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Lloyds List: Shell suffers further delays at Sakhalin II

Lloyds List: Shell suffers further delays at Sakhalin II

“In July, Shell said capital costs in Sakhalin II have doubled to $20bn because of a raft of issues including the new pipeline routes, increasing contractor costs and changes in project requirements. It has already pulled back first deliveries of liquefied natural gas from the project into 2008.”

Thursday Aug 04, 2005

ROYAL Dutch Shell could possibly face further delays to year-round oil production at the key Sakhalin II project in eastern Russia, writes Martyn Wingrove .

The Anglo-Dutch oil major has already said year-round oil output would be put back to the end of 2007 because of problems laying the onshore pipeline across the island’s icy terrain.

Mitsubishi, a Japanese investor in the project, said the delays could be extended into 2008 because Sakhalin Energy Investment will have to re-route offshore pipelines to avoid a whale breeding area.

At present, Sakhalin Energy, led by Shell, exports crude from the Sakhalin II production sharing contract area over the summer months only, because of the restrictions from winter ice sheets

The proposed offshore pipelines will transport crude to an onshore processing plant and enable year-round production of 180,000 barrels per day.

In July, Shell said capital costs in Sakhalin II have doubled to $20bn because of a raft of issues including the new pipeline routes, increasing contractor costs and changes in project requirements. It has already pulled back first deliveries of liquefied natural gas from the project into 2008.

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