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Gulf-Times (Qatar): Russia ups pressure as Exxon delays Sakhalin-1 full exports

Sakhalin I Exxon led project
(An aerial view of the Yastrev (Hawk) land rig at Sakhalin-1’s Chaivo field, some 1,000km (621 miles) north of Yuzhno Sakhalinsk on Tuesday.)

Published: Thursday, 12 October, 2006, 10:11 AM Doha Time 

When ExxonMobil finishes drilling the world’s longest oil on Sakhalin island next year, it hopes to leave behind something more than just technological innovations. The world’s biggest energy firm hopes that the unique technology it says it brought to Russia will help ease the Kremlin’s pressure on production sharing deals with foreign majors

NOGLIKI, Russia: Russian authorities are still checking a new oil terminal built by the Exxon Mobil-led Sakhalin-1 group and it may take two months before full operations are allowed, project members said yesterday.

They also said full scale oil production of 250,000 bpd could be delayed to the first quarter of 2007, from the initial target of the end of this year, as the facilities needed more work.

“The terminal is currently working under a testing regime. This may continue for another month or two,” said Michael Allen, head of government and public relations for the group.

The Pacific De Kastri terminal had been expected to obtain the necessary permissions in September or October, but Russia’s technical watchdog RosTekhNadzor delayed the approval as it said the newly built facility should undergo more checks.

It is now allowed to export only trial cargoes, which are loading very slowly although the group has already pre-sold five tankers to Asian customers.

The De Kastri terminal, in the continental Khabarovsk region, is linked to the offshore production facilities of Sakhalin-1 via a 210km (131 mile) pipeline.

Analysts see the delay as part of rising pressure on production sharing projects in Russia, such as Sakhalin-1 and the Royal Dutch Shell-led Sakhalin-2, and say the Kremlin aims to limit foreign involvement in strategic energy assets.

Both Sakhalin projects have been already told they would not be allowed to increase costs. Shell has been accused of ecological damage, while Exxon faces trouble in agreeing gas exports to China.

“The inspectors are currently working at the terminal and we are working through a number of issues with them. A lot of things have to be tested. But there are no ecological questions whatsoever,” Allen said.

Lev Brodsky of Russian state oil firm Rosneft, which is Exxon’s partner in Sakhalin-1 along with Japanese consortium Sodeco and India’s ONGC, said he expected De Kastri to become a state registered export outlet in early December.

RosTekhNadzor has said it may grant all the permissions by mid-November.

“We are currently not talking about a large number of cargoes. We are not in a rush. What we want is a safe start of operations,” said Brodsky, the head of Rosneft subsidiary Sakhalin Projects.

Allen and Brodsky said the first Exxon crude tanker arrived in the port on September 30 and as of Tuesday was only half loaded.

The tanker Viktor Titov, which can take 100,000 tonnes, may be fully loaded with light Sokol crude in five days or more and the pace of loadings is unlikely to change in the coming weeks. “It basically means we can load around two tankers a month,” said Brodsky.

By comparison, the terminal is due to load one Aframax – a tanker carrying up to 100,000 tonnes – in three or four days when Sakhalin-1 reaches peak production of 250,000 bpd.

This may be also a challenge as the group has still to drill more wells and test more facilities, including its new $1bn onshore oil processing facility.

“We will reach peak production of 250,000 bpd by the end of this year or may be in the first quarter of next year,” Allen said.

The group’s output is eagerly awaited by South East Asian markets as it will be the biggest addition to regional oil production in several decades. – Reuters

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