The Sakhalin II Phase 2 Project: Delivering New Energy for Asia
1. 1
The Sakhalin II Phase 2 Project
The New Energy Source for the Asia Pacific
Transforming the Vision into Reality
Scottish Oil Club, Edinburgh, Oct 13th 2005
David J. Greer OBE C.Eng. FIMechE.
Sakhalin II Phase 2 Deputy CEO / Project Director
2. AGENDA
• Introduction
• Sakhalin Island and its Resources
• The Sakhalin II PSA
• Phase 1 Development
• Phase 2 Development
• Phase 2 Project Benefits
• Russian Resources
• The Challenges Ahead
• Questions/ Discussion
Piltun
Astokhskoye
Piltun
Astokhskoye
LunskoyeLunskoye
Sakhalin IslandSakhalin Island
• Yuzhno -
Sakhalinsk
• Yuzhno -
Sakhalinsk
2
4. • Territory: 87,100 km2 (Scotland 96,000km2).
• Length: 948 km.
• Min. Width: 30km.
• Mountain Areas 67%.
• Population: Approx. 550,000. Stabilised in
2002 after 10 years of decline.
• Regional Centre: Yuzhno-Sakhalinsk.
• The executive power of Sakhalin is the
Regional Administration (“Oblast”).
• The legislature is the Sakhalin Regional
Duma.
Sakhalin Island at a Glance
4
5. •17 administrative districts, 19 towns,
and 33 urban-type settlements.
•Major cities are Yuzhno-Sakhalinsk,
Kholmsk, Korsakov, Okha,
Poronaisk.
•Major industries are oil & gas,
fishing, agriculture, coal and timber.
•Transportation: seaports, railroad
and local airports.
•Proximity to Hokkaido and Japanese
port of Wakkanai assists logistical
operations.
Sakhalin Island at a Glance
5
6. Sakhalin Island GeographySakhalin Island Geography
2/3 of Sakhalin area is mountainous
More than 16,000 lakes
Seismically active
Large temperature difference between
North & South
Winter average : - 6 to - 24 degrees C
Summer average: - 10 to +19 degrees C
One of the most productive fisheries in
the world is offshore Sakhalin
Rich in wildlife generally
Indigenous People
Numerous Endangered Species
6
7. Sakhalin Island at a Glance
Sakhalin Island - Summer Sakhalin Island – February Ice
7
8. Sakhalin Island
at a Glance
• Minimum winter average
temperature –24 deg. C.
• Heavy sea ice for 5 months.
• Typhoon area.
• Approx. 6 month weather
window.
8
9. Sakhalin Shelf: Hydrocarbons In-place
III
I
I
II
II
III
IV V
VI
VIIIX
VII
I
III
GAS-IN-PLACE ( 196 Tcf )
10%
12%
14%
20%
0004%
Sakhalin I
Sakhalin II
Sakhalin III
Sakhalin IV
Sakhalin V
Sakhalin VI
Sakhalin VII
Sakhalin VIII
Sakhalin IX
40%
OIL-IN-PLACE (60,500 MMbbls)
13%
7%
26%
8%
34%
7%
3% 0.5%
1.5%
NORTH SEA
(Proven Reserves: 2005)
Oil: 14.8 billion bbls
Gas: 169.8 TCF
9
10. Sakhalin II Hydrocarbon Resources
IN-PLACE (8,700 MMboe)
42%
11%
10%
37%
PA Oil
PA Gas
Lunskoye
Oil/Cond
Lunskoye
gas
RECOVERABLE (4,900 MMboe)
21%
13%
8%
58%
PA Oil
PA Gas
Lunskoye
Oil/Cond
Lunskoye
gas
10
11. • Discovered: 1984.
• Exploration/appraisal: 7 wells.
• Mostly gas and condensate - thin oil rims
located on the reservoir flanks.
• In place volume: 18.6 TCF gas, 931
MMbbl oil and condensate.
• Excellent reservoir quality - high rate
producers.
• One platform (Lun-A) can sustain a 20 year
production plateau for two LNG trains.
• Location:
Distance from shore: app.15km.
• Number of production wells:
17 (+possible 10 oil rim wells).
5 km
The Fields .... Lunskoye
11
12. The Fields .... Piltun / Astokh
12
• Discovered: 1986.
• Exploration/appraisal: 17 wells.
• Sandstone reservoirs of variable
quality.
• Complex field of large areal extent.
• Predominantly medium light oil, but
also gas and condensate.
• In place volume: 5.6 TCF gas, 3,630
MMbbl oil and condensate.
• Pressure maintenance will be
installed.
• Location:
• Distance from shore:15-20km.
• Number of producing wells:
• Producing wells: 13 (PA-A).
• A phased development approach
is being pursued with 30 new wells
planned initially.
5 km
13. AGENDA
• Introduction
• Sakhalin Island and its Resources
• The Sakhalin II PSA
• Phase 1 Development
• Phase 2 Development
• Phase 2 Project Benefits
• Russian Resources
• The Challenges Ahead
• Questions/ Discussion
Piltun
Astokhskoye
Piltun
Astokhskoye
LunskoyeLunskoye
Sakhalin IslandSakhalin Island
• Yuzhno -
Sakhalinsk
• Yuzhno -
Sakhalinsk
13
14. Supervisory
Board
Supervisory
Board
100%
25%
Mitsui & Co. LtdMitsui & Co. Ltd
Mitsui Sakhalin
Holdings B.V.
Mitsui Sakhalin
Holdings B.V.
100%
20%
Mitsubishi Corp.Mitsubishi Corp.
Diamond Gas
Sakhalin B.V.
Diamond Gas
Sakhalin B.V.
55%
100%
Shell Petroleum NVShell Petroleum NV
Shell Sakhalin
Holdings B.V.
Shell Sakhalin
Holdings B.V.
Shareholders
Agreement
Shareholders
Agreement
Production Sharing
Agreement (1994)
Production Sharing
Agreement (1994)
Russian Federation
Sakhalin Oblast
Russian Federation
Sakhalin Oblast
Sakhalin Energy Investment Company Ltd.Sakhalin Energy Investment Company Ltd.
Sakhalin Energy - PSA Structure
14
15. The Sakhalin II PSA
• Sakhalin II was the first Russian offshore PSA, signed in June 1994.
• The PSA is a Contract Based scheme not Taxation Based scheme.
• It is fixed for the duration of the project.
• Fixed royalty payable.
• Cost recovery from nett remaining income.
• Revenues then distributed between Russian party and the Company, based on IRR
calculation.
• Profit Tax payable by the Company.
• First oil in 1999 from Phase 1, the Astokh development.
• The Phase 2 project has a nominal maximum capacity of 9.6 mtpa of LNG, which will
be exported to the Asia Pacific market.
• Over 75% of LNG capacity has been sold on long term contracts.
• Peak oil production will be approximately 150,000 BPD from Phases 1 and 2.
15
16. AGENDA
• Introduction
• Sakhalin Island and its Resources
• The Sakhalin II PSA
• Phase 1 Development
• Phase 2 Development
• Phase 2 Project Benefits
• Russian Resources
• The Challenges Ahead
• Questions/ Discussion
Piltun
Astokhskoye
Piltun
Astokhskoye
LunskoyeLunskoye
Sakhalin IslandSakhalin Island
• Yuzhno -
Sakhalinsk
• Yuzhno -
Sakhalinsk
16
17. Sakhalin II Project Phase 1
Vityaz Complex: Molikpaq, SALM and FSO. First offshore oil production in Russia.
Produces 60-70,000 b/d oil production during six month ice free summer season.
Oil Production
2000 12.4 million bbls
2001 15.1 million bbls
2002 10.8 million bbls
2003 10.3 million bbls
2004 11.7 million bbls
2005 12.0 million bbls (target)
17
18. Phase 1- Supplying crude oil to customers since 1999
18
On 30 June 2005, Sakhalin Energy loaded
the 100th oil cargo from the Vityaz Production Complex
19. AGENDA
• Introduction
• Sakhalin Island and its Resources
• The Sakhalin II PSA
• Phase 1 Development
• Phase 2 Development
• Phase 2 Project Benefits
• Russian Resources
• The Challenges Ahead
• Questions/ Discussion
Piltun
Astokhskoye
Piltun
Astokhskoye
LunskoyeLunskoye
Sakhalin IslandSakhalin Island
• Yuzhno -
Sakhalinsk
• Yuzhno -
Sakhalinsk
19
20. 20
Sakhalin II Phase 2 Project
• Piltun-B platform.
• Astokh year round production.
• Lunskoye A platform.
• Onshore Processing Facility.
• 1,870 km oil and gas pipelines.
• LNG plant & Oil Export Terminal.
• Infrastructure Upgrades.
21. Sakhalin II Phase 2 Project
A Challenge and a Privilege
21
• To deliver the Sakhalin II Phase 2 Project
in line with performance and stakeholder
expectations.
• To design and operate facilities to Russian
Federation and International standards.
• To maximise Russian content.
• To minimise adverse impacts on the
environment.
• To maximise the social and economic
benefits for all involved.
22. Sakhalin II Phase 2 Project “The Mother of all Projects”
• > 16,000 people involved at peak!
• > 60 million man-hours a year!
• > $US 100/second spend !
• Global Involvement – Russia, Norway, UK,
Holland, Italy, Abu Dhabi, Japan, South
Korea.
22
• Multiple Stakeholders – Shareholders,
Russian Party, Indigenous People,
NGO’s.
• Complex Environment – wildlife,
earthquakes, typhoons, winter sea ice.
• HUGE in every dimension !
23. Sakhalin II Phase 2 Project – Global Participation
A Globally integrated Project
AMEC (UK)
Topsides Design
Parsons (UK)
OPF Design
Starstroi (Russia)
Onshore Pipeline
Design
AKQuattrogemini (Russia)
CGBS Construction
MTI Design
Offshore Pipeline Design
SHI (South Korea)
Topsides Construction
Saipem (Italy)
ABB(Holland)
Aker Kvaerner (Norway)
CGBS design
TLU design
NSC (Holland)
CTSD (Japan)
LNG design
23
24. Sakhalin II Phase 2 Project: Current Status
• All major parts of the project are under construction with Engineering close to
completion.
• 2 Concrete Gravity Substructures were successfully towed to and installed in
the field during summer of 2005.
• The Onshore Process Facility civil work is complete and last main items of
equipment will be delivered during summer of 2005.
• Some offshore pipelines have been installed and further pipe-lay will take place
in the 2006 season.
• Onshore pipe-lay is progressing well with over 50% welded.
• LNG civil work and design are complete. Major equipment deliveries have
started to arrive and construction is well advanced. Nearshore Jetty and TLU
installation progressing well.
24
LNG & OET Plant
25. LNG Sales Agreements Volumes
Type of
Buyer Agreement Term (Years) Quantity
• Tokyo Gas SPA 24 1.1 mtpa
• Tokyo Electric SPA 22 1.5+0.5
• Kyushu Electric SPA 22 0.5
• Toho Gas SPA 24 0.5+0.07
• Baja Mexico(SETL) SPA 20 1.6
• Korea Gas Corp SPA 21 1.5
• Hiroshima Gas HOA 20 0.2
• Tohoku Electric HOA 20 0.4
Total 8.0 mtpa
25
26. 26
Sakhalin II Phase 2
Project
Overview of the Offshore
Platform Structures at
Lunskoye and Piltun
27. Offshore Platforms
• Lunskoye (LUN-A)
4 leg concrete gravity base.
Topsides 22,000 tonnes.
Gas production 1800 MMscf/d.
30 well slots.
Possible oil rim production.
• Piltun(PA-B)
4 leg concrete gravity base.
Topsides 28,000 tonnes.
Oil production 70,000 b/d.
Gas production 92 MMscf/d.
45 well slots.
27
28. Sakhalin II Phase 2 CGBS Construction Project
LUN-A Concrete Gravity Base Structure
Key Facts
• Topside weight: ~26.000 t
• Water depth: 48,8 m
• CGBS size: w/l/h - 105m/88m/72m
• Concrete volume: 35.000 m3
• Rebar quantity: 16.000 t
• Post tensioning: 1.100 t
• Mechanical Outf.: 2.800 t
• Structural steel: 2.500 t
• No. of wells: 27
• Risers (incl. future):
3 x Ø20’’, 3 x Ø30’’, 1 x Ø4’’
• Gas production: ~52 million m3
/d
• Peak liquids and condensate
~8,000m3
/d (34,000 bl/d)
• Peak oil: ~2,500 m3
/d (16,000 bl/d)
28
29. Sakhalin II Phase 2 CGBS Construction Project
PA-B Concrete Gravity Base Structure
29
Key Facts
• Topside weight: ~33.000 t
• Water depth: 30 m
• CGBS size: w/l/h - 94m/92m/54m
• Concrete volume: 28.000 m3
• Rebar quantity: 12.500 t
• Post tensioning: 1.000 t
• Mechanical Outf.: 2.500 t
• Structural steel: 1.900 t
• No. of wells: 45
• Risers: 2 x Ø14’’
• Oil production: ~70,000 bl/d
• Associated gas: ~100 MMscf/d
31. Offices, Canteen, Clinic and
Social Premises
Casting basin for
construction of GBS’s
Batching Plant, Aggregate
and Silos
Formwork Prefab Area
Rebar Fabrication Area
Mechanical Maintenance
MMO Prefab & Storage
Warehaouse
Sakhalin II Phase 2 CGBS Construction Project
Construction Site
31
40. The Basis of Structural
Elegance…………
First find your model and then - - - - it
takes a bit of “handling” to work out
the scale factor !!!!!!!
40
41. Sakhalin II Phase 2 CGBS Construction Project
Marine Operations – Mooring & Float Up
41
42. TOWING ROUTE TO FIELD
PA-B
LUN-A
Vostochny,
Casting Basin
LUN-A
• Towing distance ≈ 960 nm.
• Duration of tow ≈ 16 days.
• 3 Tugs, each of 150 Tonnes.
• 1 Tug to assist during tow.
PA-B
•Towing distance ≈ 1020 nm.
• Duration of tow ≈ 17 days.
• 3 Tugs, each of 150 Tonnes.
• 1 Tug to assist during tow.
Target Milestone 5
LUN-A, install 15th July 2005.
Target Milestone 6
PA-B, install 15th September 2005.
Tow to Offshore Location
42
64. Integrated Topsides Deck Construction
64
• The integrated Topsides deck was constructed by
Sembawang Marine Offshore Engineering, Singapore
• Weight: 11,504 tonnes
• Provides accommodation for up to 42 crew
70. Construction at Piltun – Alternative Routes
• Offshore pipelines - assessed 3
alternatives:
• Base Case routes installed during
winter months.
• Alternative 1 (blue): routed
approximately 15Km away from
feeding grounds.
• Alternative2(green): routed
approximately 6Km away from
feeding grounds.
• Alternative 1 has been selected.
• Onshore pipeline re-routed accordingly.
70
78. The necessary infrastructure upgrades
78
Vervili River bridge and approaches:–
Constructed by Baltic Construction
Company (Vostok)
Opened for traffic June 2003
42 metre long concrete Tee beam span
bridge
1000 metre length of new road
approaches
79. Onshore Process Facility - Parameters
• Main Design Contractor – Parsons UK.
• Main Construction Contractor – BETS.
• 1800 MMSCFD gas capacity.
• 65,000 bbls/day of condensate.
• 2 process trains for gas and condensate treatment.
• Power generation of 100 MW (equivalent to a town of 125,000 people).
• Provides power via subsea cable to LUN-A Platform.
79
86. Onshore Pipelines – Route (looking South)
Onshore Sections 1592 Km
•PA to OPF 20”x1 Oil & 20”x1 Gas
•LUN to OPF 30”x2 Multiphase
•OPF to LNG 48”x1 Gas
•OPF to OET 24”x1 Oil
•OET to Shore 30”x 1 Oil
Piltun A & B
Lunskoye A
LNG/OET
BS-2
OPF
86
97. LNG & OET Facility - Parameters
• Main Contractor Chiyotec (Chiyoda, Toyo and Russian contractors)
• 2 Liquefaction trains each of 4.8 million tonnes/year.
• Dual mixed refrigerant cycle process.
• 2 x 100,000 cubic metres capacity LNG storage tanks.
• 3 loading arms for LNG tanker loading.
• Crude oil production of 170,000 BOPD through the Oil Export Terminal loaded to
tankers offshore via the TLU.
97
104. LNG and OET Jetty Erection in Progress September 2005
104
105. Concept
•All Year Round export of crude oil & condensate.
•Un-manned facility.
•30-year design life.
•General Trading Tankers in non-ice conditions.
•Lightly-modified bow loading tankers in ice.
•Cargo parcels up to 1 million barrels.
•Oil pumped via 30” x 5km pipeline from the OET.
•Electrical power provided by cable (3kV) from shore.
Substructure
•Piled Substructure (PSS) – approx. 1500T total.
•Resistant to Ice, Seismic and vessel forces.
•Access via boat landing & internal ladders to
topsides.
Rotating Head Topsides
•445 Te, rotates through 360° on 5m dia. slewing
bearing.
•21” circ. mooring hawser.
•Loading hose suspended from boom.
•Summer – Floating (24”+ 2 x 16”) x 310m long.
•Winter - Catenary 20” x 74m long.
TLU Facts and Figures
105
108. AGENDA
• Introduction
• Sakhalin Island and its Resources
• The Sakhalin II PSA
• Phase 1 Development
• Phase 2 Development
• Phase 2 Project Benefits
• Russian Resources
• The Challenges Ahead
• Questions/ Discussion
Piltun
Astokhskoye
Piltun
Astokhskoye
LunskoyeLunskoye
Sakhalin IslandSakhalin Island
• Yuzhno -
Sakhalinsk
• Yuzhno -
Sakhalinsk
108
109. Project Benefits
• Benefit to RF from direct income payable under the PSA.
• Benefit of indirect tax income from high Russian labour content,
establishment of office in Yuzhno and profit tax.
• Creation of 1000’s of jobs for Russian nationals.
• Delivery of Offshore Project experience directly to Russian industry.
• Delivery of LNG experience directly to Russian industry.
• Substantial contribution to local infrastructure:
• Ports, airports roads and bridges.
• Telecommunications facilities.
• Health facilities improvements.
• Waste management projects.
• Community and sustainable development projects.
109
112. Infrastructure Upgrades
Extensive upgrades to Sakhalin Island’s infrastructure are essentially
complete.
These upgrades collectively referred to as the Infrastructure Upgrade
Project (IUP), involve approximately $US 300 million worth of
improvements to Sakhalin Island’s roads, railways, bridges, ports, docks
and airports.
112
113. AGENDA
• Introduction
• Sakhalin Island and its Resources
• The Sakhalin II PSA
• Phase 1 Development
• Phase 2 Development
• Phase 2 Project Benefits
• Russian Resources
• The Challenges Ahead
• Questions/ Discussion
Piltun
Astokhskoye
Piltun
Astokhskoye
LunskoyeLunskoye
Sakhalin IslandSakhalin Island
• Yuzhno -
Sakhalinsk
• Yuzhno -
Sakhalinsk
113
114. Russian Resources
• Tremendous pool of highly educated,
hard working, proud and capable
resources.
• Great industrial and regulatory heritage.
• Great depth in sciences & mathematics.
• Keen to be associated with success,
keen to learn and keen to accept
responsibility.
• Eager for career growth and personal
development.
• Global Mobility.
• Huge Talent Pool for global deployment.
• Relatively Simple EVP.
114
115. AGENDA
• Introduction
• Sakhalin Island and its Resources
• The Sakhalin II PSA
• Phase 1 Development
• Phase 2 Development
• Phase 2 Project Benefits
• Russian Resources
• The Challenges Ahead
• Questions/ Discussion
Piltun
Astokhskoye
Piltun
Astokhskoye
LunskoyeLunskoye
Sakhalin IslandSakhalin Island
• Yuzhno -
Sakhalinsk
• Yuzhno -
Sakhalinsk
115
116. Sakhalin II Phase 2 Project – The Challenges
116
•A huge frontier undertaking in a tough environment.
•24/7 routine.
•Unparalleled socio-political and environmental challenges.
•Russian approvals are rigorous and contribute to a large element of delay
and unpredictability.
•Stakeholder Management
•Remote location results in major logistical challenges as well as staffing
attraction difficulties.
Dredger Aground
117. The Challenges Ahead
• To deliver the Sakhalin II Phase 2 Project safely, on time, and in line with
performance and stakeholder expectations.
• To design and operate facilities to Russian Federation and International
standards.
• To maximise Russian content.
• To minimise adverse impacts on the environment.
• To maximise the social and economic benefits for all involved.
117
118. •A landmark, integrated oil and gas
project being executed safely,
responsibly and on schedule for the
benefit of Shareholders, the Russian
Federation and the people of
Sakhalin.
•Relentless focus on the 6 key
project tenets.
•On track for 1st LNG export by Q3
2008.
•Sustainable Development in action
striving to balance economic, social
and environmental considerations at
all levels.
Transforming the Vision into Reality
118
