Sakhalin 1 Project - Oil and Gas Economics

1. Economics of Oil and Gas
Industries
Course Project Presentation
Sakhalin Island
By : Ali Jamal Pur, 20722,NSU ,
Student of M.Sc. in Oil and Gas Management
B.Sc. : Industrial and Systems Engineering

2. Sakhalin Island
Russian: Сахали́н,
Japanese: 樺太
 Location: North Pacific Ocean
 between 45°50' and 54°24' N
 between the Sea of Okhotsk to the
east the Sea of Japan to the west
 north of the Japanese island of
Hokkaido
 Population: 497,973 in 2010
 Indigenous peoples are the Ainu,
Oroks and Nivkhs.
 Sahaliyan, the word that has been
borrowed in the form of "Sakhalin",
means "black" in Manchu.

3. Oil and Gas fields in Sakhalin Island
 The North Sakhalin Basin is active Tertiary margin
and Cenozoic fold belt
 It contains one major TPS called North Sakhalin
Neogene,
 Consists of Neogene shale, siliceous-shale source
rocks, Neogene sandstone, fractured siliceous-shale
reservoir rocks.
 field-discovery history from 1923 to 1992
 Six onshore fields from 1923 to 1935
 Onshore drilling in 1947 and in the 1960s
 Offshore fields in the 1970s
 Offshore jointly with Japan from 1976 to 1982
 Six largest fields discovered after 1975
 All existing offshores in depths of less than 100 m.
 72% offshore, 28% onshore
 within latitude 47.5° to 55.5° North
 longitude 140° to 146° East

4. Amount of reserves by different classifications
North Sakhalin crude oils are generally low in sulfur and paraffin, but high in
resins
API gravities reported for all fields range from 18°-62°
Low gas-oil ratios (GOR) and biodegradation are common
North Sakhalin Neogene – has 6.1 BBOE known,
61% gas, 36% oil, 3% condensate
32 onshore gas fields,
5 offshore gas fields
29 onshore oil fields
2 offshore oil fields
2 gas fields and
3 oil fields straddle the coastline.
Totally 72 fields

5. Physical and chemical properties of the fluids and gases
█ Miocene to Oligocene rocks Mostly type II to type
III organic matter
█ Tertiary rocks were deposited by prograding paleo-
Amur River system
█ Total organic carbon (TOC) ranging from <1 to 5
wt.%
█ Onshore production occurs deeper than 4,000 m
█ Isotopic test results from 𝜹𝟏𝟑
3C = -25.2 to -25.8
o/oo to 𝜹𝟏𝟑
13C = -26.4 to –23.9 o/oo)
█ Petroleum characterized by ch:cp of 0.26-1.28,and
pr:ph of 1.1-2
█ Oil characterized as low density (0.8 grams/cubic
centimeter), high resin (20%), low-sulfur (0.26%),
and low-paraffin (1.8%)
█ The associated gas is typically 70-91% methane
█ Gas data shows methane ranging from 78-97%,
C2+ ranging from 2-7%, CO2 ranging from <1-15%,
He ranging from 10-26 ppm, N2 at <1%

6. History of object’s development and state of the project at the time
• Sakhalin 1 Project
• 1996-2001, exploration and appraisal ,
specification of the structure and the volumes
of reserves
• 2002, infrastructure work began and fields
development
• Fields are developed in several stages:
• The first stage in 2005 , the development of the
Chayvo oil field and then Odoptu field.
• At the second stage since 2014, developing the
gas reserves of the Chayvo field
• The third stage from 2014 , Arkutun-Dagi
field development
• The project life cycle will last until 2040-2050

7. Sakhalin 1 project
Sakhalin 1 project
 envisages the development of three offshore fields
- Chayvo, Odoptu , Arkutun-Dagi,
 located on the northeastern shelf of Sakhalin
Island
 in the water area of the Sea of Okhotsk,
 with an estimated total resource of 2.3 billion
barrels (307 million tons) of oil
 and 17 trillion cubic feet (485 billion cubic
meters) of natural gas.
The Sakhalin-1 project is operated by:
1. Exxon Neftegas (ENL), holds a 30%
2. Japanese consortium Sakhalin Oil and Gas Development
Company (SODECO, 30%),
3. India’s state-owned ONGC Videsh (20%),
4. Russian oil company Rosneft (20%), through two of its
subsidiaries named RN-Astra (8.5%) and Sakhalinmorneftegas-
Shelf (11.5%).

8. Financing of Sakhalin 1 project
•Phase 1
•1.16 mUSD
•European Bank for Reconstruction and Development (EBRD)
•Export-Import Bank of Japan (now the Japan Bank for
International Cooperation, JBIC)
•Overseas Private Investment Corporation
•Phase 2
• 5.3 bUSD
•Export-Import Bank of Japan now JBIC
•Phase 3
•Operation Costs
• Estimated 1.2 tJPY
•Announced 2.2tJPY in July 2005

9. Finished, ongoing and planned exploration activities of Sakhalin 1
2005
• October 1, - start of production of hydrocarbons at the Chayvo field;
the beginning of natural gas supplies to the Khabarovsk Territory
2006
• the system for oil export from the terminal in De-Kastri starts to
work
2007
• commissioning of the onshore processing complex and the launch
of full-scale production
2008
• achievement of the project payback threshold, commencement of
income tax payment
2010
• Start of production at the Odoptu field from the onshore site
2015
• Start of production at the Arkutun-Dagi field

10. Type of drilling used; type of platforms (for offshore projects); information about drilling
activities; Extraction methods used in Sakhalin 1
Crechet Onshore drilling rig on
Odoptu field
• It drilled 9 wells of BOV and set several
world records for drilling.
• A new Krechet drilling rig, almost
identical to the Hawk, is used to drill
wells.
• The upper drive with a capacity of
about 2,700 hp is able to drill wells with
a large waste of slaughter from the
vertical length of about 13 kilometers
(42,000 feet) on the trunk.
• "Krechet" was manufactured in
Brownsville, Texas, specifically for the
Sakhalin-1 project and is the largest and
most powerful drilling rig in the
industry.
• To transport modules with a total
weight of more than 22,000 tons, it was
necessary to perform 18 flights in 2016
and 2017 during the period when the sea
was free from ice.

11. Type of drilling used; type of platforms (for offshore projects); information about drilling
activities; Extraction methods used in Sakhalin 1
Onshore Yastreb Drilling rig at
Chayvo field
• Yastreb is completely enclosed,
automated and can withstand
severe earthquakes, up to 9 R.
• 70 meters high, equivalent to the
height of a 22-storey building and
has an electric motor top drive
capacity of 2,680 hp.
• It is designed to drill extended
reach wells to offshore targets from
land-based locations called
Extended reach drilling (ERD)
technology
• Yastreb has set a number of world
records of measured depth,
horizontal reach and other
industrial records

12. Offshore Orlan Drilling rig and platform
 It carries out Oil and Gas production at the
Chayvo field.
 It has steel-concrete structure, which houses
the drilling and housing modules
 It reaches the height of a six-storey building
 Installation was completed in July 2005
 drilling operations commenced in December
2005
 Production of 17 ERD wells is sent to shore for
further processing at the Chayvo OPF
 In 2017 the well O-5RD with measured depth
15000 meters and horizontal reach 14,129
meters.
 O-5RD remains the current ERD drilling record
holder for wellbore length.
Type of drilling used; type of platforms (for offshore projects); information about drilling
activities; Extraction methods used in Sakhalin 1

13. Offshore Berkut platform
 Berkut offshore platform was installed to
develop Arkutun-Dagi field
 Berkut is the largest offshore platform in
Russia
 production capacity designed for total 4.5
mt/y
 It is located approximately 25 km from
shore at a water depth of about 35 meters
 Berkut weighs 200,000 tons and towers
almost 130 m above the sea.
 The platform topsides weigh about 42,000
tons
 At the time of installation, it was the
heaviest integrated structure for offshore
platforms ever installed in the open sea
by float-over.
Type of drilling used; type of platforms (for offshore projects); information about
drilling activities; Extraction methods used in Sakhalin 1

14.  The project crude oil export system was finalized in August 2006
 a 24-inch, 230 km (143 m) pipeline to transport crude from the OPF across Sakhalin Island
and the Tatar Strait to the newly-constructed De-Kastri terminal in the Khabarovsk Krai.
Transportation scheme and possible refineries or/and markets for the extracted
oil, gas and refined products of Sakhalin 1

15.  Sakhalin 1 Oil and gas reserves: the Sakhalin 1 project is estimated is 2.3
billion barrels of oil and 17.1 trillion cubic feet (Tcf) of Gas in recoverable
reserves.
 Sakhlin 1 Oil: Sakhalin Blend to the Asia-Pacific region in 2014.
It is a light, low-sulphur oil blend. In total, 11 companies from four countries
purchased the oil blend in 2018. Products were delivered to Japan, China, South
Korea and USA.
Sakhalin 1 Liquefied Natural Gas (LNG): In 2018, Sakhalin Energy continued
to ship LNG cargoes to Japan, South Korea, Taiwan, and China. Sakhalin
LNG accounted for 4.8% of total LNG demand in the Asia Pacific and about
3.6% of global LNG demand.
Sakhalin 1 Natural Gas: In 2011, Sakhalin Energy began supplying natural gas
to the Gazprom pipeline system through two gas transfer terminals. The total gas
supply in 2018 amounted to over 1.12 bln cubic metres.
 Sakhalin-1 LNG export terminal: The export capacity of the Sakhalin-1
LNG terminal is expected to be 6.2 million tons per annum (Mtpa).
Transportation scheme and possible refineries or/and markets for the extracted
oil, gas and refined products of Sakhalin 1

16.  Concerns over Endangered Species : the Stellar's Sea Eagle , western gray whale ,Salmon
fish
• Concerns about Oil Spills: -Problems in case of tanker accidents
• Pipeline: -Concerns of land erosion and water pollution due to 800km long land pipeline
• Dredging and Marine Dumping in Aniva Bay:-Damage to fishery resource due to
dredging and dirt dumping accompanying the construction of LNG plants and crude oil
terminals.
• Impacts on rivers and streams: changes occurred in the rivers like Pilenga River,Mereya
River,Woskresenkovka River,Golubichnaya River ,Bystraya River,Stolichnyi stream
 Over 885.3 million barrels (118.2 million tons) of oil and condensate exported
• 939 billion cubic feet (over 27 billion cubic meters) of natural gas delivered to Russian Far
East customers
• Small Business Support
• Infrastructure development
• Community Contributions
Arising economical, geological, etc.
possible future development, importance for the economy, etc.

17. Sakhalin 1 Project Production line