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November 10, 2007
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Home / Issue Archive / 2007 / March #3 / Gazprom Takes Control of Sakhalin Energy

№ 3 (March 2007)

Gazprom Takes Control of Sakhalin Energy

The shareholders of the operator of the Sakhalin II project signed a Sale and Purchase Agreement with Gazprom yesterday to pave the way for Russian gas monopoly to take control of the World’s largest integrated oil and gas project with estimated resources at the level of over 4 billion barrels. Gazprom will pay $7.45 billion for a 50% plus one share stake in Sakhalin Energy with Shell holding 27.5%, Mitsui 12.5% and Mitsubishi 10% of the shares.


Gazprom Deputy Chairman Alexander Medvedev called Gazprom’s entry into the project a “powerful impetus for implementation of this large scale development in the area of energy export to Asia Pacific and North America,” according to Shell’s official press release. He also said the most recent acquisition is another step on Gazprom’s way to entering the global LNG market.

Shell’s Executive Director for Exploration and Production Malcolm Brinded welcomed Gazprom into the Sakhalin project. “Combined with the government acceptance of the Environmental Action Plan, this is another important step for Sakhalin II. The AMI should create additional growth opportunities for the partners in the future,” he said.Hisanori Yoshimura, Senior Executive Vice President for Mitsubishi, said this new combination of shareholders is “the best team to accomplish timely start-up of LNG delivery to important customers in Japan, Korea, and North American West Coast.” 

“This is an important step towards Sakhalin Energy becoming the key LNG supplier for Asia Pacific market,” added Yoshimura.

Japan is expected to be the biggest customer of Sakhalin’s LNG. Sakhalin Energy has already signed long term agreements with Tokyo Gas to deliver 1.1 mil tons of gas per years over a period of 24 years, with Tokyo Electric for 1.5 mil tons a year for 22 years, Kyushu Electric to annually ship 0.5 mil tons for 22 years starting in 2009 and Hiroshima Gas for 0.21 mil tons a year over a period of 20 years since the commencement of the project. First LNG deliveries are expected in late 2007. The company has also signed deals with Baja Mexico for deliveries of 1.6 mil tons of gas a year for a period of 20 years and Korea Gas Corporation for 1.5 mil tons a year for 20 years. Sakhalin is a new world-class oil and gas province, with estimated resources of some 45 billion barrels of oil equivalent (boe).

Sakhalin II is the largest integrated oil and gas export project in the world, with total resources of some 4 billion boe. Sakhalin II today has production capacity of 80,000 boe per day during the production season. The subsequent phase of the development will take the total project capacity to 395,000 boe per day, including 9.6 million tonnes per year of LNG production.

The second phase of the project is over 80% complete. More than 17,000 workers are currently employed in the construction of the project, of which around 70% are Russian nationals.

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