benefited hugely from working as partners in the joint venture -- Gazprom with its expertise in pipelines, Shell with its offshore and technological expertise, and Mitsui and Mitsubishi with their knowledge of LNG markets."

Thousands of men and women worked together to overcome huge technical and environmental challenges and make Sakhalin II a reality. At the peak of construction, 25,000 people were helping to build Russia's largest privately financed project.

Sakhalin Energy was set up in 1994 to implement the project, in which Gazprom has a 50% stake plus one share. Partners Royal Dutch Shell, Mitsui & Co. Ltd. and Mitsubishi Corporation hold stakes of 27.5% minus one share, 12.5% and 10% respectively.