#13 - JRL 7300
Asia Times
August 22, 2003
Sakhalin gets Russia's first LNG project
By John Helmer
MOSCOW - A Far Eastern Russian port on remote Sakhalin island is to be transformed into a modern staging point for a $10 billion project for Russia's first liquefied natural gas (LNG) plant for exports to Japan and other Asian markets. It is one of many increasingly visible signs of the coming boom in Sakhalin that could transform the economics of Japan's long dispute with Russia over sovereignty in the region and eventually provide partial relief to the energy-starved Asian region.
Ivan Chernyakhovsky, spokesman for Sakhalin Energy Investment Company, told Asia Times Online that the new LNG project will be built at the previously rundown fishing cove of Kholmsk. Known as Sakhalin-2 to distinguish it from a half-dozen other Sakhalin oil and gasfield developments in the Sea of Okhotsk, it requires the upgrading of all of the island's infrastructure, especially transportation.
The island "is in a very poor state now, even compared to other regions of Russia", Chernyakovsky said. "The upgrade includes improvement of the road network, airport and Kholmsk port. The port must be able to provide reliable transportation services for the large deliveries of cargoes and labor force for the Sakhalin-2 project. This will include massive transportation of pipes for the 1,600 kilometer pipeline to be built, sea oil platforms, and equipment for the gas plant."
In June of this year, Chernyakovsky said, Sakhalin Energy signed a $2 billion contract for detailed design, supplies for, and construction of the LNG plant. "The plant is to be built and to start production by the year 2007," Chernyakovsky said, "as Sakhalin Energy has already signed contracts signed with Japanese consumers for delivery of liquid gas starting in 2007."
The main contract has been awarded to a consortium made up of Russian companies OAO Nipigaspererabothka (Nipigas) and the KhimEnergo group, together with Japan's Chiyoda Corporation and Toyo Engineering. The plant is to go up on a 490 hectare site at Prigorodny, on Aniva Bay, in the Korsakov district of Sakhalin. Chernyakhovsky said the plant will have production capacity for 9.6 million tonnes of liquefied gas per year, making it Russia's first, and also one of the largest LNG producers in the world. Sakhalin Energy has already confirmed its first two sale deals with Tokyo Gas and Tokyo Electric for a total of 2.3 million tonnes per annum of LNG from the plant for periods of over 20 years.
Sakhalin Energy is 55 percent owned by the Royal Dutch/Shell Group, one of the developers and operators of the Sakhalin-2 gasfield, along with Mitsui and Mitsubishi of Japan. Shell is paying $56 million to Sakhalin Energy to fund the two port contract awards. The production and shipping plan call for the installation of a second production platform on the Piltun-Astokhskoye field, and a new platform on the Lunskoye field, both offshore in the Sea of Okhotsk; together with the onshore processing plant, an oil and gas pipeline system, and an oil export terminal.
While loading of LNG is planned to be made from a special mooring built into Aniva Bay, Kholmsk port nearby is to be expanded to service the project. Officials of Sakhalin Energy said last week that they had chosen a local contractor, Sakhalin Shelf Service (SSS), to build the modern port facilities over the next 30 months. The contract is worth about $40 million.
SSS is already managing shore supply depots at Kholmsk and Korsakov, another of the island's small ports. Dredging and some quayside works have already been completed at Kholmsk. A second $16 million contract has been awarded SSS to provide the labor to perform vessel berthing and unloading, materials movement within the port, equipment storage, rail car preparation and rail and truck loading and dispatching. The Russian workforce expected for these contracts will be about 280.
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