Tapping Sakhalin’s Energy Resources

Braving a new frontier of oil exploration around Russia’s remote Sakhalin Island means conquering ice-locked seas, frequent earthquakes and muddy swamps fed by melting snow in the rapid springtime thaw.

Executives at the world’s largest oil and gas project, known as Sakhalin-2, say they are nearing the finish line as they aim to open up a vast new energy source for the nearby Asian economic powerhouses of Japan and South Korea along with the U.S. and others.
Sakhalin Energy has already been exporting limited oil from a single offshore platform since 2003 that can only operate half of the year, when seas aren’t frozen. But the next phase of the project, set to be completed by the end of 2008, will see the opening of two more offshore platforms along with pipelines bringing oil and gas to the island’s warmer southern shore.

To export the gas, the company is building Russia’s first-ever liquefied natural gas plant, which converts the gas to a liquid by cooling it to a temperature of minus 161 degrees Celsius (minus 258 Fahrenheit) so that it can be transported by ship. Customers in Japan, South Korea and the U.S. have already bought all the gas to be produced here for more than the next 20 years.

When completed, Sakhalin Energy will be able to export oil and gas year-round from the fields where it is licensed to operate. They hold about a tenth of the island’s total reserves, or 4.5 billion barrels of gas and oil equivalents.

By several measures, Sakhalin-2 is the world’s largest oil and gas project. With a $20 billion (13.7 billion euros) price tag, it is the most expensive. With 25,000 employees, it has the most workers. And it uses more steel, aluminum and concrete than any other similar undertaking.

Moscow News