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RIA Novosti (Russia): Sakhalin-II supervisory board approves $2 bln financial plan

Russia: 20:10 | 01/ 06/ 2006

MOSCOW, June 1 (RIA Novosti) – Sakhalin-II project’s supervisory board approved a program and financial plan for 2006 totaling $2 billion, the energy ministry said Thursday.

The plan for the ambitious energy project to supply liquefied natural gas to Japan, Korea and the United States, was adopted in accordance with a production sharing agreement and a complex exploration plan, but the supervisory board will continue to analyze the need to increase the costs, the Ministry for Industry and Energy’s press service said.

The Sakhalin-II PSA was signed in 1994 between the Russian party (the Russian government and the administration of the Sakhalin Region) and the Sakhalin Energy Investment Company, which currently comprises Shell Sakhalin Holding (55%), Mitsui Sakhalin Development (25%) and Diamond Gas Sakhalin (20%). It was the first PSA to be signed in Russia and came into force in 1996. LNG supplies are set to begin in 2008.

In September, Sakhalin Energy, 55%-owned by Royal Dutch/Shell, said it would raise the costs of the second stage of project development from the initial $12 billion to $20 bln. The second stage includes gas production and liquefaction at a new LNG plant on Sakhalin with a projected annual capacity of 9.6 million tons.

The Sakhalin-II project includes an oil field with some associated gas production, a natural gas field with associated condensate production, pipeline, a liquefied natural gas (LNG) plant, and an LNG export terminal. The total reserves of the two fields are 150 million metric tons of oil and 500 billion cubic meters of natural gas.

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