the RUSSIA oil & gas competitive intelligence report - Report Buyer

Russia Oil and Gas Competitive Intelligence Report 2010
produces gas, with output expect to eventually reach 10bcm per year. Currently, consumption of
Sakhalin-I's gas remains confined to the Khabarovsk region. Rising output volumes, however, present
significant export potential.
Progress at Sakhalin has been slower than expected owing to disagreements between Gazprom and Exxon
over gas marketing rights. Exxon supports the construction of a pipeline to China, an option it has under
the project's PSA. Gazprom, on the other hand, has previously favoured shipping the gas as LNG from the
Sakhalin-II export terminal, although more recently it has insisted the gas is needed to supply the
domestic market to support industrial expansion in eastern Russia.
In late-April 2009, Exxon resumed work at Sakhalin-I after the energy ministry finally approved its
US$2bn cost plan for that year. Delay in the budget approval forced Exxon to briefly halted work on the
project in February 2009.
The Odoptu field is due onstream in H210, Exxon announced in January 2010. Oil production from
Odoptu will offset declining output from Chayvo. The Odoptu Phase 1 development will utilise the
existing midstream infrastructure connected to the Chayvo field. Crude from Odoptu will be sent by
pipeline to the Russian mainland for export via the De-Kastri terminal in the Khabarovsk region. No
production estimates for the Odoptu fields have been released. In May 2010 Exxon said that the Odoptu
field will increase output at Sakhalin-I by 30,000b/d when it comes onstream in H210.
Transneft – Summary
State-owned Transneft is Russia’s oil pipeline monopoly. It transports about 93% of Russia’s oil
production, operating some 50,000km of long-distance pipelines, including the Druzhba (Friendship) line,
which runs from Russia through Belarus and Poland into Germany. Transneft is also the largest
shareholder (31%) in the 750,000b/d CPC system, which stretches 1,505km from Tengiz in Kazakhstan to
the Russian Black Sea port of Novorossiysk.
In December 2008, the government approved Transneft’s request to increase oil transportation tariffs by
15.7% from 2009. While this increase is lower than the 21% rise requested by Transneft, the news will
present another blow to Russian oil producers that are already exporting crude at a loss after paying
export duties, transportation tariffs and taxes amid subdued oil prices. In 2008, Transneft raised its oil
shipping fees in January and August by 19.4% and 10.7% respectively. The company has argued the
increases are necessary to maintain its infrastructure and finance new projects, particularly the ESPO.
Sakhalin Energy – Summary
Sakhalin Energy operates the Sakhalin-II project, which formally began operations on February 18 2009
and which incorporates an oil field with associated gas, a natural gas field with associated condensate, a
pipeline, and an LNG processing plant and export terminal. Once fully onstream, the project will produce
© Business Monitor International Ltd Page 58