The project lays the foundation for Russia to become a leading exporter to energy markets of the Asia-Pacific region.
In mid-February, President Dmitry Medvedev opened Russia's first liquefied natural gas (LNG) plant. Built by Sakhalin Energy Investment Co., the LNG plant is at the heart of Sakhalin II, one of the largest integrated oil and gas projects in the world.
The project also lays the foundation for Russia to become a leading exporter to energy markets of the Asia-Pacific region. The infrastructure includes three offshore platforms, an onshore processing facility, 300 km (186 miles) of offshore pipelines and 1,600 km (994 miles) of onshore pipelines, an oil export facility, and the LNG plant. LNG exports are expected to begin shortly.
Guests present at the ceremony included Taro Aso, the prime minister of Japan; Prince Andrew, Duke of York; Maria van der Hoeven, minister of economic affairs of the Netherlands; and high-ranking officials from Russia and countries that co-partnered in the project — the UK, the Netherlands and Japan. Also present were Sakhalin LNG customers, representatives from international financial institutions, and senior executives from Sakhalin Energy shareholders - OAO Gazprom, Royal Dutch Shell, Mitsui & Co., and Mitsubishi Corp.
Facility construction commenced in August 2003, with around 10,000 people from more than 40 countries employed on site at the peak of construction activities. The LNG plant on Sakhalin uses a specially adapted technology of double-mixed refrigerant, which enhances the plant's efficiency by taking advantage of Sakhalin's cold climate.
Christopher Finlayson, chairman, Sakhalin Energy, said: “This achievement is a take-off point, which opens up a new era in the history of Sakhalin. This has only been possible thanks to the cooperation between Sakhalin Energy and its shareholders, the Russian Federal government, and the Sakhalin Oblast authorities”.
Nearly all of the 9.6 million metric tons annual production capacity of the LNG plant has already been committed in long-term contracts. Approximately 65% of Sakhalin LNG will be exported to nine buyers in Japan, the world's largest LNG market. The remaining volume will go to South Korea and North America where, following arrival at a terminal in Mexico and regasification, most will be supplied to the U.S. This will establish Russia as a new player on the Asian and American energy markets. It creates opportunities for countries in that region to diversify their gas supplies and lower dependency on exports from other sources. The share of Sakhalin gas in the LNG consumption of Japan, in particular, will approach 8%.
Sakhalin Energy Chief Executive Officer Ian Craig said: “Sakhalin has now firmly established its position on the global energy map. When the Sakhalin II project is fully on stream, it will supply around 5% of the world's LNG and make a significant contribution to strengthening global energy security.”
As is well known, to convert natural gas to a liquid, it is cooled to approximately -160°C (-320°F). Liquefied natural gas (LNG) is a colorless, odorless liquid, less than half the density of water. Liquefying natural gas reduces its volume by 600 times. It remains in a liquid state under normal atmospheric conditions, and can then be transported by sea in specially designed LNG carriers. Moreover, natural gas is said to have the least environmental impact of all the fossil fuels and global demand for it is steadily increasing.
The LNG plant on Sakhalin Island features two processing trains, each with an annual capacity of 4.8 million metric tons. With the plant operating at its design capacity of 9.6 million metric tons, expected in 2010, the highly automated facility will be operated by only 300 personnel.
The Sakhalin II Project also is developing two oil and gas fields (Piltun-Astokhskoye and Lunskoye) offshore north-east Sakhalin for production and export of crude oil and liquefied natural gas (LNG).