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Reuters: UPDATE 1-Sakhalin-2’s winter crude exports delayed- sources (*Predictions made by Sak2 insiders on this website proven correct)

Wed Sep 19, 2007 12:23 PM BST
(Adds details, background)

By Annika Breidthardt and Ajay Kamalakaran

SINGAPORE/YUZHNO-SAKHALINSK, Russia, Sept 19 (Reuters) – Russian Sakhalin-2’s first year-round exports of Vityaz crude will be pushed back to next year due to delays in pipeline commissioning, sources said on Wednesday.

The delay will mean lower-than-expected winter supplies of a highly-sought light crude to a tight oil market worried about peak heating season demand and already facing record prices at above $82 a barrel.

“We are going for the first half of next year for all-year round production,” said a crude trader familiar with the field.

A second source close to Sakhalin Energy said the pipeline commissioning would likely be delayed due to problems with Russia’s technical and environmental watchdogs.

Last year, an ownership deal between Gazprom (GAZP.MM: Quote, Profile , Research) and Shell (RDSa.L: Quote, Profile , Research) was at risk for months, under pressure from Russian environmental authorities, which analysts interpreted as yet another step in the Kremlin’s drive to win more control control over Russia’s huge energy industry.

Sakhalin Energy had said at a conference held at Yuzhno-Sakhalinsk earlier this month that the project was on track to begin year-round production this year.  

Currently, Sakhalin-2 produces 60,000-70,000 barrels per day (bpd) of Vityaz crude, with API gravity of 34.3, for only about six months of the year because drift ice stops production and closes the loading port.

“Production will gradually increase from next year. By 2010/11 maybe we will produce 150,000 bpd,” the trader added.

Sakhalin-2, one of only three production-sharing agreements in Russia’s energy sector, is owned by Gazprom, with 50 percent plus one share, Shell with 27.5 percent, Mitsui & Co (8031.T: Quote, NEWS , Research) with 12.5 percent and Mitsubishi Corp (8058.T: Quote, NEWS , Research) with 10 percent.

“The oil export terminal has already been finished for four months. But there’s no oil because the pipelines aren’t finished,” said a contractor on site. (Additional reporting by Tanya Mosolova in Moscow)

© Reuters 2007. All Rights Reserved.

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