The consortium is planning to build two new oil rigs in the Russian far east region of Sakhalin Island, a development that offers extensive and long-term business opportunities for Australian suppliers.
In addition to the two rigs, infrastructure will include gas and oil pipelines crossing the island from north to south, an oil treatment centre, a liquefied natural gas plant and an oil export terminal in the south. The projects come under an oil and gas project called Sakhalin 2, which will lead to exports of LNG to Japan and South Korea in 2007.
The LNG plant at Prigorodnoye on the South of the island will produce 9.6 million tonnes of liquefied natural gas per annum with each of the two trains, of 4.8 million tonnes annual capacity, being the largest ever built. Sakhalin LNG will also be the first LNG plant to be built in Russia.
The gas resource base will guarantee supplies of more than nine million tonnes a year for at least 25 years to Sakhalin's key markets in the growing economies of Asia.
The fields contain in place reserves of approximately 140 million tonnes (1 billion barrels) oil and 550 billion cubic metres (20 trillion cubic feet) natural gas. The oil reserves equate to more than one year of crude oil exports from Russia at the current level of around 2.5 million barrels per day.
The gas reserves represent nearly five years of Russian gas exports to Europe, or enough to supply current global LNG demand for four years. The fields are located approximately 15 kilometres off the north-east coast of Sakhalin in waters frozen for six months of the year. It is predicted that oil production will plateau at about 250,000 barrels per day.
Sakhalin Energy has been producing oil from the north-east coast of the island since 1999 and is still Russia's only offshore petroleum production site.
It is expected that up to $US100 billion will be invested in the development of the Sakhalin oil and gas reserves over the life of the resource with future phases of construction including a natural gas pipeline to Japan.
The downside for Australian producers is the proximity of the field to the key Asian markets, which could spell danger for several upcoming North West Shelf contracts.
Austrade has launched a 'Project Sakhalin' strategy to develop opportunities for Australian suppliers including a series of free briefings on the project.
