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RIA Novosti (Russia): Sakhalin Energy inks deal with construction firms

Sakhalin Energy inks deal with construction firms

11:37 24/ 04/ 2006
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YUZHNO-SAKHALINSK, April 24 (RIA Novosti) – Sakhalin Energy has signed a letter of intent with a consortium of construction firms that won a tender to build oil and gas pipeline infrastructure on the far-eastern island, the regional press department said Monday.

Sakhalin Energy, a Dutch-British-Japanese, venture is the operator of the Sakhalin-II energy project and developing two vast fields on the island that have estimated recoverable reserves of 150 million metric tons of oil and 500 billion cubic meters of gas.

The regional press department hailed the letter of intent. “The tender is worth $85 million, a record contract won by Sakhalin builders under the project to develop the island's shelf,” it said.

The group of the Sakhalin companies that have won the tender includes Sphera, Transstroi Sakhalin and SU-4. Overall, nine companies, including two foreign firms, bid in the tender.

The contractors will carry out work from May 2006 through June 2007 and employ about 500 Sakhalin builders.

Sakhalin Energy, owned by Royal Dutch/Shell (55%) and Japan's Mitsui (25%) and Mitsubishi (20%), is working under a production sharing agreement that gives the company major tax breaks in exchange for a share of production. The Sakhalin II project, which will likely cost over $20 billion, is based on a production sharing agreement signed in 1994.

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