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Shell wraps up last major gas well on Sakhalin II

Shell wraps up last major gas well on Sakhalin II

Author: Kostis Geropoulos
31 May 2009 – Issue : 836
The road to the Sakhalin II LNG terminal and project in Prigorodnoye, Aniva Bay, Russia. Once the hydrocarbons are pumped ashore, a processing plant treats gas and condensate, a natural gas liquid, from the Lunskoye-A platform, along with oil and some gas produced by the Molikpaq and Piltun Astokhskoye-B platforms. From there, the gas is sent through two parallel 800-kilometre pipelines to the Prigorodnoye complex at Aniva Bay in the south of the island, which includes an LNG plant, an oil export terminal and a port which is virtually ice-free during winter
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Royal Dutch Shell is completing the last major offshore gas well at the Lunskoye platform in Russia’s sub-Arctic Sea of Okhotsk preparing the way for full production capacity of liquefied natural gas (LNG) at Sakhalin II, one of the world’s largest and most challenging integrated oil and gas projects.
Production at Sakhalin II’s first LNG unit – the first ever in Russia – was under way in March. Completion of the final gas well – Russia’s largest – is a vital step towards starting operations at its second LNG unit. Full capacity of 9.6 million tonnes a year is expected to be reached in 2010. 
The project on Sakhalin Island will meet nearly eight percent of Japan’s gas needs and five percent of South Korea’s. The first Sakhalin II LNG cargo delivered arrived in Japan’s Tokyo Bay in April 2009, the first time Russia has exported gas from its eastern borders and the first time it has supplied gas to Japan. “It’s going very well and we ramping up production on the LNG towards the target of 9.6 million tonnes a year,” Shell spokesman Adam Newton told New Europe, adding that this is primarily for the Asian markets. The first Russian LNG is also planned for the west coast of the US and there is a Lng receipt facility on the west coast, Newton said.
Shell is a partner and lead technical adviser to the project’s operator, Sakhalin Energy. Sakhalin II has total resources of some four billion barrels of oil equivalent. At full capacity, the LNG plant would add up to five percent to the world’s current LNG capacity.
The Sakhalin project represents a range of different challenges. “The very significant ice in the winter impacts the types of platforms that you can have, but also the seismic, geological phenomenon that exists in Sakhalin — what they call the ‘Ring of Fire,’ the tectonic plates are such that experience quite a lot of seismic activity — that’s another challenge. And if you think about the pipelines, the impact of crossing salmon streams in sensitive breeding areas, they pose a technological challenge and the temperatures fluctuate in this parts of the island from -40 at one time of the year to +40 in the summer,” Newton said. At such temperatures, people can work outside only in short shifts despite steel cladding on the outer sides of the platforms that breaks the wind, offering some protection. “All of these things together did make it a very challenging project,” Newton said.
The platforms that produce Russia’s first offshore oil and gas, 15 kilometres off Sakhalin Island, stand in water up to 50 metres deep in the stormy Sea of Okhotsk. They are the Piltun-Astokhskoye A platform (also known as Molikpaq), Piltun-Astokhskoye B and Lunskoye A platforms.
Sakhalin II’s fanfare launch, which was attended by Japanese Prime Minister Taro Aso and Russian President Dmitry Medvedev, marked the culmination of a USD 20-billion oil and gas project that has been led by Russian gas monopoly Gazprom since a controversial change of ownership in 2007. In 2007, Gazprom acquired 50 percent plus one share in Sakhalin II after the Russian government put pressure on the then-project developer Shell. Shell now owns a 27.5 percent stake in the project, while Japan’s Mitsui & Co. Ltd. and Mitsubishi Corp. own 12.5 percent and 10 percent respectively. “We talked before the dilution of the equity in Sakhalin about the involvement of a Russian partner,” Newton told New Europe, agreeing that it’s all water under the bridge. “But, as you said, it was a challenging period in which we came through, but we believe we work well now — Gazprom, Shell and the Asian partners, Mitsubishi and Mitsui.” After all Russia needs Shell’s expertise. “Shell in terms of partner status with countries that hold resources like Russia’s has the advantage of technology,” Newton said. 

 Kostis Geropoulos

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