Sakhalin II Crude Oil and Liquified Natural Gas, Sakhalin Island, Russia

An extensive expansion of the Sakhalin Island oil and gas project completed in 2009, heralded a new phase of production. The expansion involved an increase in crude oil production by way of new platforms and also the construction of a new liquefied natural gas (LNG) infrastructure for the export of natural gas to international markets.

The project is led by the Sakhalin Energy Investment Company (SEIC) and required a total investment of over $20bn (the original estimate of $10bn was revised in 2005).

SEIC is a joint venture between Gazprom (50% and one share) Royal Dutch / Shell Group (27.5%), Mitsui & Company (12.5%) and Diamond Gas-Mitsubishi Corporation (10%). Gazprom took a 50% stake in the project in 2006 (Russian Government exerted pressure through environmental concerns) for BYR50m.

Oleg Mitvol of the Russian Federal Service for the Oversight of Natural Resources threatened to revoke environmental authorisation for the Sakhalin II oil and gas production project in September 2006 (supported by Vladimir Putin). By March 2007 the environmental dispute with the Russian Government came to an end.

Production and supply contracts

The sea around the Vityaz Production Complex is covered in ice for six months of the year and therefore production from Phase 1 is limited to the ice-free summer months.

Phase I of the Sakhalin Island project focused on oil development and went into seasonal production during mid-1999 at the Vityaz Production Complex. Phase II of the project is an integrated oil and gas development that allows year-round oil and gas production.

Of particular importance is the construction of the new LNG infrastructure for the convenient export of gas.

SEIC signed several deals with Japanese companiesa ndash; Tokyo Gas (1.1 million tonnes a year for 24 years from May 2003) Tokyo Electric Power (1.5 million tonnes a year for 22 years from May 2030 and Kyushu Electric Power Company (0.5 million tonnes a year for 21 years from 2003) – and Korean companies to supply LNG for the next 25 years.

The Sakhalin II licence area accounts for only 10% of the abundant hydrocarbon base of the Sakhalin shelf. Sakhalin II is creating infrastructure that can be used by other offshore Sakhalin oil and gas projects in the future. The Sakhalin II project phase II was completed in February 2009.

Sakhalin’s LNG and oil

The project involved the installation of an offshore platform (Piltun-Astokhskoye-B [PA-B]) on the Piltun feature of the Piltun Astoskhskoye field, and the installation of a single large platform (Lunskoye Platform [LUN-A]) at the Lunskoye gas field.

These platforms, as well as the Molikpaq platform (PA-A), are linked to the shore by offshore pipelines. The oil and gas are transported via 800km onshore pipelines to Prigorodnoye, at the south of Sakhalin Island, the site of the new LNG plant and oil and LNG export terminals.

Yokogawa Electric Company was awarded the contract to supply and install the complete upstream measurement, control and safety systems for the whole of the project including onshore and offshore facilities. The facility uses foundation field bus technology.

Piltun-Astokhskoye-B platform

The Piltun-Astokhskoye-B (PA-B) is a drilling, processing and production platform that extracts oil and associated gas from the Piltun reservoir.

Construction began in the fourth quarter of 2003 and production began in the first quarter of 2007.

The platform is a four-legged concrete gravity base substructure (GBS) with a fully integrated deck construction that was engineered and constructed by Aker Kvaerner Technology and Quattrogemini. The platform has facilities for 140 personnel.

Estimated production capacities are approx. 70,000bpd (11,130m³ per day) oil and 100mscf per day of gas.

Molikpaq platform

The Molikpaq offshore platform is the centre of the Vityaz Production Complex. It is a converted drilling rig that was first used in Arctic waters offshore Canada.

In 1998, Molikpaq was towed to Korea where it was upgraded for the Sakhalin II Project. It was then towed from Korea to Russia where a steel spacer, manufactured by the Amur Shipyard was retro-fitted to the bottom of the Molikpaq so that it could be used in the deeper offshore waters at Sakhalin Island. The structure was specially constructed for use in severe ice conditions. The completed steel and concrete substructure was filled with sand permanently anchoring it to the seabed.

During phase II of the Sakhalin II Project the Molikpaq platform was connected to the new pipeline infrastructure, the TransSakhalin oil and gas pipeline system, in December 2008 allowing year-round production.

Molikpaq sits 16km offshore, north east of Sakhalin. The platform is 120m wide, weighs 37,523t, and is home to over 150 people. Molikpaq is ballasted down with 278,000m³ of sand. In the winter, offshore temperatures, with the wind chill, drop to -70°C.

Lunshoye platform

The LUN-A platform is located 15km off the north eastern coast of Sakhalin Island, in 48m of water. This is a drilling and production platform with minimum processing facilities. Oil / condensate and gas separation, including gas treatment for transport to the LNG plant, is carried out onshore at the Onshore Processing Facility (OPF). This platform produces the majority of the gas for the LNG plant. Construction began in July 2003 and production began in 2008.

The platform is a four-legged concrete gravity base substructure that was engineered and constructed by Aker Kvaerner Technology and Quattrogemini. The platform has facilities for 126 personnel. Its production capacity is estimated at 52 million cubic metres a day (1,800mscf per day) gas, 8,000m³ per day (34,000bpd) liquids and condensate and 2,500m³ per day (16,000bpd) of oil.

Onshore processing facility

The OPF is located off the northeast shore of Sakhalin Island, 7km inland from the landfall of the gas pipelines from the Lunskoye Platform.

The construction contract for this facility ($250m) was awarded to BETS (Technostroyexport of Russia, Enka of Turkey and Bechtel of the US) in June 2003.

The OPF mainly processes gas and condensate received from the Lunskoye field, prior to transportation by pipeline to the oil export terminal and LNG facilities at Prigorodnoye.

It also receives oil and gas streams from the Piltun Platforms for transportation by pipeline to Prigorodnoye.

The gas and oil produced at the Lunskoye and Piltun-Astokhskoye fields come ashore in two pipelines, after which the oil and gas is separated. The OPF adds antifreeze to stop the products from freezing. This antifreeze is then removed and recycled for use again in a closed loop system. The OPF cleans up the oil and gas and relays it on its way to storage or the LNG processing train.

The OPF facilities includes a 100MW power plant to generate power for the OPF itself and also up to 19MW for the Lunskoye platform. At full capacity the OPF is capable of processing 1,800 million scf per day (51 million cubic metres a day) and about 60,000 barrels of condensate / oil per day (9,500m³/d).

Construction began in the second half of 2003 and production start-up occurred in phases from the final quarter of 2005 to the final quarter of 2006. The OPF became fully operational in 2008. The construction of the OPF included use of 13,600t of steel, 350,000km of cables, 88,000km of piping and 17,000m³ of concrete. The OPF was designed to meet all the required safety and environmental standards and includes modern fire safety equipment.

The OPF site is in the north east of Sakhalin Island, and 70km away from the nearest settlement it is a remote spot and it takes 17 hours to get to the site.

Onshore pipelines

Onshore oil and gas pipelines run from Piltun in the north of Sakhalin Island via the OPF, near Lunskoye, to Prigorodnoye, in the south. The two pipeline systems each cover a distance of over 800km, including 126km of swamp crossings and 110km over mountainous routes.

The distance from the Piltun landfall to the OPF is 172km (pipeline diameter 20in for both the oil and gas lines). The distance from the OPF to the LNG / Oil Export Terminal (OET) is 637km (pipeline diameters 24in and 48in for the oil and gas lines respectively). Two short multiphase pipelines (30in diameter, onshore length 7km) and a 4in mono-ethylene glycol (MEG) pipeline in the same run connect the landfall at Lunskoye to the OPF.

ZAO United Metallurgical Company (OMK) produced and coated over 45,000t of pipe at its Vyksa Steel Works mill in an order worth around $36m as part of a joint venture with Mitsui.

The contract also required steel plate supplied by Severstal of Russia. Additional coated pipe for the project ($35m) was produced by OOO Transpromresurs in a joint venture with Mitsubishi at its new high-tech coating plant in Vostochy.

The outside of the pipelines was coated with a three-layer polyethylene coating to protect them from external corrosion. Both pipelines were monitored using a state-of-the-art leak-detection system. Where the pipelines have to cross active faults, specially developed installation methods were used to protect the pipelines in the event of seismic activity (designed to withstand an earthquake of 9 on the Richter scale).

The contract ($1.2bn) for laying the pipelines was awarded to Starstroi of Russia in a joint venture with Saipem, LukoilNephtegazstroi and AMEC / Spie Capag.

These companies prepared the right-of-way, weld, trench, installed and tested the 1,620km of pipeline required for the onshore section.

Offshore pipelines

The overall length of the offshore pipelines is approximately 165km. They will include:

• Two 42km x 356mm pipelines from Piltun-Astokhskoye B platform (PA-B) to land
• Two 17.5km x 356mm pipelines from Piltun-Astokhskoye A platform (PA-A or Molikpaq) to land
• Two 13.5km x 114mm pipelines from Lunskoye Platform (LUN-A) to land
• One 13.5km x 762mm pipeline from shore to LUN-A to provide gas to the facility
• One 5.5km x 752mm tanker loading line from the OET to the TLU (Tanker Loading Unit) in Aniva Bay

LNG plant

An LNG plant was built on a 490-hectare site at Prigorodnoye, Aniva Bay, 13km east of Korsakov. Aniva Bay has the advantage of remaining mostly ice-free throughout the year making it an ideal export location. The contract to develop the OET and LNG plant was awarded to a consortium of Russian companies, OAO Nipigaspererabothka (Nipigas) and the KhimEnergo consortium together with Chiyoda Corporation and Toyo Engineering of Japan. The KhimEnergo consortium includes: ZAO ‘Engineering Corporation Transstroy’, OOO ‘Company IKEM’ and OAO Angarsk Construction Division.

The LNG plant is Russia’s first and has an annual production capacity of 9.6 million tonnes. The plant will eventually have two trains with an annual capacity of 4.8 million tonnes each. These are some of the largest single trains ever built. However, if required there will be sufficient room on the site to build more trains at a later date.

The processing trains use a Shell GSI licensed double mixed refrigerant process (DMR). The Shell GSI DMR liquefaction process uses coil-wound type cryogenic heat exchangers for both the pre-cooling and the main cooling cycle. The cold climate on Sakhalin Island also assists in air-cooling for the process.

The LNG plant has two LNG storage tanks of 100,000m³ capacity and the LNG is exported from an 805m jetty in Aniva Bay. The jetty has two loading arms and one boil-off gas return arm. The loading of the specially designed tankers takes between six and 16 hours depending on the size of the cargo.

In May 2008 the LNG plant saw the completion of the first train (4.8 million tonnes capacity). LNG train 1 at Prigorodnoye achieved its ‘ready for start up’ status and was handed over to the Sakhalin II operators.

The LNG plant was inaugurated in February 2009 and the first Russian LNG cargo from the plant was loaded in March 2009 and transported to Japan.

Oil export terminal

The OET is located 500m east of the LNG plant on the same site. The facility provides oil storage in two tanks with geodesic domes and internal floating roofs.

The total storage capacity is 1.2 million barrels (190,000m³). A leak detection system was installed in each tank foundation to prevent land contamination.

Crude oil is exported via a subsea pipeline to a tanker loading unit (TLU), which is located offshore in Aniva Bay, about 5km into the bay. Up to 50,000 barrels of oil can be loaded an hour (8,000m³ per hour).

The TLU has a surge relief system installed to protect the tanker loading unit from overpressure and leaks in the event of a sudden shutdown. The OET began operations in December 2009.

Sakhalin infrastructure upgrade project

Extensive upgrades to Sakhalin Island’s infrastructure were completed in 2007, in time for the start of phase 2 construction activities.

These upgrades, collectively referred to as the Infrastructure Upgrade Project (IUP), involved approximately $300m worth of improvements to Sakhalin Island’s roads, railways, bridges, ports, docks and airports. In total these contracts encompass more than 50 construction sites and employ more than 2,000 staff across the length and breadth of the island. Work on the infrastructure upgrades began in 2002. Projects include:

• Sakhalin Western Marine Port
• Federal roads and bridges
• Onshore Processing Facility site works
• Onshore processing facility on the Southern Access Road
• Railways
• Phase II project office
• Phase II accommodation facility
• LNG site works
• Municipal works