Sakhalin II Project Overview

Abstract The Sakhalin Project overview discusses the origin of Sakhalin Energy, its participants, organization, supervision by Russian Federation--as guided by the production sharing agreement--and the decision-making process. The paper then delineates the major accomplishments to date on Vityaz Production Complex, with the most significant milestone being the installation of the Molikpaq Platform in September 1998. With the delivery of a new-build FSO to the Piltun Astokhskoye Field in June 1999, Phase I of Sakhalin II development will near completion, with first oil to be offloaded in summer 1999. The balance of the paper discusses lessons learned, and provides an introduction to the remaining Sakhalin II papers. As the first international company to secure a production sharing agreement from the Russian Federation, Sakhalin Energy is fully committed to its shareholders and to the people of Russia in the delivery of maximum efficiency and safety in the development, production and marketing of Sakhalin area hydrocarbons. This unyielding commitment has challenged the full project team to "think out of the box" in creating the most economic and safe approach to project viability. Inherent in this approach is the project philosophy of maximizing revenue while minimizing cost. Simplicity, standardization and austerity in facilities design represent guiding principles. Russian content is a key consideration to ensure in-country growth. Sakhalin Energy is executing a world-class project to develop two fields that have combined proven reserves of approximately 1 billion barrels of liquids and 14 trillion cubic feet of gas. This global effort incorporates the expertise of highly trained Russian employees and contractors, plus the international oil industry's best resources for upstream oil and gas development. Introduction Years of effort by the Russian Federation, the Sakhalin Oblast administration and the Sakhalin II project partners has resulted in the industry's first production platform being successfully installed offshore Sakhalin Island. The newly refitted Molikpaq drilling/production facility-the keystone of the Vityaz Production Complex-was installed at the Piltun-Astokhskoye Field in 30 meters of water, 16 kilometers offshore Sakhalin Island's northeast shore in the Sea of Okhotsk on Sept. 1, 1998. Other components of the Vityaz Production Complex include the facilities required for tanker offloading during the six months of the ice-free season. Production start-up is slated for July 1999, with flow rates expected to reach 90,000 barrels/day of oil and 70 million standard cubic feet/day of gas by the start of second producing season producing season. The project is managed by Sakhalin Energy Investment Company Ltd.--a four-company consortium including Marathon Sakhalin Ltd., Mitsui Sakhalin Holdings B.V., Shell Sakhalin Holdings B.V. and Diamond Gas Sakhalin B.V., a Mitsubishi subsidiary. The Sakhalin II project will provide the first production under a production sharing agreement in the Russian Federation. The Molikpaq--a gravity-based structure originally designed for Beaufort Sea exploratory drilling--was acquired in 1997 from Gulf Canada. It is the first platform of its kind, designed for an environment of high ice loads combined with significant seismic activity and intense wind and wave loads. The lack of infrastructure for oil and gas development at this remote location presented a challenge for the Sakhalin II team in defining a design scheme for an early production system. Molikpaq provides all of the required facilities for this remote development, including accommodations, the ability to drill and produce up to 32 wells, an oil export system and appropriate gas utiliz