Annual Review 2009
Sakhalin Energy Investment Company Ltd.
Sakhalin Island (Head Office)35, Dzerzhinskogo St.,
Yuzhno Sakhalinsk, 693020, Russia
Moscow Branch31, Novinskiy Boulevard,
Moscow, 123242, Russia
www.sakhalinenergy.com
Annual Review
Annual Review
2009
Годовой обзорAnnual Review
MESSAGE FROM THE CEO 4
INTRODUCTION 6
CORPORATE MILESTONES IN 2009 9
Safety 10
Startup of gas production on Lunskoye field 11
Inauguration of the LNG plant 12
Essential completion and status of facilities 14
Transfer to full operation 14
Molikpaq platform (PA–A) 15
Lunskoye–A platform (Lun–A) 16
Piltun–Astokhskoye–B platform (PA–B) 16
Onshore processing facility (OPF) 16
LNG plant 17
TransSakhalin pipeline system 17
Restoring onshore pipeline right of way 17
Well drilling programme 18
Fulfilling plans to produce and export hydrocarbons 19
Crude oil 19
LNG 20
New phase for Project financing 21
Russian Federation revenues 22
Training and development 23
CONTENTS
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Contents
Annual Review
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Contents
ENVIRONMENTAL PROTECTION
AND SOCIAL RESPONSIBILITY 26
Environmental protection 26
Biodiversity 26
Local monitoring 27
Monitoring wetlands 27
Monitoring fisheries 27
Controlling ballast water discharge 27
Sakhalin Taimen 28
Steller’s Sea Eagle 28
Monitoring other protected bird species 28
Western Gray Whales 28
Social responsibility 29
Human rights 29
Public engagement 30
Engaging Sakhalin Indigenous minorities 31
Charity and social investment 31
Sakhalin Salmon Initiative (SSI) 33
Sakhalin Road Safety Partnership 33
LOOKING AHEAD – 2010 PLAN 34
For Sakhalin Energy and the entireoil and gas industry in Russia, 2009represents a true watershed. Manyyears of hard work brought spectacularresults in that one year. Russia’s firstLNG plant on Sakhalin Island came on-stream, a tremendousaccomplishment for Sakhalin Energy.The start-up of the plant also openedup world markets to Russian liquefiednatural gas. This event, central to theCompany’s development, transcends
our corporate history: the launch ofthe LNG plant strengthens Russia’sposition as a global energy supplier.
The Company’s first priority ishuman safety, and we are pleased toreport outstanding results here: lastyear there was not a single fatality, andthe overall lost time incident ratedropped precipitously. All year we alsomaintained high standards ofenvironmental protection and safetyduring production.
Last year the entire massiveinfrastructure of Phase 2 went intooperation. Sakhalin Energy started upthe first LNG Train and then thesecond Train began operation,according to plan. Our drillingprogramme continued on schedule.Operations and facilities werecertified as compliant withenvironmental managementstandards. We also completed animportant technical innovation, asmart water injection well, whichstarted operating on the Piltun-Astokhskoye field.
The Company can take pride in itsproduction achievements last year.Even under the challengingconditions of a commissioning year,we far exceeded our productiontargets: 11% more oil and 47% moreLNG were shipped than we planned.
Despite the global financial crisis,Sakhalin Energy not only posted astrong economic performance lastyear, the Company also securedadditional project financing. The loanagreement, insured by NEXI, anExport Credit Agency owned by the
Message from the CEO
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CEO message
Annual Review
Japanese government, was a vote ofconfidence by international banks inour ability to implement a world-classproject.
Meeting our commitments tocustomers and shareholders,continuously delivering oil and gas,launching innovative technologies,operating safely and reliably,maintaining the highestenvironmental standards, and caringfor people – these are theachievements for which the Companycan be proud, and that command thecentre of our attention. We also aim tobe a good neighbour to Sakhalincommunities and contribute to thesocial development of the island. Oursocial programmes, funded by theshareholders, promote sustainabledevelopment in the region. We devotespecial attention to the island’s future,so many of the Company’s socialprogrammes are dedicated to theyounger generation of Sakhaliners, inwhom we place our trust and pin ourhopes on. They are the future ofSakhalin and our Company.
The year 2009 was full ofanniversaries. Two anniversaries werenoteworthy: it is 10 years since thefirst Russian oil was produced by theMolikpaq platform (the first ice-resistant offshore platform in Russia)and 15 years since Sakhalin Energywas founded. Over the years, Sakhalin-2 has become a major presence in thelocal economy and in the national oiland gas industry. Today, SakhalinIsland is steadily emerging as a newglobal energy hub.
Sakhalin Energy made a step changein 2009. What we used to call a“project” has evolved into a new oiland gas production system. TheCompany has many years of
operations ahead, when it must ensurethe new oil and gas infrastructurefunctions smoothly, and productionand supplies to customers arecontinuous. To achieve these newbusiness objectives, we re-formulatedSakhalin Energy’s mission and visionstatements. Our goal is for SakhalinEnergy to be the premier energysource for the Asia-Pacific. SakhalinEnergy is committed to being a leadingenergy supplier, recognised for itsoperational excellence, reliability andsafety. Our role is to ensure we extractand deliver hydrocarbons profitablyand in an ethically, socially andenvironmentally responsible manner.The proposed goals and objectiveshave dictated the key targets that wereset in the company’s Journey Book –business plan for 2010-2015, approvedby the Committee of ExecutiveDirectors. The focus of the plan is howto achieve maximum productionefficiency, reflecting our ambition tobe the leading company in areaswhich are critical to our success.
We can all be very proud of what wehave achieved thus far. As RussianPresident Dmitry Medvedev said, theproject “will make a very largecontribution to the development ofSakhalin, the prosperity of the entireFar East, and to the energy security ofthe Far East and the whole world.” Thisplaces on us a great responsibility. Weaccept this responsibility, and we willcontinue to work hard to earn theconfidence of our shareholders andcustomers, and the leaders and citizensin the country where we operate.
Andrei Galaev
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CEO message
Annual Review
Sakhalin-2 is one of the world’slargest projects. It was designed toproduce offshore oil and gas, liquefythe produced natural gas andtransport and sell crude oil and LNGin the international market. Its
license areas are located in the Sea ofOkhotsk, off the north-eastern coastof Sakhalin Island. Geographydetermines the destinations ofSakhalin supply: most of the LNG anda blend of crude oil are shipped to therapidly-growing energy markets inthe Asia-Pacific region. The operator,Sakhalin Energy InvestmentCompany Ltd., marked its 15th year inbusiness in 2009.
The two offshore fields of theproject are located approximately 15kilometres from the coastline of theisland at a water depth of 28 metres
to 48 metres. The Piltun- Astokhskoyefield produces mostly oil, while theLunskoye produces gas andcondensate. The combined reserves ofthe two fields represent about 9% ofthe total reserves of the Sakhalincontinental shelf.
Development started in theAstokh area of the Piltun-Astokhskoye field in 1996. SakhalinEnergy began producing oil from the
Introduction
6
Introduction
Annual Review
June 2009 marked 15 years sincethe Sakhalin-2 production-sharingagreement was signed.
The Sakhalin-2 project opened up the Asia-Pacific market to Russian oil.In 2009 Sakhalin Energy celebratedits 10th anniversary of supplying oil.
Molikpaq, the first ice-resistantoffshore platform in Russia, in 1999.
Launched in 2003, Phase 2 was anintegrated, full-scale development ofthe two fields. It is one of the largestoil and gas infrastructure project inthe world.
The main production facilities ofSakhalin-2 are: • the Molikpaq platform (PA-A)
produces oil and condensate fromthe Astokh area of the Piltun-Astokhskoye field;
• the Piltun-Astokhskoye-B platform(PA-B) produces oil from the Piltunarea of the Piltun-Astokhskoye field;
• the Lunskoye-A platform (LUN-A),the first and only offshore gasplatform in Russia;
• the TransSakhalin system of onshoreand offshore pipelines. The offshorepipelines connect the threeplatforms to the shore. The onshorepipelines run almost the entirelength of the island – from the northto the LNG plant and the Oil ExportTerminal (OET) in the south;
• the Onshore Processing Facilitytreats gas and condensate from theplatforms for transport by pipelineto the south of the island;
• the Booster Station №2; • the Oil Export Terminal with a
Tanker Loading Unit (TLU). TLU is installed in Aniva Bay 5 km from the shore;
• the first LNG plant in Russia*.
Sakhalin-2 is one of the mosttechnically sophisticated projectsever achieved in the global oil andgas industry. The project activitieswere envisioned on a grand scale,requiring massive investment.
The island contains uniqueecosystems. The climate is harsh.There was no oil and gasinfrastructure beforehand. What ismore, the project is located far from
major business centres. All this meantthe Company needed the best-available industry expertise, the latesttechnologies, and the most effective
management solutions. The challengewas successfully met, thanks to theunique partnership of SakhalinEnergy’s shareholders.
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Introduction
Annual Review
The global community has recognisedSakhalin Energy’s achievements in environmental safety. In November2009, our Oil Export Terminal won the Environmental Safety award in the 2nd International Oil Terminalcontest.
* The LNG plant and the Oil Export Terminal together form the Prigorodnoye complex. The territory of the complex hosts Russia’s first specialised marine portfor shipping oil and liquefied gas.
10%
12,5%
27,5%
minus one
share
50%
plus one
share
The shareholders of SakhalinEnergy are ОАО Gazprom (50% plusone share), Royal Dutch Shell (27.5%minus one share), Mitsui (12.5%)and Mitsubishi (10%). These fourmajor global companies have anenormous wealth of knowledge,experience, and expertise inconstructing and ope rating oil and
gas infrastructure and in producingand transporting hydrocarbons.
Sakhalin Energy's day-to-day ma -nagement functions are handled bythe Committee of ExecutiveDirectors (CED). CED membersinclude heads of the Company'sdirectorates, which have authorityover the associated activity areas.
Committee of Executive Directors(as of 01.04.2010)
Andrei GALAEV,
CEO
Tim HAKE, Production Director
Erwin NIJSSE, Financial Director
Sergey ANTONOV, HR Director
Sergey DUBYNIN, Legal Director
Valery CHOLOVSKIY,Technical Director
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Introduction
Annual Review
Corporate milestones in 2009
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Corporate milestones in 2009
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Sakhalin Energy’s main priority islabour safety. In 2008, Sakhalin Energyidentified the key risks that pose ahazard to life and introduced LifeSaving Rules. Compliance with theserules is obligatory for everyoneinvolved in Sakhalin-2 operations.The results of the focused safety effortwere quick to manifest themselves: in2009 there were no workplacefatalities, while the total number oflost-time incidents fell considerably.
To encourage and motivate emplo -yees and contractors to be highly
responsible and committed toworkplace safety, the CEO of SakhalinEnergy created a special monthlyaward. The award is given toindividuals who have exhibited modelactions or beha viours that showleadership and a pro-active mindset inregular and systema tic efforts toimprove workplace safety.
Sakhalin Energy also recordedanother significant safetyachievement in 2009: road accidentsinvolving vehicles of the Company
and its contractors dropped sharply.By late 2009, close to 500 motorvehicles involved in the projectoperated for more than 10 monthsfree of road injuries. On 23 February2010, the Company entered its secondyear without injuries from roadaccidents.
To chart the way forward on how tofurther install a culture of workplacesafety, the Company conducted asurvey of personnel in 2009. Theresults of this survey formed the basisfor a 2010 action plan on laboursafety.
Safety
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Corporate milestones in 2009
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In 2009, the Company received the Shell CEOsafety award for the second time.
From February 2009 to February 2010,vehicles involved in the project travellednearly 19 million kilometres – equal to 500 trips around the Earth at the equator.
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Corporate milestones in 2009
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Startup of gas productionin the Lunskoye field
Sakhalin Energy started producinggas from the Lunskoye field in January2009. Lunskoye-A is the first platformto produce offshore gas in Russia.
LUN-A is the first platform in theworld equipped with frictionpendulum bearings, which protect theplatform from seismic loads in theevent of an earthquake. The platformis designed for year-round operation
in a climate with ice, wind, waves andextremely low temperatures. A similardesign was used in PA-B platform.
By the end of 2009, five of the wellsin Lunskoye field were producing gas.These are “big bore” wells, specialtechnology designed for prolificreservoirs like Lunskoye that also havea very high gas flow rate. These are thelargest producing gas wells in Russia.
Gas produced from LUN-A ispumped through a multiphase pipelineto the Onshore Processing Facility(OPF) installed seven kilometres inlandfrom the LUN-A pipeline landfall.
LUN-A, the first offshore gas platformin Russia, was installed in 2006at a water depth of 48 metres
On 18 February 2009, the first LNGplant in the Russian Federation wasinaugurated in a ceremony onSakhalin Island. Russian PresidentDmitry Medvedev, who addressed theaudience, described the plant as “oneof the most innovative, state-of-the-art production facilities that meetsthe highest standards.” Praising theLNG plant and the project as a whole,Pre sident Medvedev also said: “Russiais one of the world’s leading gasprodu cers, and I am confident thatthis new facility will strengthen ourpotential for supplying gas andRussia’s position as a global energysupplier.”
The high-profile of the guests whoattended the ceremony was anindication the launch of the LNG plantwas a truly global event. About 500important dignitaries were presentduring the ceremony. It was PresidentMedvedev’s first visit to Sakhalin sinceassuming office. The presence of PrimeMinister Taro Aso of Japan marked thefirst visit by a Japa nese leader to
Sakhalin since the end of World War II.Among the honorary guests werePrince Andrew, HRH Duke of York(UK); the Netherlands’ Minister forEconomic Affairs, Maria van derHoeven; executives of Gazprom, Shell,Mitsui and Mitsubishi; high-rankingRussian and foreign governmentofficials; and business leaders.
Construction of the LNG plant tookfive years. About 10,000 workers andengineers from nearly 40 countrieswere employed during construction,which started in August 2003. Theplant was designed and built by CTSD,an international consortiumcomprising Chyoda Corporation andToyo Engineering of Japan andNipigazpererabotka and Khimenergoof Russia.
The LNG facilities occupy a site of490 hectares. The LNG plant consistsof two gas liquefaction trains (eachcapable of producing 4.8 milliontonnes of LNG per year), an LNG jetty,a chemical la boratory, a centralcontrol room, and LNG tanks. Gas
Inauguration of the LNG plant
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Corporate milestones in 2009
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Corporate milestones in 2009
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from the Lunskoye and Piltun-Astokhskoye fields is piped to the LNGplant after processing by the OPF fortransport. The world class Lunskoyefield is the main source of gas. Inaddition to its high heating value,Sakhalin gas is also known for its lowlevel of impurities, and is consi dered a“clean gas”.
The LNG plant removes any waterand trace impurities from the gas toprevent freezing or damage toinfrastructure. The gas is then cooledto around –160°C, when it turns into aliquid, occupying about one 600th ofits original volume and remaining li quid at ambient pressure. TheSakhalin-2 LNG plant uses Dual MixedRefrigerant (DMR) technology thatShell developed for this project. It is
the world’s most advancedtechnology, saving energy by takingadvantage of Sakhalin’s cold climate.
LNG produced by two trains runs toLNG tanks, each with a capacity of
100,000 m3 , for further export byspecial tankers. Due to the high levelof automation of the LNG plant, ateam of only 300 people is needed tooperate it at the design capacity.
Dmitry Medvedev:The creation of this facility will deepen
international cooperation, whichis especially important to us today.
More than 100 journalists covered the ceremonyrepresenting more than 60 Russianand international media.
Essential completion and status of facilities
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The facilities of Phase 2 wereessentially completed at the end of2008. In parallel, the process ofgradually starting them up andphasing them into operation beganthe transition to a fully integratedfunctioning of the system.
Transfer to full operation
The completed facilities underSakhalin-2 Phase 2 underwent testingin 2009. The test operating mode isrequired to tune and conduct final
checks on all systems and equipmentbefore transferring them to fulloperation.
In parallel, Russian authoritiescarried out very thorough checks ofthe facilities. The final inspections bystate body Sakhalin Rostekhnadzorcovered all the major facilities of thePhase 2 project, including: PA-B andLUN-A platforms, OPF, offshore andonshore pipelines, the LNG plant,OET, and pipeline maintenancedepots. Sakhalin Rostekhnadzorissued conclusions certifying the
Corporate milestones in 2009
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Corporate milestones in 2009
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completed facilities complied withtechnical standards, other regulations,and the design documents. InFebruary 2010, SakhalinRostekhnadzor issued an orderapproving the certificate ofcompliance for the onshore pipelines.
Issuing the certificates ofcompliance allowes the Company toapply to state authorities for thenecessary approvals for the fulloperation mode.
In addition to the positive outcomeof the state checks, all our facilitieswere certified to be in compliance withthe requirements of the ISO 14001:200standard for environmentalmanagement systems.
Molikpaq platform (PA-A)
The Molikpaq platform (PA-A),installed in 1998 in the Astokh featureof the Piltun-Astokhskoye field, wasthe first fixed offshore oil-producingplatform in Russia. It began year-round operations during the winter of
2008-2009. Before switching to year-round production, all oil fromMolikpaq was produced seasonally.
PA-A reached its design level for oilproduction in 2009. Molikpaq iscurrently operating 14 oil productionwells, four water injection wells, onegas re-injection well and one cuttingsre-injection well.
In July 2009, Molikpaq achievedan important HSE milestone – five yearsof operating without a lost time incident.
In May 2009, the Company receivedan award for the best innovative offshore
project from the Board of Directorsof the Offshore Technology Conference,
a world forum for oil and gas technologies.
Lunskoye-A platform (LUN-A)
Production of gas and condensatefrom LUN-A started in January 2009.The big-bore wells drilled from LUN-Aare the largest gas wells in Russia.Each LUN-A well produces enough gasto feed a 2 GW power plant. Theprolific gas bearing zone of theLunskoye reservoir and the very highgas flow rate determine the largediameter of wells. Each well canproduce up to 10 million m3 of gasper day.
Piltun-Astokhskoye-B platform (PA-B)
PA-B produced first oil inDecember 2008. By the end of thefollowing year, six oil wells wereoperating on the platform.
The average daily capacity of eachPA-B production well is some 10,000bbls (1.3 thousand tonnes) of oil.
Onshore processing facility (OPF)
The main function of the OnshoreProcessing Facility (OPF) is theprimary processing of natural gas andcondensate coming from theLunskoye field for transport bypipeline to the Oil Export Terminaland the LNG plant. The OPF alsoincludes a 100 MW power generationunit that supplies power to LUN-A.
In January 2009, gas started flowingfrom the OPF to the LNG plant via theTransSakhalin pipeline system.
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Corporate milestones in 2009
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The successful transportationand installation of the PA-B topsidesweighing 28,000 tonnes seta new world record in 2007.
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Corporate milestones in 2009
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LNG plant
The LNG plant was inaugurated on 18February 2009. LNG train 1 producedfirst LNG soon after that, and the firstLNG cargo was offloaded later on. LNGtrain 2 started operations in late May.The Sakhalin-2 LNG plant is the sixth-
largest LNG facility in the world inproduction capacity. Sakhalin Energyplans to optimise the LNG productionsystems, which may allow raising plantcapacity by several percent.
TransSakhalin pipeline system
The onshore facilities of the projectare linked by the TransSakhalinpipeline system, which includes over300 km of offshore and over 1,600 kmof onshore oil and gas pipelines, 104block valve stations, and five pipelinemaintenance depots. There are alsotwo booster stations, one at the OPFand the other about halfway betweenthe OPF and the Prigorodnoyecomplex in the south of the island.
The oil pipeline was commissionedin late 2008, and the gas pipeline inJanuary 2009. In April, the operationand maintenance services of theTransSakhalin pipeline system werehanded over to Sakhalin Energy’scontractor, GazpromTransgazTomsk(GTT). GTT specialists were directlyinvolved in testing and commissioningthe pipelines. Engaging GTT in thesetwo tasks allows Sakhalin Energy to tapthe wealth of experience of its majorshareholder, Gazprom. GTT will alsoprovide maintenance services toBooster Station 2, which will becommissioned in 2010.
Restoring the onshore pipelineright of way (ROW)
Construction of the onshorepipeline involved a range of activitiesto restore the pipeline ROW, controlerosion and stabilise river banks. By2009, these activities were almost fullycompleted within the pipeline ROW.
High precipitation in the summer of2009 caused minor landslips andwashouts in some parts of the ROW.The heavy rainfall also caused somedamage to river banks of the rivers inthe Makarov district. An action planwas put in place to repair the damagefrom the heavy rains. By year end, allhigh priority repairs of the ROW werecompleted. Late in the year, winterworks on repairs of the river banks inthe Makarov district began. Acomplete survey of the ROW was alsocarried out at that time to gauge thesuccess of biological reinstatement ofthe ROW, which includedrecultivating the grass. The surveyrevealed some areas requiringrecultivation, and a plan was enactedto finish the work in 2010.
In June 2009, the LNG plant received an innovative project award from
the Japanese Ministry of Land Use,Infrastructure, Transport, and Tourism.
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Corporate milestones in 2009
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Well drilling programme
Drilling continued in 2009 fromPA-B and LUN-A with “zerodischarge”, meaning all drilling wastewas injected in special cuttings re-injection wells which were completedfirst. No wells were drilled from theMolikpaq (PA-A) platform in 2009.
As of year end, eight wells wereproducing in the Piltun area: sixproducing wells, one dedicatedcuttings reinjection well, and onewater injection smart well.
As of year end , six wells of theLUN-A platform were in operation,
five wells for producing gas and onewell for reinjecting cuttings.
A smart well is drilled in the shape of a fish hook. Smart wells substantially reduce field developmentcosts and increase oil production.Thanks to the unparalleled skills of the drilling crew and impeccablecoordination, the drilling time of the smart well fell from a planned 77 days to a record 41 days.
Implementing plans to produceand export hydrocarbons
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Corporate milestones in 2009
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Crude oil
Once the PA-B offshore oilplatform went into operation and theLUN-A platform started gascondensate production, crude oilexports increased. Oil produced fromthe Molikpaq and the PA-B is blendedwith gas condensate from theLunskoye field. Gas condensatemakes up 25% to 30% of the crude oilblend. Due to its low sulfur contentand high amount of light andmedium-light hydrocarbon fractions,this blend of crude is used to producepetrol, kerosene, diesel fuel, andsource materials for thepetrochemicals industry. The blendalso has a low flow threshold (below–60°С) and requires no heatingduring transport via pipeline. Theblend derives its name from “VityazCrude”, which has been in the marketfor the last decade. The new crude iscalled Vityaz Blend.
In 2009, the Company producedand offloaded over 5.5 million tonnesof oil and condensate, almost fourtimes the oil export volume theprevious year. The Company
exceeded its 2009 targets for oilproduction and exports by 11%.
Buyers of Vityaz include powercompanies and refineries in Japan,South Korea, China, the Philippines,Thailand and New Zealand.
To transport the oil, SakhalinEnergy secured the tankers“Governor Farkhutdinov” and“Sakhalin Island” under long-term
charter contracts with PrimorskShipping Corporation. In October2009, the Company signed a long-term charter contract with PrimorskShipping Corporation for anothertanker “Zaliv Aniva”. These threeAframax class tankers, each with agross deadweight over 100,000 arerated Ice 2 (ICE-1C as perinternational classification). They aredouble hulled and equipped with abow loading facility to loadhydrocarbons from the TankerLoading Unit.
0
5
10
15
20
ChinaKorea ThailandNew ZealandPhilippinesJapan
12.70
7.40
2.78
1.46
0.60
16.86
K
oreaK Ch
Japahina
an Philippin
nes New Zeala
nd Thailand
2009 Vityaz Blend sales by country (mln barrels)
In 2009, Sakhalin Energy surpassed its plannedestimates for exports of crude oil by 11%and LNG by 47%.
LNG
In March 2009, the first LNG cargowas offloaded from the LNG plant forJapanese buyers Tokyo Gas and TokyoElectric. The startup of the secondprocess trains of the LUN-A platform,the OPF, and the LNG plant allowedthe Company to gradually ramp upLNG production to 5.3 million tonnesof LNG by the end of 2009, a 47%increase over plan.
Such a successful performancewhile in the midst of commissioningand start up of a production facility iswell above international standards.This impressive feat was achievedmostly due to the detailed and highlyefficient coordination of thecommissioning effort. The end resulthas been the reliable operationalreadiness of all equipment, includingthe process facilities of the offshoreplatforms, the OPF and the LNG plant.In addition, the timely commissioningof gas wells, a high drilling rate, and abetter-than-expected performance ofthe reservoir contributed to thesuccess of the effort.
Almost all the annual output of LNG(98% of the LNG produced by bothprocess trains) was contracted for thenext 20-25 years. A total of 13 LNG
sales contracts were signed, with 10Japanese companies and the rest withSouth Korean state-owned companyKogas, Shell Eastern Trading, andGazprom Global LNG. Thanks to theselast two contracts, buyers of RussianLNG last year included India, China,Taiwan, and even Kuwait.
When the LNG plant reaches itsdesign capacity, Sakhalin Energy willbe producing some 5% of the world’sLNG output.
Sakhalin-2 LNG is transported tocustomers by LNG tankers charteredby the Company under long-termcharter contracts or by the shipsprovided by the buyers. Wheneveradditional cargoes are needed totransport LNG to buyers, theCompany charters tankers in the spotmarket. Three “grand” class LNGtankers were custom-built in Japan totransport Sakhalin LNG: “Grand
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Corporate milestones in 2009
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Each “grand” class LNG tanker has four spherical tanks capableof holding 145,000 m3 of LNG. The tankers can break ice up to40 cm thick. There are only 10 LNGtankers of this kind in the world.
0
750
1500
2,250
3,000
KoreaJapan TaiwanChinaKuwaitIndia
1,097
519324 260 187
2,884
JJapan oK Indirea ia Kuwait China aiwanTT
2009 Sakhalin LNG sales by country (thousand tonnes)
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Corporate milestones in 2009
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In October 2009, Sakhalin Energyand a consortium of internationalcommercial banks signed anagreement for an additional $1.4billion in Sakhalin-2 project financing.The loan was insured by NipponExport and Investment Insurance(NEXI), an export credit agency ownedby the Japanese government.
The funds are to finance completionof the full scope of the Sakhalin-2Phase 2 project, including the drillingprogramme, enabling the project toreach full production capacity.
The project financing for Sakhalin-2Phase 2 project including this loannow totals $6.7 billion.
Project financing is often used by theoil and gas industry to develop majorinfrastructure assets. Debt is repaidfrom the cash flow generated by theasset financed. Securing additionaldebt financing despite difficultfinancial market conditions shows the
confidence a wide range of businessinterests and the internationalfinancial community have in Sakhalin
Energy, a confidence grounded in theviability of the project and itseconomic and financial strengths.
Elena”, “Grand Aniva”, and “GrandMereya”. The first two tankers belongto a consortium of Russia’s largestshipping company, Sovkomflot, andJapan’s Nippon Yusen KabushikiKaisha. The owner of the third LNGtanker is a Russian-Japaneseconsortium set up by PrimorskShipping Corporation, Mitsui OSKLines and K Line.
Sakhalin Energy sets the moststringent requirements for vesselscalling at Prigorodnoye Port to take oiland LNG on board. All oil and LNGtankers must be equipped with specialice detection radar. They must alsohave additional chain stoppers tosecure reliable mooring during cargo-handling operations. These mandatoryCompany requirements greatly reduceenvironmental risk and in some
aspects are stricter than therecommendations of the InternationalOrganisation of Offshore TerminalOwners for loading safety.
To prevent alien species fromdissemination with ballast watersfrom calling ships, the Companydeveloped a procedure for ballastwater discharge from LNG and oiltankers in Aniva Bay. Among themeasures in the procedure, all callingships are required to change ballastwater offshore, also required by theInternational Maritime Organisation(IMO). The Company closely controlsand monitors compliance with thismandatory requirement. For thistask, the Company uses an integratedmonitoring system, widelyconsidered to be the most innovativein Russia and the world.
The $6.7 billion financing secured for Phase 2is the highest ever for a Russian project financing.
Project financing new phase
Since year-round production andexport of oil has begun, theCompany has ramped uphydrocarbons production, which hasled to a substantial increase inrevenue for the Russian Party.
The amount of royalty paid by theCompany has increased more thansevenfold to $281 million versus $39 million the previous year.
In total in 2009 Sakhalin Energycontributed $368 million in taxesand other mandatory payments toall levels of the Russian Federation, a75% increase from the year before.
Given 2009 revenues, overallfinancial proceeds of the RussianFederation from the project reached$1.299 billion.
The revenues of the RussianFederation in 2009 represent 28% ofthe total financial gains from the lifeof the project to date (1995-2009).
Sakhalin Energy paid taxes andobligatory contributions in 2009into the Sakhalin Oblast budget of1,792 billion roubles. Some decreasein payments to the regional budgetwas due to completion of the mainconstruction and reduction in thenumber of construction personnel.
The contributions Sakhalin-2makes to municipal budgets generatea large percentage of the totalrevenue received by themunicipalities involved in the project.
Russian Federation revenues
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Corporate milestones in 2009
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0
10
20
30
40
50
0
10
20
30
40
50
Yuzhno-Sakhalinsk
Korsakov Aniva Kholmsk Dolinsk Makarov Poronaysk Smirnykh Tymovsk Nogliki
368
931
1995–2008
2009
% of municipality budget revenue from the project
(1st half 2009)
Russian Party receipts
from the project ($mln)
Since start of the project,the amount of Russian industry content has
riched over at over $14 billion.
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Corporate milestones in 2009
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Based on relevant provisions in theSakhalin-2 Production SharingAgreement, several years ago themanagement of Sakhalin Energy set agoal to fill key positions with Russiannationals. At the same time, theCompany embarked on a strategy todecrease the total head count ofexpatriate staff and replace them withRussian personnel.
The Company launched a plan toachieve these goals which included anaggressive effort to train and promoteexisting Russian personnel, provide asteady stream of junior technical staff,and locally recruit apprentices andnew skilled labour.
Since 2003, Sakhalin Energy has runan apprenticeship programme tostrengthen local capabilities. So far,the programme has trained 150apprentices. Many of them are nowemployed at the LNG plant, the OPF,
and offshore facilities. A total of 10more specialists started training inSeptember 2009.
Training is a core activity of theCompany’s human resources policy. In2009, more than 1,800 peopleunderwent training in educationalworkshops, training sessions andrefresher courses. The Company alsoteaches skills that are new to Russia,
such as how to operate gasliquefaction, which only expatriatespecialists could do previously. Thefirst three Russian nationals werecertified in this job in early 2010.
With a view to creating a futuretalent pool, Sakhalin Energy offerspractical training opportunities tosenior students in Russia’s institutionsof higher education. The traineesprogramme, available since 2000,allows students to apply theirtheoretical knowledge, gain practicalexperience, and develop theirprofessional skills. In 2009, 45students received offers to participatein this programme.
The State Labour Inspectorateof Sakhalin Oblast issued Employer
Confidence Certificate number 001to the Company, based on
a declaration by Sakhalin Energyto implement employees’ labour
rights. The declaration project beganin Russia in 2006 mainly
to develop corporate socialresponsibility practices.
Training and development
The Company also generouslysupports talented Sakhalin youths.From 2003, the top graduates ofSakhalin high schools receiveeducation grants at the top institutionsof higher education in Russia. In 2009,Sakhalin Energy offered grants not onlyto the students who had chosen tostudy oil and gas, but also to those whoselected other popular branches ofstudy, such as economics, finance andcredit, nanotechnology, informationtechnology, and internationaleconomic relations. Students studyingoil and gas may undergo practicaltraining and pre-graduation practicewith the Company, and the best in thegroup have the opportunity to work forSakhalin Energy. In 2009, a total of 12Sakhalin high school graduatesreceived education grants.
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80%20%
54% 46%
2009
90% 10%
2010
2009
Russian staffExpat staff
2018
25%75%
Russian staff share
Russian managerial staff share
Environmental protection
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Environmental protection and social responsibility
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Environmental protectionand social responsibility
Sakhalin Energy is committed tominimising any unfavourable impactsthe project may have on health, theenvironment, and the social fabric ofthe communities of Sakhalin, whilemaximising benefits to thesecommunities and other stakeholders.Our guidelines in this domain are theCompany’s Health, Safety andEnvironment (HSE) Policy and the HSE
and Social Action Plan (HSESAP). Bothdocuments were developed based onthe most rigorous internationalstandards and with support of variousstakeholders, notably financial lendinginstitutes. The action plan includesseveral hundred long-termcommitments the Company hasundertaken on the environmental andsocial aspects of the project.
Sakhalin Energy’s key objectiveduring both the construction and theforthcoming long-term operationperiod is to minimise environmentalimpact. To achieve this goal, theCompany has developed a BiodiversityAction Plan, as well as an IndustrialEnvironmental Control and LocalMonitoring Programme, that hasalready been approved by relevantsupervisory and regulatory authoritiesand is in force.
Biodiversity
The Company submitted in 2009the final version of the BiodiversityAction Plan to the Biodiversity ExpertGroup, which comprisesrepresentatives of the SakhalinAdministration, environmental andsupervisory agencies, federal andregional scientific institutions, andRussian and Japanese NGOs. TheBiodiversity Expert Group supportedthe Biodiversity Action Plan andrecommended it for implementation.
Local monitoring
The implementation of the long-term local monitoring programme,approved by the governmentenvironmental authorities for theoperational phase of the project,began in 2009.
The purpose of the programme is toensure regular environmentalmonitoring of the soils, wetlands andvegetation, rivers and riverbeds, birdsand mammals, marine biota andbottom sediments. The monitoring isdone in and around the main projectfacilities – pipelines, the LNG plant,the Onshore Processing Facility,Booster Station 2, and offshorefacilities, such as platforms, the TLUand the LNG jetty.
Results from early local monitoringshow only a minor impact on theenvironment from the project facilities.Notably, biotic communities in thespawning rivers have successfullyrecovered after disturbances fromconstruction. The species compositionof plant communities around theproject facilities have remainedpractically unchanged, and benthos inlocal marine ecosystems are nowrestored. Monitoring results are thebasis for new approaches toward theongoing reinstatement of the right ofway (ROW).
Monitoring wetlands
The wetlands of Sakhalin have aunique value to the naturalenvironment of Sakhalin. Thewetlands absorb precipitation andfeed water to streams and rivers,maintaining the surface waterbalance, and are therefore veryimportant for migrating andspawning salmon. It is necessary forSakhalin Energy to make sureconstruction of the pipeline has notaffected these fragile ecosystems. TheCompany, pursuant to its obligationsbefore the shareholders, monitors thereinstatement of wetlands after theconstruction phase of the project, andlooks for any long-term impactscaused by the construction orpresence of pipelines.
Monitoring rivers
In 2009 Sakhalin Energy studied thelocal river systems from fishery pointof view. The research shows that thequality of spawning areas at theserivers markedly improved since theconstruction phase. The Companyplans to continue these studies, toavoid any degradation in the qualityof spawning areas in the rivers crossedby the pipeline.
Controlling ballastwater discharge
Ballast water discharge by oil and gastankers in Aniva Bay can potentiallycreate serious environmental hazards.The Company has undertakenextensive measures to prevent theintroduction of alien species withballast waters from these vessels. Mostimportant, changing of ballast watersin full ocean is one of the mandatorymeasures. The flora and fauna in andaround Prigorodnoye has beenmonitored since 2008 to determine if
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the mitigation measures are sufficient.To date the results of these monitoringsurveys are satisfactory.
Sakhalin Taimen
The Sakhalin Taimen, a rare speciesof salmon endemic to Sakhalin Island,is listed in the Red Book of the RussianFederation, the Red Book of Sakhalinregion, and the IUCN Red List. From2007 to 2009, Sakhalin Energyconducted special monitoring of theSakhalin Taimen fry numbers in sevenmodel rivers crossed by the pipeline.The information collected during thestudies will be used to developmeasures to preserve this rare species.
Steller’s Sea Eagle
The Company continued monitoringthe Steller's Sea Eagle population in2009, in all areas where there was thepotential for environmental impact ofthe project on the eagle populationnorth of the OPF. Some positivechanges of this protected species wereobserved: a higher percentage of activenests and better breeding productivity,as well as a steep drop in attacks bybrown bears that destroy nests. A totalof 274 nesting areas yielded 108 eaglets.More importantly, the reproductionsuccess in the area of potential impact
from the project was even higher thanfor the eagle population as a whole,probably due to measures put in placeto protect the nesting trees.
Monitoring other protected bird species
Protected birds, including theAleutian tern, Sakhalin dunlin,Siberian grouse, owl, long-billedmurrelet, Japanese snipe weremonitored on the Chaivo sand bar, atand around the OPF, along thepipeline corridor, and in the vicinityof the LNG plant.
The Company identified severalpositive developments in the Japanesesnipe population, whose numbers haveincreased in the Dolinsk district as wellas the Korsakov district, near the LNGsite, thanks to an expansion of thesnipe’s reinstated lands. The number ofSiberian grouse has not declined overthe years of OPF construction, and thebirds are still in the same forestbiotopes close to the site boundaries.No negative impact has been seen onthe nesting colonies of migrating birdsin the Chaivo area. A decrease in thenumber of owls, Aleutian tern andsome other species is probably relatedto natural variations in environmentalfactors. Future monitoring data willhelp identify the true causes of thedecline in these populations.
On the whole, bird communitiesfound along the pipeline corridor atand around the OPF appeared to be ingood condition, and the ecosystems inthe zones of impact showed strongsigns of recovery.
Western Gray Whales
In 2009 the Company continued tomonitor the Western Gray Whale(WGW) population. This work hasbeen carried out in cooperation withExxon Neftegaz Limited.
The studies demonstrated nonoticeable negative impact of SakhalinEnergy operations on the WGWpopulation. After an observed declinein whale densities in 2008, distributionand photo-ID surveys conducted in2009 demonstrated that whaleabundance increased and was similar
to 2007. In 2009, 138 whales fromSakhalin catalogue were identified offSakhalin Island and the KamchatkaPeninsula. A near-record of 10 calveswere photographed, demonstrating ahealthy annual reproduction rate.
As part of the Marine MammalProtection Plan, vessels operating inthe whale feeding ground navigate atminimum speed in controlledcorridors with dedicated observer on board.
Engagement with the Western GrayWhale Advisory Panel (WGWAP),organised by IUCN, continued in 2009.Two WGWAP meetings were held aswell as various task force meetings.Work on development of the 3DAstokh seismic survey monitoring andmitigation plan continued in closecooperation with the Seismic TaskForce. This seismic survey is scheduledfor execution in June 2010.
Human rights
The Company’s core valuesinfluenced its decision in November2009 to join the United NationsGlobal Compact, a strategic initiativeto promote corporate socialresponsibility. Thousands ofcompanies from more than 100countries are enrolled in theinitiative.
The United Nations GlobalCompact is both a policy platform anda practical framework for businessesseeking to align their operations andstrategies with 10 universallyaccepted principles in the areas ofhuman rights, labour, environmentand anti-corruption.
As a voluntary initiative, it is led bycompanies that are committed to
sustainability and responsiblebusiness practices. By joining the GC,companies demonstrate their beliefthat responsible business practicesbased on the universally acceptedprinciples help to benefit economiesand societies everywhere andcontribute to a more sustainable andinclusive global economy. The UNGlobal Compact’s 10 principlesenjoy universal consensus and arederived from the followinginstruments: • The Universal Declaration of
Human Rights;• The International Labour
Organisation's Declaration onFundamental Principles and Rightsat Work;
• The Rio Declaration onEnvironment and Development;
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Social responsibility
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• The United Nations ConventionAgainst Corruption.
Public engagement
Sakhalin Energy makes sustainedefforts to engage with the localcommunities. The main objective ofthis awareness-raising is to help theCompany foresee potential issues andaddress them well before they becomegrievances. Regular dialogue with thepublic is conducted by a team of fivecommunity liaison officers (CLO)based in the local communities in thevicinity of the project’s main facilities.
The CLO team in 2009 receivedadditional support when a network of20 information centres wasestablished. Information centres arehosted by local libraries in residentialareas close to Company facilities. Theinformation centres function in towns,including Dolinsk, Smirnykh andKholmsk, and in small villages with apopulation of only a few hundred.
Feedback makes it possible for theCompany to get real-timeinformation and respond quickly by
giving assistance when necessary. Onthe other hand, the informationcentres ensure residents havepermanent access to information onthe activities of the Company.
In nevertheless a grievance emerges,it is addressed and resolved byfollowing the Company’s grievanceprocedure. In 2009, Sakhalin Energybecame one of five companies in theworld to participate in a pilot project totest the Ruggie Principles. Theprinciples concern the human rightsaspects of grievance mechanisms, andwere developed by Prof. John Ruggie,Special Representative of the UNSecretary-General on business andhuman rights as part of an approach tomanaging business and human rightsapproved by the UN Commission onHuman Rights.
The Company’s continuousapplication of a simple andstraightforward mechanism to register,review and settle grievances was thereason why Sakhalin Energy wasinvited to represent Russian businessand the international oil and gasindustry to test these principles.
The UN will use the lessons learnedfrom the five pilots to developrecommendations for businesscommunities around the globe.
Engaging Sakhalin's indigenous minorities
Since its inception, the Company hasput in place social programmes tobenefit the indigenous people ofSakhalin Island. A breakthrough in theCompany’s relationship with thenative population of the islandoccurred after the creation of atrilateral Sakhalin IndigenousMinorities Development Plan. The planhas already helped in theimplementation of more than 230projects that were selected anddeveloped by representatives of theindigenous population in education,health care, conservation and languagestudies, national farming, and thepreservation of traditional cultures.
At the Sixth Congress of IndigenousMinorities of the North, Siberia andthe Far East in 2009, Sakhalin Energywas awarded the title of BestIndustrial Company.
Charity and social investment
Sakhalin Energy’s activities have awide-reaching and positive impact onthe society and economy of the region.
In only 15 years, Sakhalin Island hasbecome one of the leaders in thecountry’s economic growth. SakhalinOblast is one of the first regions inRussia, where small and mid-sized
businesses evolved: as of 2009, theshare of small business in the GrossRegional Product was about 30%.
The Company develops andimplements a wide range of social
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In 2009, the gross regional product of Sakhalin Oblast was 335 billionRussian roubles, a 106.4% increasefrom the previous year.
The unemployment rate of Sakhalin was1.3% in early 2010 – among the lowestin the Russian Far East and in thecountry at large.
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programmes that contribute tosustainable development of theSakhalin Oblast. In 2009 alone,
Sakhalin Energy invested a total of65.7 million Russian roubles ($2.27million) to implement socialprogrammes in Sakhalin Oblast.
Sakhalin Energy’s sustainabledevelopment and social programmeshave received wide acclaim. TheCompany won regional Philanthropistof the Year once again in 2009.
Sakhalin Energy’s efforts have alsobeen recognised at national level. A corporate philanthropy studyconducted in 2009 by auditorsPriceWaterhouseCoopers, Vedomostinewspaper and the Donorspartnership of the Russian Union ofIndustrialists and Entrepreneursunder the Corporate Philanthropy inRussia Research project. The studyranked Sakhalin Energy third afterTransaero and Uralsib Bank. Theexperts noted the Company’scoherent and well-structuredprogramme of social investments,fully transparent objectives, and clearevaluation criteria.
The Company won two awards in2009 for its social programmes in theRussian social investmentscompetition The Corporate Donor ofRussia awards. The Russian Union ofIndustrialists and Entrepreneurs(RUIE) recognised the SakhalinSalmon Initiative as “The BestProgramme to Develop the Principlesof Corporate Culture and CompanyCorporate Standards in the Social
Sphere.” The RF Public ChamberCommission for PhilanthropyDevelopment and Improvement ofLegislation on NGO gave the Companya prize for its programme supportingemployees’ charity initiatives, “HurryUp for Good Deeds”, under thecategory “The Best Programme(Project) Promoting the Developmentof a Philanthropic Culture in Society.”
In 2009, Sakhalin Energy also wonthe Silver Archer National Award inpublic relations for its long-term socialproject, “Breaking the Stereotype”,aimed at strengthening the Company’sreputation and winning the trust of thepeople of Sakhalin Island.
The Company programmes“Employees’ Charity InitiativesSupport” and “What to Do inEmergency Situations” were includedin the 2009 publication “CollectedSocial Programmes” of the RussianUnion of Industrialists andEntrepreneurs (RUIE).
Sakhalin Salmon Initiative (SSI)
Sakhalin Energy, alongside theinternational non-profit organisation,the Wild Salmon Centre (US) and theSakhalin Administration, were thefounders of the Sakhalin SalmonInitiative (SSI). The goal of theinitiative is the conservation andsustainable use of wild salmon,ecosystems, and salmon spawningrivers. The four-year budget for theinitiative is $8.8 million.
In 2009, SSI organised twocomprehensive scientific expeditions;conducted integrated monitoring ofthe local salmon population, its
The Company is now one of Russia’s most efficientcorporate philanthropists, ranked third in the nationwideproject that assesses charitable programmes.
Sakhalin Energy spent more than $600 million to develop infrastructure for the common good: roads, bridges,
airports, and seaport infrastructure werebuilt or rehabilitated, and regional medical
facilities were upgraded.
biodiversity, and its habitat in therivers of Sakhalin; supported the anti-poaching activities of basin salmoncouncils; and restored salmonspawning migration routes that hadbeen destroyed by powerful cyclonesand other causes. Many SSIprogrammes teach the youth ofSakhalin environmentally-responsiblebehaviours. For example, youngenvironmentalists from the US and
Sakhalin attended the firstinternational salmon summit, thatincluded educational tours and othercultural events, such as the children’scompetition “Salmon, Live!” Theinitiative also developed learningprogrammes for kindergartens andprimary schools.
Sakhalin Road Safety Partnership
Along with road safety actionslinked to the works under theSakhalin-2 project, the Company alsoconducts road safety initiatives withthe communities of Sakhalin Islandunder the Sakhalin Road SafetyPartnership, launched by the SakhalinAdministration, local traffic police,other businesses, and the generalpublic. Established in 2005 on theCompany’s initiative, the Partnershiphas implemented several long-termprojects.
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Small Grants – Big Deeds
The charity programme “Small Grants – Big
Deeds” supports district initiatives in Sakhalin
Oblast. The programme started in 2003. The
Company awards grants after a competitive
bidding process to action groups, non-
governmental organisations, and institutions
for social, environmental, cultural and
educational initiatives that adress specific local
problems.
What to Do in Emergency Situations
The project “What to Do in Emergency
Situations” is not only a fixture in Sakhalin, but
has been taken up in many parts of the country.
Started in 2005, the programme is conducted in
partnership with the Sakhalin Regional
EmerCom Department and the Sakhalin
Department of Education. The project teaches
the children of Sakhalin Oblast, an area prone
to natural disasters, including earthquakes,
avalanches, forest fires, major snowstorms, and
tsunamis what to do in an emergency. By the
end of 2009, the programme had a repertoire of
23 “Senya” cartoons on standards of emergency
conduct. Outside Sakhalin, the programme has
also generated a lot of interest. The cartoons are
displayed in 10 Russian regions. Since 2009, the
cartoons are posted on EmerCom children’s
website at http://www.spas-extreme.ru/.
Examples of Sakhalin Energy social programmes
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Sakhalin Energy’s main operationalobjectives for 2010 are to completethe transfer of its newly built facilitiesfrom commissioning and test mode tofull scale, steady operations, and focuson production efficiency.
The Company plans to ramp upproduction of the LNG plant to itsdesign capacity, and to raisehydrocarbons production of thePiltun area and Lunskoye field to fullcapacity (the Astokh area reached fullproduction capacity in 2009).
During the last stage ofcommissioning, all systems andequipment will receive finaloptimisation, and the complexinfrastructure built by SakhalinEnergy will be completelysynchronised, a task necessary toensure process efficiency andreliability.
Further drilling from PA-B andLUN-A is a Company priority. In 2010,two gas wells will be drilled onLunskoye (one of these was started in
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Looking ahead – the plan for 2010
Annual Review
Looking ahead –the plan for 2010
2009), as well as an experimentalhorizontal well to study the oil rim.On Piltun, the Company plans to drillfour operation wells (two for oilproduction and two for waterinjection), complete a water injectionwell begun in 2009, and start thepreparation works for further drilling.Water injection is beginning at Piltunto maintain reservoir pressure.
The Company will start a majorupgrade at the Molikpaq platform(PA-A), which has been working for 10years. The upgrade will make itpossible to build new wells from theCompany’s first platform. TheCompany also plans to conduct a 4Dseismic survey on the Astokh field todetermine the current status of thefield after 10 years of development,plan new wells, and increase future oilproduction.
Large-scale construction activities,required for efficient functioning and
transfer of the projects into operation,are behind us. What is left is to finish in2010 constructing and commissioningof the Booster Station 2 (BS2). BS2 willmake it possible to pump additionalgas by pipeline and thus increase LNGproduction.
In keeping with the ProductionSharing Agreement, royalties andshare of profits will soon be paid tothe Russian Party in gas. The RussianFederation appointed Gazprom as anauthorised company to manage theRussian share of the royalties andshare of profits. To transfer the gas toGazprom, the Company will build twogas transfer terminals (GTT).Construction of the southern terminalnear the village of Troitskoye isalready underway. Sakhalin Energyplans to complete the main scope ofthe work by late 2010, so the facilitywill be commissioned and gas transferwill start in 2011, to supply gas to the
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Looking ahead – the plan for 2010
Annual Review
Yuzhno-Sakhalinsk power station.The latter will be transferred fromcoal to gas. Construction of thenorthern terminal near the village ofBoatasyno is aligned with Gazprom’sdevelopment plan. Gazprom intendsto transfer gas from the northernterminal to the mainland through theSakhalin-Khabarovsk-Vladivostokpipeline, as part of the gasificationprogramme for the Russian Far East.
Environmental and social projectswill continue in 2010. We will workhard to become a world leader inmeeting and even setting the highest
global standards of environmentalprotection and corporate socialresponsibility. The second SakhalinIndigenous Minorities DevelopmentPlan covering 2011 to 2015 will beelaborated in 2010. We will deepenour dialogue with society by issuingnon-financial reports according to thestandards of the Global ReportingInitiative (GRI).
In accomplishing all tasks, SakhalinEnergy will continue striving tomaximise economic efficiency whileensuring safe and reliable productionand delivery of hydrocarbons.
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Looking ahead – the plan for 2010
Annual Review
Sakhalin Energy Investment Company Ltd.
Sakhalin Island (Head Office)35, Dzerzhinskogo St.,
Yuzhno Sakhalinsk, 693020, Russia
Moscow Branch31, Novinskiy Boulevard,
Moscow, 123242, Russia
www.sakhalinenergy.com
Annual Review
Annual Review
2009