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Lloyds List: Sakhalin II on course for 2008 start

Published: Sep 22, 2006

With the completion last month of the 800 m finger pier and LNG loading jetty at Prigorodnoye in Aniva Bay, at the southern tip of the Sakhalin Island, Russia’s Sakhalin II project is on course to begin exporting gas in the third quarter of 2008.

The Sakhalin II project not only represents the largest foreign direct investment scheme ever undertaken in Russia, it also marks the start of an ambitious programme to develop the country’s vast gas resources in the form of LNG.

Most of the oil and gas resources in the Russian Far East are located offshore, in the inhospitable waters of the Okhotsk Sea off the northeastern shores of Sakhalin Island where the ice cover prohibits tanker operations for six months of the year. The construction of oil and gas pipelines down the length of the island to Aniva Bay will enable Sakhalin II to maintain a steady, year-round flow of exports.

Sakhalin Energy Investment Company (55% owned by Shell, 25% Mitsui and 20% Mitsubishi) is responsible for developing Sakhalin II.

The LNG facility shares the 490 ha Prigorodnoye site with an oil export terminal. The fact that they are just 20 miles from Hokkaido, Japan’s northernmost point, provides Sakhalin II with an important competitive advantage.

Besides the marine jetty, the other principal features of the LNG part of the complex are the two production trains, each with an LNG capacity of 4.8m tonnes per annum (mta), and two 100,000 cu m storage tanks. One advantage of the cold climate on Sakhalin Island is that less energy-intensive air-cooling can be used for the liquefaction process.

LNG exports had been due to commence in late 2007 but some required design adjustments and installation problems with the onshore and offshore pipelines in the challenging Sakhalin environment prompted a decision to delay the startup date. In addition, higher than anticipated development costs, stemming from soaring raw material prices, higher contractor fees and the installation problems, have doubled the project’s original budgeted cost to $20bn.

The Sakhalin II project has so far tied up sales of 7.83 mta of LNG under long-term contracts spanning 20-24 years, mostly with Japanese companies. Tokyo Gas will take 1.1 mta, Tokyo Electric 1.5 mta, Kyushu Electric 0.5 mta, Toho Gas 0.5 mta, Tohoku Electric 0.42 mta, Hiroshima Gas 0.21 mta and Chubu Electric 0.5 mta.

In addition, Korea Gas Crop is committed to buying 1.5 mta and Shell Eastern Trading 1.6 mta for transport to the Costa Azul import terminal on the Baja California coast in Mexico.

A fleet of 10 LNG carriers have already been lined up to serve the Sakhalin II project, excluding the ships needed for deliveries to Costa Azul and any further vessels needed to cover sale and purchase agreements still to be finalised.

The waters around Prigorodnoye are susceptible to some ice cover, usually between January and March. In addition to winter ice floes that drift down the coast of Sakhalin Island, there may be some relatively modest first year ice. This rarely exceeds 0.5 m in thickness, and in nearshore waters the landfast ice in-way of the LNG jetty is usually only in the 0.10-0.30 m range.

In view of this relatively thin, short duration ice cover, the LNG carriers to serve Sakhalin are recommended to be built to a minimum of Russian ice class LU2, equivalent to Finnish-Swedish ice class 1C.

In addition, non-cryogenic cargo-handling components located on deck on the Sakhalin ships will be ‘winterised’ through fabrication in special steel grades to enable trouble-free operation in air temperatures down to -25°C and sea temperatures down to -2°C. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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