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RIA Novosti: Gazprom aims to become key oil and gas player on Sakhalin Island

15:55 | 31/ 05/ 2007 

YUZHNO-SAKHALINSK (Far East), May 31 (RIA Novosti) – Russian energy giant Gazprom [RTS: GAZP] said it aims to become a major oil and gas producer and distributor on Sakhalin Island in Russia’s Far East. 

Alexander Medvedev, deputy chairman of the Gazprom management committee, said Thursday the company was interested in buying the entire gas output under the Sakhalin I project.

The project, operated under a production-sharing agreement by Exxon Neftegas Limited, a subsidiary of U.S. oil major ExxonMobil, is located on Sakhalin’s northeastern shelf, and is expected to bring around $52.2 billion to the Russian budget by 2054, when production is scheduled to end.

“In view of the company’s priority policies and internal needs, we are interested in purchasing all the gas in Sakhalin I. We have made a corresponding offer to Exxon,” Medvedev said.

Sakhalin I is expected to yield about 258 million metric tons (1.89 billion barrels) of oil and 356 billion cubic meters of gas over its lifespan.

Medvedev said the Sakhalin-III oil and gas project was also among the company’s priorities.

The project’s estimated reserves in the Sea of Okhotsk total over 800 million metric tons (5.86 billion bbl) of oil and more than 900 billion cubic meters of gas.

Speaking on the Sakhalin II project, Medvedev said he hoped it would be successfully carried through.

Gazprom acquired a $7.45 billion controlling stake (50% plus one share) in Sakhalin II in December 2006. The stakes of the other partners, Royal Dutch Shell, Mitsui and Mitsubishi, halved to 27.5%, 12.5% and 10% respectively, as a result of the deal.

As well as two fields with estimated reserves of 150 million metric tons (1.1 billion barrels) of oil and 500 billion cubic meters of natural gas, Sakhalin II comprises a pipeline, a liquefied natural gas (LNG) plant due to be launched in 2008, and an LNG export terminal. Most LNG from the project will be exported to Japan.


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