Oil Production at the Sakhalin-1 Project Will Reach 200-220 Thousand Barrels Per Day in Early February 2023
The project is currently operating at 65% capacity.
Oil production at the Sakhalin-1 project will fully recover in 3-4 weeks. Reuters reported this on January 9, 2023, citing an industry source.
Currently, production at the Sakhalin-1 project has recovered to 140-150 thousand barrels per day, which is about 65% of capacity. Sakhalin-1 will reach its peak production level of 200-220 thousand barrels per day in 3-4 weeks.
The Sakhalin-1 project, implemented on the basis of a production sharing agreement (PSA), includes 3 fields: Chaivo, Odoptu and Arkutun-Dagi on the northeastern shelf of Sakhalin Island. Sakhalin. The total reserves of the project fields are estimated at 307 million tons of oil and 485 billion m3 of natural gas, the annual production volume is 11.3 million tons of oil. Until October 2022, the operator of the Sakhalin-1 project was Exxon Neftegaz Limited, a subsidiary of ExxonMobil, which owned 30% in the project. The project also involves Rosneft (20% through Sakhalinmorneftegaz-Shelf and RN-Astra), Japanese Sodeco (30%) and Indian ONGC Videsh (20%).
On March 1, 2022, ExxonMobil announced the recall of its American employees employed in oil and gas projects in Russia, and the next day, the withdrawal from the Sakhalin-1 project. In April, Exxon Neftegas Ltd. announced a force majeure regime and reduced production, and from May 15, production activities at the project were actually stopped. It was reported that ExxonMobil refused to work with Sovcomflot tankers, in particular, did not accept Russian ship insurance. On August 3, ExxonMobil announced that it was working on the transfer of its operating activities on the project to an unnamed legal entity, but this step was blocked by the decree of Russian President Vladimir Putin dated August 5, which prohibited transactions with foreign shareholders’ shares in Russian strategic companies until the end of 2022.
On October 7, 2022, another decree by V. Putin followed, providing for the creation of a Russian operator for the Sakhalin-1 project, similar to the previously implemented change of operator in the Sakhalin-2 project.
In accordance with the decree, Sakhalinmorneftegaz-Shelf received 11.5% in the company’s authorized capital (in proportion to the stake in the project), another 8.5% was at the disposal of RN-Astra.
The Russian operator, LLC Sakhalin-1, was established on October 14, and Sakhalinmorneftegaz-Shelf is currently its sole executive body. Foreign shareholders got the opportunity to convert their stakes in the project into a new operator, ONGC and Sodeco took advantage of this right, and ExxonMobil announced its complete withdrawal from Russia.
Due to the six-month shutdown of the project, at the end of 2022, oil production under the Sakhalin-1 project was forecasted to be 2 times lower than the planned level – 4.2 million tons, against the planned 8.9 million tons. The total loss of revenues in the budget system of the Russian Federation was estimated at about 4 billion rubles per month.
In addition to budgetary losses, among the negative consequences of the project downtime was the deterioration of the characteristics of the fields, which can significantly affect the reduction in the oil recovery factor (ORF).