Sakhalin-2 Advances Phase II Development

The Sakhalin-2 integrated oil and gas project is advancing its US$8.5 billion Phase II development with the launch of engineering, procurement and construction tenders, Sakhalin Energy said.

Sakhalin Energy, responsible for the development of Sakhalin-2, has invited consortia involving Russian companies to bid for two contracts. "These two tenders are particularly significant because they offer a major opportunity for Russian industry to compete in the international market to win prime contracts on the Sakhalin 2 project," Sakhalin CEO Steve McVeigh said.

The tenders call for the construction of an onshore processing facility and associated booster station, and up to 1,640 kilometers of onshore oil and gas pipelines, key elements of the Phase II development. Bids are expected to be submitted in August, and the contracts are to be awarded early 2003.

"Duration of the works will be driven by target dates of year-round oil production from 2005 and commercial deliveries of LNG from late 2006." The development of Phase II of the project will enable year-round oil production from Molikpaq, which started production on a seasonal basis (summer months) in July 1999, Sakhalin said. The contracts for the onshore processing facility and pipelines alone will be worth over US $1 billion. Shell Sakhalin Holdings BV, a unit of Royal Dutch/Shell Group, is a 55% shareholder of Sakhalin Energy. Mitsui Sakhalin Holdings BV, a unit of Mitsui & Co, is a 25% shareholder and Diamond Gas Sakhalin BV, a unit of Mitsubishi Corp., holds the remaining 20% share.

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