sakhalin-1 1995–2015 Record of Achievements sakhalin-1 1995–2015 Record of Achievements 1

o energy project in the world better Sakhalin-1 also stands as one of the largest represents the power of innovation foreign investments in Russian history. and cooperation than Sakhalin-1. It has delivered significant benefits N to the global economy while maintaining For two decades, this pioneering project one of the industry’s best safety performances, in Far East Russia has been a remarkable despite the challenging environment. symbol of what we can achieve when the strengths of national and international oil Simply put, Sakhalin-1 is a model for solving companies are brought together. the world’s shared energy and environmental challenges. At ExxonMobil, we have been proud to partner with our co-venturers: Rosneft, SODECO, I consider it a privilege to have such and ONGC, to achieve what many believed a personal connection to this project, was impossible. Sakhalin-1 is in an area beginning in the late 1990s, when I was characterized by harsh conditions, which offer president of Exxon Neftegas Limited. In this only limited windows of opportunity for safe position, I was able to meet and work with and successful exploration and production. many of the talented people who have taken Sakhalin-1 from bold vision to technological Yet, over the past 20 years, by applying marvel. innovative technologies and teamwork, this project has unlocked new supplies of energy, I am delighted this commemorative book will contributed to growing local communities, tell the extraordinary story of this world-class Rex W. Tillerson and protected a sensitive environment project. Chairman and CEO, on both land and sea. Exxon Mobil Corporation Content

Message from R. Tillerson, Chairman and CEO Chapter 11 . Access to World Markets . . . . 72 Message from Wayne Warwick, of Exxon Mobil Corporation ...... 1 President of Exxon Neftegas Limited . . . . . 139 Chapter 12 . Setting Records Introduction ...... 5 as a Business Need ...... 80 Chapter 21 . It’s All About the People . . . . 140

Chapter 1 . Sea of Okhotsk’s Treasures . . . . . 10 Chapter 13. Riverside Office ...... 86 Chapter 22 . New Opportunities for Russian Companies ...... 144 Chapter 2 . In the Footsteps of the Pioneers . . 16 Message from James Taylor, President of Exxon Neftegas Limited in 2006–2015 . . . 91 Chapter 23 . Caring about Nature ...... 148 Chapter 3 . Appraisal ...... 22 Chapter 14 . Secrets of Odoptu ...... 92 Chapter 24 . Harmony of the North . . . . . 152 Chapter 4 . From Concept to Plan ...... 30 Chapter 15 . Sustainable Development . . . . 96 Chapter 25 . In Good Health ...... 156 Chapter 5 . Battle Against the Ice and Winds . . 34 Chapter 16 . Technological Leadership . . . . 102 Message from K. Pepper, Vice President Chapter 6 . Creation of Yastreb ...... 40 of ExxonMobil Production Company . . . . . 161 Chapter 17 . Treasures of Arkutun-Dagi . . . 108 Chapter 7 . Voyage of Orlan ...... 48 Chapter 26 . Investing in the Future . . . . . 162 Chapter 18 . Time of Berkut ...... 116 Chapter 8 . Links of One Chain ...... 54 Chapter 27 . What the Heart Wants . . . . . 168 Chapter 19 . From One World Record Chapter 9 . Heart of the Project ...... 60 to the Next ...... 124 Chapter 28 . A Glance into the Future ...... 172 Chapter 10 . First Oil ...... 64 Chapter 20 . Berkut’s First Oil ...... 130 Message from N. Duffin, President Message from Jim Flood, Vice President of ExxonMobil Development Company . . . . 177 of ExxonMobil Development Company . . . . . 71 5

ot too long ago, Sakhalin its extraction having numerous island were joined by the as one of the oil and gas hubs Nwas perceived as the obvious difficulties: freezing best international experts . where, even in quite harsh edge of Russia, a place for temperatures, high winds The sharing of information, climate conditions, industrial the Tsar’s labor camps, which and damp soil . This, however, as well as a slew of innovations records were set, one after had been described in detail did not stop oil enthusiasts, and cutting-edge technologies another . These rapid changes by Russia’s great author, who even at the time, helped to unlock a trove transformed the region Anton Chekhov . The fact that were seeking international of hydrocarbons beneath the into one of the country’s oil the island had hydrocarbon cooperation to develop the seabed that was previously leaders . And for the residents reserves was established new industry . By the end inaccessible . As a result, of Sakhalin and the entire in as early as the 19th of the 19th century, Russian Sakhalin became known Far East region of Russia, the century . However, the oil was oilmen who had already made to the entire world not time of new opportunities and challenging to produce, with their first steps beyond the as a remote outpost, but prospects had arrived . 6 7

Zotov’s Drilling Derrick

The discovery of natural oil Company, Petersburg-Sakhalin worked on the island . In 1898, Visitors to the Sakhalin northern oil Chasing reserves in the north of Sakhalin Oil and Coal Company, and the he obtained permission to capital Okha have most certainly noticed an unusual, time-darkened wooden in 1879 precipitated the launch of Vladivostok-Sakhalin Expedition develop oil fields there, and set structure. This is the so-called Zotov’s several attempts by enthusiasts all staked their claim . Foreigners up Sakhalin and Amur Oil and Drilling Derrick. 2015 marks its 105th Black Gold anniversary. to begin commercial production . also began expressing interest in Mining Syndicate in London . Probably just a few have heard about Russian entrepreneurs like the promising region . Starting The syndicate, with a starting the man who provided the namesake Grigory Zotov, as well as the in 1892, German engineer capital of £100,000 was in for this structure, which looks nothing like modern drilling rigs. Yet, the retired partnership created by his F . F . Kleye, with the assistance operation for almost 10 years, naval lieutenant, Grigory Ivanovich followers, G . I . Zotov’s Heirs and of Royal Dutch Petroleum, Zotov (1851–1907) is considered to be the founder of the Sakhalin Oil Industry; one of the first oilmen of the Russian Far East.

In 1879, the estate manager of Nikolaevsky, merchant А. Е. Ivanov, guided by the stories of Sakhalin’s indigenous people, discovered natu- ral oil seeps in the northern region of the island. In 1880, the merchant Japanese specialists filed a land allocation request to the Amur River Region Governor- at Okha well site, General, Baron A. N. Korf, for the purpose of oil exploration and 1930s ­production. However, the wheels of the bureaucratic machine turned The first SakhalinNeft slowly, and Ivanov died before receiving a positive reply, which arrived derrick in Okha, 1995–2015 three years later. August 1928

One of the merchant’s inheritors was the first to perceive the potential

of the remote island; this was Grigory Zotov. In 1874, he resigned from his service to the monarch at the Far East and started his own business. In 1888, Grigory Zotov obtained the right to prospect for oil and founded a joint stock company, Zotov and Co. The company attracted interest, and even the famous Swedish billionaire, Alfred Nobel, tried to become a shareholder, but his request was rejected.

As early as 1889, the first expedition organized by Zotov took place. The expedition was aimed at researching oil sources in the north of Sakhalin. This, and subsequent expeditions, resulted in the discov- ery of Okhinskoye, Noglikskoye, Staro-Nabilskoye, Piltunskoye and Ratmanovskoye oil shows, which later turned out to be high-grade deposits, still under development.

As for the drilling derrick named after Zotov, it was built in 1910

Record of Achievements Record by the oil partnership company, G. I. Zotov’s Inheritors and Co. Zotov’s

Drilling Derrick is protected as a historical monument, and provides visual representation of the progress of oil well drilling, in both scale and technology, over the course of one century. sakhalin-1 8 9 started drilling the first well, and The Japanese oil concession was produced its first commercial oil as annulled ahead of time in March early as in November . Sakhalinneft 1944, at the request of the USSR, was developing by leaps and and all concession property was bounds; by 1945, the annual oil transferred to the Soviet Union . production had grown to 695,000 In 1945, Sakhalinneft trust was tonnes . In 1940, construction work transformed into the Sakhalinneft started on the Okha — Sofyiskoye- production enterprise, which in turn on-Amur pipeline from the island was transformed in 1978 into the to the mainland . The pipeline was All-Union Industrial Association, completed in two and a half years . Sakhalinmorneftegazprom, and shortly thereafter, changed its name to Sakhalinmorneftegaz.

Community center Oil production sites and derricks in Okha, in northern Sakhalin, 1931 Site #10, late 1930's

Oil production sites in northern Sakhalin, late 1930s 1995–2015

but never achieved commercial Hokushinkai, a consortium Chayvo, Nutovo, Piltun, Ekhabi, necessary for the large-scale scale production of oil . of five Japanese companies Nyivo and Uiglekuty . In return, industrialization of the country . was formed, which started the local and state taxes, rent, and In 1916, the Japanese Chamber In 1927, the Soviet Union began development of oil fields jointly 5% to 45% of total revenue were of Trade and Commerce to prepare for independent with Russian entrepreneurs . paid to the Soviet government . expressed its interest in development of the Sakhalin In 1926, under the auspices Kita Karafuto Sekiyu drilled Sakhalin oil and suggested oil fields. At first, the work was of Hokushinkai, a joint stock 54 wells; the peak annual Record of Achievements Record conducting joint surveys on performed by Embaneft trust,

company, Kita Karafuto Sekiyu production reached 310,000 Sakhalin with the Petrograd which in September 1928,

(Northern Sakhalin Oil), was tonnes of oil . All of this oil was Geological Committee . was replaced by Sakhalinneft, created, which developed exported to Japan, and in return, Permission was obtained in a newly created trust of national eight fields under a concession the young Soviet government 1917, and in May of 1919, significance, which immediately Zotov's eye sketch agreement: Okha, Katangli, received the financing

sakhalin-1 of the northern Sakhalin area. 10 11

Chapter 1

long time ago, experts in 1972, with a 2453 m deviation . Arealized that northern Its testing indicated the presence Sea of Okhotsk’s Treasures Sakhalin deposits were not limited of oil beneath the seafloor. to what was extracted onshore . However, in order to achieve The question was just how the objectives as soon as possible, significant the potential of the oil the implementation of advanced and gas basins hidden beneath exploration technologies the waters of the Sea of Okhotsk were required . Taking into might be . account the availability of such technologies (as well as a wealth At the 24th Congress of the of economic resources) in Japan, Communist Party of the Soviet the Soviet party decided that Union, which took place in March- Japanese companies and Japanese April 1971, the USSR National loans would make it possible Economy 5-year Development Plan to implement this plan at least five geological and geophysical data Currently its successor is Sakhalin Exploration works was adopted . It called for geological on Piltun spit,

1995–2015 years earlier . on the shelf and were briefed Oil and Gas Development Co ., late 1960–70s exploration of the coastal and on the scientific and operational Ltd. Established in March 1995), offshore areas. For the first time, As a result, at a meeting of the achievements of scientists and responsible for conducting further the government had planned the Soviet-Japanese and Japanese- oilmen . It was concluded that there negotiations with the Soviet development of offshore resources . Soviet Committees for Economic was a high probability of major government, and for signing the The plan covered oil and natural Cooperation in April 1972, upon oil and gas discoveries in the General Agreement . gas exploration surveys on the the initiative of the Soviet party, shelf’s subsoil . In 1974, principle continental shelf of the USSR it was decided that negotiations On January 28, 1975, the USSR agreements were reached regarding as a whole, and included a general needed to be held for entering Ministry of Foreign Trade and the draft of the General Agreement outline of surveys on the Sakhalin into a mutually acceptable SODECO signed a General on participation in exploration, shelf for 1972–1985 . agreement on the exploration Cooperation Agreement in the area and development of discovered and development of Sakhalin’s of oil and / or gas exploration,

Record of Achievements Record deposits on the Sakhalin shelf . Sakhalinneft production enterprise

offshore fields. Both parties had field infrastructure development, Under this agreement, the Japanese undertook the implementation

formed working groups, and offshore production near Sakhalin party created the company of the plan. In 1971 the first in September 1972, a Japanese Island, and for delivery of these Sakhalin Sekiyu Kaihatsu Kyoryoku deviated well (650 m seaward) was Odoptu North Well Site delegation of 16 experts arrived products to Japan . The agreement Kabushiki Kaisha (SODECO. on Piltun spit, drilled, followed by a second well in Sakhalin . They reviewed the called for a ten-year, two-stage

sakhalin-1 summer of 2010 12 13 period of geological exploration on the Sakhalin shelf (in the Veninskoye and Lunskoye), out covering 95,000 linear kilometers course of its operation from 1980 of which Odoptu, Chayvo, Dagi of geophysical surveying, and to 2000) . and Lunskoye were considered prospect drilling of 56 wells to be the most promising . From 1976, all offshore geophy­ on 20 structures . The hope was sical operations were conducted The drilling of the first well began to discover six oil and gas fields. by Dalmorneftegeofizika group. at Odoptu in August 1977, with Loans from Japan, in the amount The operations were carried out its first oil produced in October. of US $181 .5 million, were from Orion Arctique vessel rented In 1979, the Chayvo field was secured for technical upgrading from CGG, a French company . discovered . In 1982, the Chayvo and the creation of modern In 1976, the Far Eastern Offshore reserves were recognized as being facilities . These funds were used Oil and Gas Exploration Survey suitable for development . In June first to rent, and subsequently, Company for Deep Drilling was 1986, the Odoptu reserves were to build floating drilling rigs, created . registered with the State Mineral jack-up drilling rigs, and Resources Commission . Geological exploration operations Newspaper “Soviet Sakhalin”, February 11, 1982 service vessels . Money was also Map of potential under the General Agreement Geological exploration under production fields spent in order to create a base Approaching the Shelf offshore Sakhalin were conducted, with the active the General Agreement was of operations for the Far East (SODECO archives) involvement of Japanese completed in 1983 . However, S. Polonsky, Head of the Offshore Fields Integrated Development Department Offshore Exploratory Drilling of SakhalinNIPIneftegaz Institute experts, in the northeast and under the terms of the agreement Directorate; to train specialists, southwest areas of the Sakhalin there were no restrictions The development of offshore oil reserves may be drilling exploration wells from floating drilling rigs, knowledge of hydrological and meteorological and to provide the Okha Offshore

1995–2015 compared to alpinists climbing mountains: before has been tested in practice and proven as highly conditions, ice conditions, bank erosion and shelf (to a depth of 200 m) on the use of the offshore drilling Field Geophysical Survey reaching the peak, one has to cross one barrier effective. seafloor deformations, it is impossible to accurately from May 1976 until 1983 . rigs and other equipment that had after another. Crossing each barrier means finding The next stage should be the preparation for determine the composition and the amount of off- Company with state-of-the-art Northern Sakhalin, solutions to certain intermediate problems. the pilot development of discovered fields. Sakha- shore construction equipment required to install During this period, a total been procured using the loans . drilling in winter equipment . The remainder was In our case, we have more than enough of such lin oilmen have come really close to solving this platforms and lay underwater utility lines. It is also conditions of 24,000 linear kilometers This made it possible for barriers-problems... problem. difficult to determine the scope of the work and used to purchase vessels for Upon the request of the All-Union Industrial We have studied all known worldwide practices the timeline of construction. The data required for of geophysical profiles were the Soviet party to independently Dalmorneftegeofizika group Association, SakhalinNIPIneftegaz — simultane- of developing subsea fields: using artificial islands, engineering calculations are currently unavailable. acquired, and 25 wells were drilled discover the Piltun-Astokh, ously with exploration operations — has started offshore ice-resistant platforms and subsea Besides, collection and the processing of such data (created in the same 1975) to work on technical solutions for the development extended-reach wells drilled from onshore bases. would require several years of observations and on six structures with a combined Lunskoye, and later, in 1989, and the Offshore Geotechnical of fields which, in terms of harsh climatic and However, it is not enough to discover subsea natu- a substantial scientific research effort. depth of 58,836 m . Arkutun-Dagi fields. hydrogeological conditions, has no equivalent ral resources and to determine the main strategies If the process of obtaining such information Expedition, and to expand in the world’s oceans. We have set up a special for their development. The appropriate industry onshore is challenging enough, it is twice as hard the processing and scientific Offshore Fields Development Department. Its engi- has to be created. Today we have to address to gather offshore data, due to the lack of precise As a result of geophysical Studies related to ice-resistant neering work has already been put into practice. the develop­ment of an integrated project affecting reference points, since operations have to be con- research capabilities of these exploration under the General platform construction and The experience of other countries shows that interests of quite a number of ministries, govern- ducted from structures which are not fully fixed. organizations. it takes from 12 to 15 years from the moment ment agencies, and several administrative districts. The higher alpinists climb, the harder their climb Agreement, seven structures Sakhalin’s ice environment were Record of Achievements Record of discovery to the moment of fields reaching While developing the Integrated project, we have becomes.. We are in the same situation, facing new

with gas-and-oil-bearing being conducted until the 1980s, design capacity, even under more favorable to urgently address our gaps in environmental and additional challenges... Thorough study and It is worth noting that from just

environmental conditions. But it appears that this studies. No architect would undertake the design coordination, today may expedite commencement potential were discovered and but negotiations between one offshore jack-up drilling rig timeline could be reduced by dividing the devel- of a building without knowing the types of soil; of offshore oil production by one or two years. confirmed in the northeast areas the Soviet and Japanese parties opment process into several stages; the first stage, no builder would start laying the pipeline route Okha (built in Japan in 1980), which entails offshore geophysical operations and without a geological map. Without the necessary of Sakhalin shelf (Odoptu, Piltun- under the General Agreement did 38 exploratory wells with a total Astokh, Arkutun, Dagi, Chayvo, not come to fruition . Despite this, sakhalin-1 length of 96,300 m were drilled 14 15 the long-term joint work completed the currently existing Sakhalin-1 Drilling crew led by one of the pioneers by the Soviet and Japanese parties project, and other projects of extended reach drilling offshore under the General Agreement on the Sakhalin shelf . Sakhalin Island, Hero of Socialist Labor, drilling foreman B. V. Vorotnikov. was extremely important in terms On August 30, 1993, a Russian of contributing to the creation Federation Government Instruction of an extensive technological and signed by Prime Minister Victor technical base for offshore geological Chernomyrdin was issued . It was exploration in the USSR . Such a base the first regulatory document to refer would subsequently be developed to the project as “Sakhalin-1 ”. and successfully used, not only off the coast of the USSR (and later Russia), but in other countries as well . As for Sakhalin, the work completed under the General Agreement became the basis for 1995–2015

On August 30, 1993, the RF Government issued a directive 1977 1979 1989 Discovery Discovery Discovery of Odoptu field of Chayvo field of Arkutun-Dagi field Exploration drilling signed by Prime Minister Victor at Chayvo (SODECO archives) Chernomyrdin assigning the name Offshore drilling Record of Achievements Record platform Hakuri, “Sakhalin-1” to the project. 1983

sakhalin-1 16 17

Chapter 2

nterest in developing Sakhalin the leadership of Sid Reso, In the Footsteps of the Pioneers Ioffshore fields began to grow (at the time a senior vice president steadily once the market-oriented of the former Exxon Company Moscow professor, Valentin International), Exxon began Fyodorov came to power in the a dialogue about creating new region . On April 18, 1990, he was business opportunities . This is how elected Chair of the Sakhalin the Sakhalin-1 Project consortium Oblast Executive Committee. began to form . Then in September 1990, the To take on the functions of the Oblast Executive Committee project operator, Exxon Neftegas approved a framework for the Limited was created, with development of the shelf’s a 30% interest in the project . hydrocarbon resources . Divisions Other ownership shares were and administrations of the Oblast Federation regarding the start times when, in order to conclude Signing of Sakhalin-1 divided among SODECO (30%) Production Sharing Executive Committee were charged of negotiations on technical and the technical studies and present Agreement in Moscow,

1995–2015 and two affiliates of Rosneft — with working out the terms and commercial terms for developing their results to the appropriate June 30, 1995 Sakhalinmorneftegaz-Shelf (SMNG)

raising funds from foreign investors the three fields — Chayvo, Odoptu agencies by the established (23%) and Rosneft-Sakhalin (17%) . for the integrated use of one of the and Arkutun-Dagi . deadline, 80–100 Russian Later, in 2001, when the Russian shelf’s fields. geologists and engineers, as well partners invited the Indian oil Following this decision, dozens as their American and Japanese In parallel with these events, and natural gas company ONGC of Russian and American experts counterparts, had to combine SODECO and new investors began Videsh Limited to join the project, had to roll up their sleeves and forces, often working 10–12 hours to explore the opportunities the ownership structure changed . get to work . Steve Ramsower, a day, six days a week . which would interest the Russian ONGC Videsh Limited acquired business manager of ExxonMobil side in developing the previously a 20% interest . The shares for the Exploration Company and Once the project’s initial economic discovered Odoptu and Chayvo Russian side were 11 .5% for SMNG the former field development feasibility studies had been

Record of Achievements Record fields. They chose the America- and 8.5% for the Rosneft affiliate planning manager of ExxonMobil completed, employees of the Exxon

based Exxon to take part in this RN-Astra . Development Company, group of companies and Rosneft-

project; a company that they was one of the coordinators SMNG presented their findings In November 1993, the Consortium believed had the necessary of the first engineering studies jointly to the Russian agencies signed a Memorandum technical and operating capabilities under the Sakhalin-1 Project . whose acceptance was needed Orlan platform at Chayvo, of Understanding with the Russian sakhalin-1 winter of 2006 to complete the task . Under According to him, there were to obtain the government’s final 18 19

Vladimir Shapoval, Manager of the OJSC “Gazprombank” Branch in Yuzhno-Sakhalinsk

Twenty years ago, he was the Vice-Governor difficult negotiations resulted in a well-­ of Sakhalin Oblast and the Head of the balanced document, which recognized, with Sakhalin Oblast Government, under the all fairness, the interests of the project, President and the RF Government. as well as the the RF Government and He witnessed and participated in the Sakhalin Oblast. preparation and the development of the “Today it is easy to recount PSA bene- key Sakhalin-1 document — the Production fits”, — says Shapoval, — “other regions are Sharing Agreement (PSA), as well as the envying the budget of Sakhalin Oblast, development of the RF legal framework for which has to a large extent, been generated the PSA. Vladimir Shapoval believes that by the revenue from oil and gas projects. one has to give credit to the perseverance Numerous infrastructural and social issues of then-Governor, Igor Farkhutdinov, who are being solved using budgetary funds. defended the need to use the PSA mecha- And what is most important, people see nism on the Sakhalin Shelf with a daring for themselves the benefits from the Shelf. 1995–2015

brashness. I remember when Farkhutdinov was saying

Said Shapoval: “Farkhutdinov under- that he would like to live till the time when stood that there was no other way to pull Sakhalin residents would start building the Oblast out of poverty. Today, it is clear en masse their own houses. This is what that he was right”. we are witnessing today. It has already It is also important to note that ultimately become a problem to find a free plot of land there were practical-minded people within the administrative center to build at the federal level; they saw the Sakha- a private property. I am sure this is only lin Shelf project as an opportunity the beginning. Sakhalin Oblast faces great to bring momentum to the development opportunities and good development of the depressed region. Lengthy and prospects”. Record of Achievements Record

Working meeting dedicated to enacting the Sakhalin-1 PSA,

sakhalin-1 Moscow, June 10, 1996 20 21 approval . The approval of the project’s Federal Law on Production Sharing technical scope by the Expert Council Agreements ”. The president called allowed the Consortium to begin it a remarkable event for Russia, negotiating the Sakhalin-1 Project especially for its Far East regions. Production Sharing Agreement (PSA) The Sakhalin projects blazed a difficult with the Russian Government and but important path . The Sakhalin the Sakhalin Oblast Administration . regional authorities, headed by Governor The first round of PSA negotiations Igor Farkhutdinov, were consistent was held from September 23–30, 1993 . advocates for the implementation All in all, it took almost two years of production sharing . to put together this primary document The Sakhalin region, which in the 1990s, of the Sakhalin-1 Project . The document was ranked highly among the nation’s was signed on June 30, 1995, and Rossiyskaya Gazeta (Russian Newspaper), June 29, 1996 most depressed regions, has now solidly the Sakhalin-1 Project PSA went into established itself as having one of the top effect on June 10, 1996 . This same day, Investment Law composite indices of socio-economic the press published a letter from Russian status in all of Russia . It is obvious that Breaks Prejudice Barrier President Boris Yeltsin, addressing such a shift would not have been possible the participants of the Sakhalin-1 Project M.Subbotin without implementing these offshore and Sakhalin-2 Project agreements, projects using the PSA mechanism, Every important business starts with At a time when the country continues as well as the projects’ personnel and expenses: first, you have to spend to suffer from an investment crisis, 1995–2015 something which ensured an influx money; then, work in order to recover it is the implementation of the PSA law

the residents of the Far East region. of investment into the oil and gas sector, costs and make profit. When a private that creates investment opportunities

In this address, the President expressed investor spends his hard-earned money, for such giant projects as Priobsky (over and protected the interests of the state a feeling of profound satisfaction, he must be absolutely sure of business $60 bln. of investments), Timan-Pechora and the region, as well as the investor . success; he needs to estimate and ($40 bln.), Shtockman (over $20 bln.), noting that “working together, Russian analyze everything. If the investor can’t Sakhalin projects (over $10 bln.), and foreign experts have completed do it, he will not spend a dime. Which Samotlor ($5 bln.), and many others. means there will be no new businesses, For Russia, the purpose and meaning a significant work to prepare for new jobs, wages, and tax payments of this new type of agreement — abbre- September June 30, December June 10, the enactment of the Sakhalin-1 and to the budget. Nothing... viated as PSA — is to save unprofitable businesses and, consequently, the cities 1993 1995 1995 1996 Sakhalin-2 PSAs based on the adopted Political parties and movements that depend on them, not by borrowing First round The Sakhalin-1 PSA Federal Law № 225- The Sakhalin-1 PSA in the country offer various solutions for from the government budget, but quite of the Sakhalin-1 was signed by the FZ “On Production came into effect attracting investments into the Russian the opposite, by replenishing it and Production Russian Federation Sharing Agreements” economy, as they understand that generating an influx of vast financial Sharing Government, of December 30, Agreement Sakhalin Oblast 1995, was enacted investments are, perhaps, the main resources in order to accomplish negotiations Administration,

Record of Achievements Record booster for economic development. the tasks that seem unmanageable and Sakhalin-1

When the Law on Production Sharing today. Consortium Agreements (On PSAs) became effective on January 11, 1996, very few people understood its tremendous potential and true investment opportunity.

sakhalin-1 Pages of Sakhalin-1 PSA 22 23

Chapter 3

pon signing the Production the first kilometers of a 3D survey At Sakhalinmorneftegaz-Shelf, Appraisal USharing Agreement, data of the Arkutun-Dagi field, whose rigs we had leased for this, the Sakhalin-1 Project which were appraised highly . they were saying that in the past, Consortium faced a number because of early storms, two The first Arkutun-Dagi of uncertainties . Two of the three jack-up rigs had run aground ”. exploratory well was spudded fields were discovered about on September 1, 1996, from The region’s climatic conditions 20 years ago, but their the Okha jack-up rig . were, and remain, one exact boundaries were yet of the most important factors to be determined . In addition, The Sakhalin drilling team affecting the Sakhalin-1 Project . exploratory drilling and new supervisor, Richard Rush later In the northeast Sakhalin technologies were needed to put recalled: “We had to get things offshore area, strong winds together a commercial field done within very tight time and sustained snowstorms are development plan . frames . Between roughly early common; weather can change June and October 15, we had Despite the absence of a legal abruptly within a 24-hour period, to tow out jack-up drilling rigs

1995–2015 framework for PSAs, the project and cyclones and typhoons

from the southwest coast operator, so as not to waste can rage . The Sakhalin shelf of Sakhalin to the field area, the 1996 field season, entered is one of the stormiest areas drill one or two wells, and into a contract with Dalmornefte­ in Russia . The heaving of the sea then tow the rigs back before geofizika to perform geophysical is particularly dangerous when Exploration drilling autumn storms moved into at Chayvo, surveys, including 3D surveys . floating ice is present — 1990s the area and the winter ice Dalmorneftegeofizika a so-called “ice storm” . Icing-up cover set up . Studies helped formed a joint venture with of drilling vessels and fixed us to schedule a work start time the Norwegian company platforms also pose a threat . for each drilling season . But PGS and on July 9, 1996, In general, the ice conditions as October approached, we knew at the Port of Korsakov on the shelf are unusually harsh . that we needed to prepare

Record of Achievements Record presented the research vessel It is ice in particular that poses

to wind down operations and tow Orient Explorer, which had the greatest threat to offshore

the rigs southward . A journey been chartered specifically installations, and is a hindrance like that could take 6-7 days . for the Sakhalin-1 Project to drilling . And yet ice conditions Orient Explorer seismic boat Even in early or mid-October, geophysical surveys . By July 21, can differ noticeably from area during acquisition operations at Chayvo, towing can be very difficult. sakhalin-1 summer of 2015 the client had already reviewed to area . 24 25 Dredging works in Kholmsk than 900 sq . km (550 sq . mi), covering a portion port in preparation to sea lifting operations for of the Arkutun-Dagi field never before studied, and the offshore projects, 2000 the Chayvo field up to the Sakhalin Island coastline.

For a long time, Chayvo was considered a gas field with a small number of thin oil deposits . This perception was based on the data from the five wells drilled in the upper zone of the structure, prior to the effective date of the PSA . But in late spring, 1998, just before the start of the next drilling season at Arkutun-Dagi, experts on interpreting seismic data uncovered Exploration drilling something unusual in the Chayvo data . They noticed at Chayvo, amplitude anomalies, which showed that the upper summer of 2000 boundary of the hydrocarbons’ occurrence lay deeper than the hydrocarbons previously discovered when drilling the wells . This prompted the team of 15 geophysicists to undertake a large-scale investigation . The important question was: why did the data from prior wells indicate only the presence of thin oil deposits? Beyond that, the scientists wanted to confirm the presence of deep deposits discovered during the 3D 1995–2015

survey in 1997, and, in particular, whether they or not

they bore oil or gas .

To answer these questions, the most advanced Ekhabi jack-up rig After completing the first well and interpreting not penetrate oil-bearing formations, and was viewing as an obvious first step in developing methods of seismic data visualization were employed. at Chayvo, 2000 the preliminary 3D survey data in the summer subsequently plugged . the Sakhalin-1 Project was now cast very much After a few months, the scientists announced that of 1997, the Consortium drilled two more wells in doubt. And given that field development the 3D data most likely revealed significant oil deposits Nevertheless, as was noted by Richard Powell at the Arkutun-Dagi field. The drilling was in such a remote, subarctic region with a harsh in the Chayvo area . But “most likely” is not the same (manager of geological and geophysical surveying performed using the two jack-up drilling rigs, climate and a great deal of seismic activity as “certainly” . To remove any lingering doubt, a well projects in Russia, the Caspian region, and Okha and Ekhabi, installed roughly 25 km from is a very expensive proposition, we, of course, did needed to be drilled as quickly as possible at Chayvo . the Middle East for ExxonMobil Development shore, at a depth of 40 m . Five service vessels were not want the development of our first field to be Company), the drilling of the wells was

Record of Achievements Record contracted to support the drilling operations . associated with such uncertainty ”.

relatively successful, in that the wells appeared

Drilling of the Dagi-6 and Dagi-8 wells was to not be “dry” . “Still, they did show anticipated In the spring of 1998, Powell and other members completed in late August . The results of drilling answers,” Powell emphasized. “The problem of the geophysical team started interpreting the Dagi-8 well confirmed the presence of oil was that we encountered highly dispersed the data from the second 3D survey, which had reserves in target formations . The Dagi-6 well did hydrocarbon reserves . Thus, what we had been been performed in 1997 over an area of more

sakhalin-1 Okha jack-up rig, 2000 26 27 In the summer of 2000, the data joint venture was established from the Chayvo-6a delineation to train specialists, and retrain well confirmed the presence engineering and technical of a roughly 150 m (330 ft) personnel, for offshore thick oil deposit in the main operations . By the end of 1998, reservoirs on the western flank 49 Sakhalin Oblast companies of the Chayvo field, with reserves were involved in offshore totaling 150 million metric projects, becoming a real factor Richard Rush, tonnes (1 billion barrels) . “This in stimulating regional economic Drilling Operations Manager, was the ‘dining table centerpiece’ development . ExxonMobil Development Company we had been searching for,” Mr . Powell later recalled .

Richard Rush, Sakhalin-1 Drilling Operations Manager from 1996 to 2011, Meanwhile, notable events recalls that despite all the tremendous work at the Arkutun-Dagi field which were happening on other fronts resulted in first oil in early 2015, it was the Chayvo field located closer to the coast that, played the key role in contributing to the current status as well . In 1998, the Sakhalin of Exxon Neftegas Limited. Having said that, he acknowledges that while drill- Oblast administration received its ing the first exploration well at Arkutun-Dagi 19 years ago, he could not even imagine that one day this will become a reality. first bonuses for implementing offshore projects. In Yuzhno- We knew that Arkutun-Dagi contained hydrocarbons, but the geology of the field was hard to predict. Although, when the Chayvo-6 well almost Sakhalinsk, under the auspices „ reached the target determined by geologists, we gained confidence that of the Special Research Bureau the project would go on. In just three years our “trusty beast” — the Yastreb drill-

1995–2015 ing rig — arrived at Chayvo and started to drill, setting practically all the records Exploration wells confirmed oil

for the Automation of Marine during the next ten years. reserves in Chayvo field, Ekhabi jack-up

Investigations, a college / training rig, summer of 2000 We were very happy that drillers made a significant contribution to the con- center of the Sakhalin-Alaska struction of the rig: we received a great rig! Our rig had to be winterized and able to drill the world’s longest wells, and it did it!

Today, as a Drilling Operations Manager, Richard Rush is responsible for drilling operations under seven projects around the world and, despite the fact that he currently works in Houston, the 37-year ExxonMobil veteran says “here” 1996 1997 2000 when he recalls Sakhalin. He can look back, evaluate all the work done during “ Seismic survey Drilling of two Chayvo-6a explora- the last two decades, and. and still be dazzled by the accomplishments. and drilling of the first exploration wells tion well was drilled. According to him, some of the technologies that are currently used did not exploration well in Arkutun-Dagi The data confirmed even exist when everything started 20 years ago; others existed but were in the Arkutun-Dagi and 3D seismic survey the presence of used differently, and some of the current processes can be truly called “space field in Arkutun-Dagi and significant oil Chayvo reserves (about 1 bln technologies”. barrels) in the Chayvo field Record of Achievements Record

sakhalin-1 28 29

Sovetsky Sakhalin Newspaper, June 7, 2003 October 20, 1996, marked the first in the history of the Sakhalin oblast What Exactly are Sakhalin-1 and elections of the Head of the Oblast Administration. Sakhalin-2 Projects? How Beneficial Approximately 40 percent of participating voters supported the 46-year old Igor are they to our Region? Farkhutdinov. Igor Farkhutdinov, Governor of the Sakhalin Oblast

I often get these questions, even though we have That is why people started criticizing the projects. been discussing them often enough. I believe that First the pseudo-patriots said: “You are selling your by asking about offshore projects, people do not homeland to foreigners!” As if somebody prevented Igor Pavlovich Farkhutdinov (April 16, 1950 — August 20, 2003) was really doubt their feasibility; they just want to feel our Russian companies from participating in bidding. the administrator of the Sakhalin Oblast from 1995 to 2003. His name is closely additional confidence in their future. It is a normal These were regular tenders, and not loan-for-share associated with the Sakhalin’s offshore development history. desire. In a nutshell, it should be noted that people auctions that were popular previously. Our companies of Sakhalin and the Kuril Islands have already just did not have that much money back then. Even Having graduated from the Krasnoyarsk Polytechical Institute with greatly benefited from the projects, but they will get now, it is unlikely that they are able to make large a specialization of “engineer-economist”, Igor Farkhutdinov came to Sakhalin considerably greater benefits in the near future. investments even into one project. in 1972. In less than twenty years, he made a career from a Tymovsk Power The oil industry is one of the leading industries Then, the public environmental protection Plant engineer to the Mayor of Nevelsk. From 1991 to 1995, I. P. Farkhutdinov in the Oblast, although there has been no extensive organizations took their turn. They appeared to follow worked as the Chairman of the City Council, and then the Mayor of Yuzhno- oil and gas production history in Sakhalin. Over one common trend: the farther such an organization Sakhalinsk. In April of 1995, he was appointed the Head of the Sakhalin Oblast 75 years of production, the main island’s fields have was from the Oblast, the more furiously it fought Administration, and then elected the following year for a four-year term. been significantly depleted, and it is challenging for the environment of our largest island and His signature affirms the Sakhalin-1 PSA on behalf of the Sakhalin Oblast for Rosneft-Sakhalinmorneftegaz (RN-SMNG) surrounding seas. But recently, project operators declared that they have not only gas pipelines; and an LNG plant. Already, companies are construction period under the Sakhalin-1 Project and Administration. to maintain the production even at the current level When, for many years, Russian companies — begun with the proposed investments, but also executed first investing in reconstruction and modernization of federal 16 thousand jobs under the Sakhalin-2 Project. of approximately 1.7 MTA of oil and 1.8 BCMA of gas. to put it mildly — did not pay particular attention contracts for LNG supplies to Japan. facilities, including the Nogliki airport and Sakhalin railway. The creation of additional jobs at Sakhalin, as well 1995–2015 In 2000, Mr. Farkhutdinov successfully passed the regional elections test In the early 1990s the Russian Government and to environmental protection, this was considered I am almost sure that intrigues against, and attacks on the The companies also allocate funds for construction of Sakhalin as the engagement of construction companies from mainland

again; over 56 percent of voters supported him. While in the governor’s office, Oblast Administration decided to start developing almost a standard. These companies are “ours”. projects will continue. Why? Oblast and municipal facilities, including a number of new Russia, allow us to achieve a very important objective

he claimed the economic growth of the Oblast as his main objective. a number of Sakhalin offshore fields. Development Foreigners are different. They get special attention. Our projects and fields are competitive with the best projects motor road sections and bridges. of increasing revenues for the budgets at all levels. companies were selected based on bid results. And it is rightfully so. It should be noted though and fields both in Russia and abroad. How are they competitive? We must clearly understand that, without offshore projects, Oil and gas projects also provide a multiplier effect. As an efficient leader, Mr. Farkhutdinov proved to be a consistent advocate Currently, the Sakhalin-2 Project is being that maybe for the first time, these projects Firstly, thanks to the thoroughness of the technical and eco- we all would have lived worse than we do now. Sakhalin The activity of service, transportation, and trading companies of the island’s offshore field development, and provided great support for implemented by a Consortium of three well-known underwent the most grueling and thorough nomic justification of projects, and the use of the latest techno­ Oblast received 205 mln. dollars from operating companies also intensifies with the development of oil and construction the implementation of this idea. global companies: Shell, Mitsui, and Mitsubishi. environmental expert review. We all want these logies, we can produce oil and gas at sufficiently low costs. since the early 1990s. These include bonuses, reimbursement businesses. Another group of companies including Rosneft and projects to exemplify sound environmental Secondly, due to the excellent location of the fields in an Asian of exploration costs paid to the Russian party, and payments I do not want the readers to get an idea that the Governor On August 20, 2003, an helicopter with a group of Sakhalin Oblast its Sakhalin subsidiary, has been implementing protection standards, but we do not want new, Pacific region with the highest current and expected economic to the Sakhalin Development Fund. These funds were used does not see any problems in Sakhalin. I think we should Administration executives onboard headed by the Governor crashed 150 km the Sakhalin-1 Project. ExxonMobil is the Operator constantly hatching, environmental protection growth rates. to build several important industrial and public facilities, remind everybody that, as before, the region where south of Petropavlovsk-Kamchantsky en route to Severo-Kurilsk. All 17 people of this Project. organizations to keep “feeding” on the projects. Thirdly, due to the fact that the projects are beneficial both for including the first stage of the Nogliki gas power plant, we live has practically not developed any hi tech industries. onboard were killed. We have been through a lot during the 8+ years Foreign investors may not really care about it, but the Russian Federation as a whole (especially for the Sakhalin a significant number of public facilities, a secondary school The development of the transportation infrastructure and of project implementation. Indeed, for the first time, it will be a burden for the Oblast and its population Oblast) and for the investors. in the town of Okha, and a hospital in the town of Korsakov. power supply system has been drastically behind even He was buried at the Holy Voskresensky (Resurrection) cathedral in Yuzhno- major foreign companies have obtained development to increase spendings on endlessly spreading group For Russian citizens, the benefits of the projects come mainly These funds were also used for repairs, or equipment compared to the neighboring mainland regions. Sakhalinsk. A passenger ship and an Aframax oil tanker were later named after licenses on conditions of production sharing which of environmentalists. from the implementation of the Federal Far East Gasification installation, at a great number of municipal educational, health, First, we need to catch up with them. Then, we must continue Igor Farkhutdinov. are largely unknown. Although there is nothing Last year — and in the beginning of the current Program, especially in Sakhalin Oblast, Khabarovsky Krai and and cultural facilities. to move forward without slowing down. We have not yet

Record of Achievements Record complicated about these novelties for us; certain year — the project’s opponents developed new Primorsky Krai. For several years already, war and labor veterans are receiving reached the full scale offshore oil production level. But by all

Igor Farkhutdinov was the Governor of the Oblast during a difficult period taxes are replaced with production sharing. As for “arguments.” Allegedly, foreigners received licenses, It should be noted that the Sakhalin-1 and Sakhalin-2 Projects increased government pensions from the funds provided means we will reach it already in 2005–2006. We will not of the post-Soviet recovery of the Russian Federation. He truly believed that investments, they constitute over 20 billion US but would not make investments. They will not drive not only the oil industry, but also of the entire economy by the operating companies. only build most of what we really need, but we will also start implementation of offshore projects would be beneficial for the Sakhalin dollars for both projects. Nothing similar has been invest their money, and nobody will buy our products of out Oblast. Major investment projects are elevating Over four thousand jobs were created in the Oblast during receiving more tax revenues from the oil industry. This will economy and people and defended his opinion during discussions with critics done in Russia, and it is not known when, or if, it will abroad, especially liquefied natural gas. the oil industry to new levels, due to the construction and the initial project implementation stage. A total of twelve allow us to increase the living standards of Sakhalin Oblast of PSAs and offshore projects. Time proved him to be right. be done again. installation of new offshore drilling platforms; oil and thousand jobs are expected to be created during the peak and Kuril Islands. sakhalin-1 30 31 Chayvo Spit in 2002, future location of Chayvo Well Site

Chapter 4

ithout a doubt, the discovery proven the viability of using the extended From Concept to Plan Wof sizeable oil reserves was reach drilling (ERD) method on the Sakhalin a pivotal moment in the development shelf . of the Sakhalin-1 Project . Having concluded On July 27, 1998, at the Odoptu-more field the exploration stage, the Consortium (North dome), drilling was completed now set about working on a field on the first Sakhalin ultra-deep directional development plan . The drilling program well (No . 202, 5589 m deep with the seaward would have to ensure the maximum scale horizontal reach of 4782 m). Well tests of development of hydrocarbon reserves showed a steady flow of practically water- at the lowest possible cost . free crude at a rate of 200 tonnes per day . experts . For a wellbore eight to ten or more of Sakhalin oilmen in directional drilling However, harsh reality dashed these hopes . According to Vladimir Astafiev (formerly kilometers long, this is an extremely from the Odoptu shoreline, reinforced Calculations showed that drilling costs one of the managers of NK Rosneft- difficult task. Furthermore, there was confidence in the plan. In parallel, would be extremely high, especially if Sakhalinmorneftegaz OJSC, and assistant virtually no knowledge about the strength the exploration and production surveying a gravity-based platform were to be used . general manager of the Sakhalin-1 Project), of the rock around the Chayvo field — group performed their well completion

1995–2015 Even the availability of a “ready” solution

Sakhalin oilmen drilled new directional the rock that needed to be drilled through, study and other testing, which served in the form of a reinforced concrete drilling wells in the years that followed and were from onshore, into the field’s pay zone. as additional validation of the feasibility platform in Alaska (cheaper to have happy to share their experience with of the ERD well drilling program. delivered than to build), would not provide To shed some light on the rock’s properties, Sakhalin-1 project partners . the necessary level of profitability. a member of the work group was tasked with In addition, the work with the government To assess the technical feasibility collecting rock samples from the directional agencies to obtain the necessary permits But what would happen if the drilling of Chayvo’s extended reach wells, a work well drilled at the Odoptu field, located and approval, and to progress the field took place from the shore? After all, group with various experts was created, about 65 km north of Chayvo . This is a fairly development concepts continued . the Chayvo field is only 8–10 km from comprised of drilling engineers, geologists, significant distance for making any well- land . This would not only reduce costs The Federal Law on Production Sharing pay zone appraisal experts, and field founded geologic assumptions . Nonetheless, and allow drilling to begin much sooner, Agreements (PSA) went into effect in 1996 . development experts . experts from the exploration and production but would also reduce the environmental

Record of Achievements Record However, this document proved to be group of ExxonMobil, having analyzed

impact . There was a precedent of drilling One of the geologic challenges was hitting insufficient for getting the production- the samples, found it justifiable to rely

such wells in the United Kingdom and the target (the oil portion of the deposit) sharing mechanism off the ground . Changes on the comparison of properties . The rock in South America . And not only abroad . with a horizontal wellbore. It was essential also had to be made to 11 federal laws which was found to be sufficiently strong for ERD The Sakhalin-1 Consortium member to enter the formation in the exact location interfaced with the framework law . Well site at Chayvo Spit, drilling . This, combined with the experience Sakhalinmorneftegaz-Shelf had already

sakhalin-1 summer of 2012 specified by geologists and development 32 33 This crucial stage was spearheaded The next day, President Vladimir Putin by Mr . Rex Tillerson, the current welcomed the decision of the Sakhalin-1 CEO of Exxon Mobil Corporation. In January Consortium to proceed with the project 1998, he took over the leadership of Exxon in his opening speech to the Davos Neftegas Limited, and in December 1999, World Economic Forum’s “Russian he became Executive Vice President Meetings-2001”, which was held in Moscow . of ExxonMobil Development Company, In late 2001, Sakhalin Oblast Governor Igor and in this capacity, was directly involved Farkhutdinov noted, with satisfaction, that in making key decisions for the project . 25 billion dollars had already been invested Largely due to his patience and in the Sakhalin PSA-based projects, perseverance, the preparatory work saw and that ten percent of the revenue steady progress, and on October 29, 2001, in the Oblast’s coffers was coming from at the meeting of the Foreign Investment businesses working on the shelf . Advisory Council in Moscow, the Sakhalin-1 Project was declared a commercial enterprise .

Future Chayvo Onshore Processing Facility site, 2002

Latest 3D model of Chayvo field. October 29, 2001 Sakhalin-1 Consortium notified the Authorized State Body of the commercial viability of the project

Chayvo OPF, summer of 2012 34 35

Chapter 5

n order to speed up the execution It was necessary, for example, which carry 90,000 to 110,000 Battle Against the Ice and Winds Iof the Sakhalin-1 Project, reduce to answer the question of how tonnes . This data sheet, which is used costs, and strengthen environmental to safely conduct year-round export by the Russian merchant fleet, specifies protection measures, Exxon Neftegas of oil from the De-Kastri terminal . safe speeds according to the type Limited specialists used a phased field In search of an answer to this question; of vessel and the ice conditions development program for the fields in the depths of winter, in 2002, when on the route . included in the project. ExxonMobil the temperature was holding at about After the Sakhalin-1 Consortium utilizes this approach successfully all –15 degrees, Russian and American discovered major oil reserves at the over the world . Phased development scientists (joined by ExxonMobil Chayvo field, scientists-under the makes it possible to use the experience specialists) embarked on a voyage supervision of Doctor of Engineering and knowledge gained during through the frozen Tatar Strait Sciences Igor Stepano, decided to test previous phases for subsequent field on the tanker Primorye, escorted the classification procedure for large development, thereby maximizing by two ice breakers . tankers navigating channels cleared project efficiency. The ice in the Tatar Strait is often by icebreakers . The initial phase of the Sakhalin-1 half a meter thick, and almost 80 cm 1995–2015 Survey equipment, including 97 strain Project included Chayvo field in Chikhachev Bay, where a Single

gauges, was installed on the tanker development and hydrocarbon Point Mooring was to be built for Primorye, and the icebreakers, before production (using the land-based loading tankers . the tests . The strain gauges were Yastreb drilling rig and the Orlan The Primorye is a large oil tanker with attached to the sides of the tanker, offshore platform), processing a capacity of 105,000 tonnes . Before in order to determine the ability of hydrocarbons at the Onshore this, oil was shipped from the Russian of the vessel’s steel hull to withstand Processing Facility (OPF), and Far East using small tankers, which the impact from collisions with floating the subsequent transport of oil posed a challenge during the winter ice ice . The survey program also included to the De-Kastri export terminal, Trial escort of the Primorie season . How could the process be made the assessment of meteorological and tanker and ice surveys and natural gas to consumers in the Tatar Straight, more flexible and efficient? ice conditions, using satellite images, in Khabarovsk Krai . Full-scale system winter of 2002 Record of Achievements Record helicopter reconnaissance, video

operation required a large amount In 1999, The Arctic and Antarctic recording, and field ice measurement

of preparatory work by thousands Research Institute (AARI) data . of specialists in different fields, as well in St . Petersburg began working as hundreds of studies and experiments on the development of an “ice data While the tanker moved through of various kinds . sakhalin-1 sheet” for heavy tankers — ones the ice, the ice load monitoring system 36 37 recorded more than 12,000 cases of ice specialists and scientists analyzed data The tests in the Tatar Strait confirmed impact, exceeding the pre-assigned on ice conditions covering a period that Sakhalin-1 would be one of the most Grigory Belyakov, Commercial Operations ice load in the bow area of the ship's of more than 20 years; this data had technically difficult projects ever executed Lead hull . The procedure developed by AARI been collected by the Sakhalin Territorial in the industry . At the same time, for estimating the tanker speed which Administration for Hydrometeorological the tests once again inspired confidence is reasonably possible under various ice and Environmental Monitoring, as well in the ability of ExxonMobil to achieve conditions, included time diagrams of all as by Russian shipping companies . the objectives of a project under I joined Exxon Neftegas Limited back in 1998, when I was in my third year of college, at the age of 20. I had the forces acting on the vessel . This made Satellite imaging data for the previous harsh climate conditions, with careful „ a chance to work in various disciplines, from exploration Trial Tanker Escort it possible to obtain roughly a thousand 10 years was studied. preparation . and field development to production and export of hydrocarbons, and participate in many major project reference values, which were then used Through the Northwest events. The trial icebreaking escort of Primorye tanker After carefully analyzing the tested data, to calculate the ice resistance and cruising during the winter season of 2002 was one of such the scientists developed the requirements Passage major events; it seemed to be incredible for its time. speed, and to improve the technical This voyage, without exaggeration, was truly a historic for safe oil transportation . The main characteristics of the tankers and milestone, since in the past, all regular tanker navigation On March 13, 1968, ExxonMobil and Atlantic Richfield Company results from ice experiments in the Tatar in the Tatar Strait ended with ice floe formation. The main icebreakers to ensure safe navigation (ARCO) announced the discovery of Prudhoe Bay field, the largest goals were to determine whether supertankers were Strait were plans to build five specialized oil reservoir in North America. The field reserves were estimated during the ice season in the Tatar Strait . capable of sailing year round, and to gather ice data. at 25 bln barrels in oil equivalent. The field is located on Alaska ice-class tankers with double hulls, A team of Russian and international researchers had In addition, numerous measurements North Slope, 400 km north of the Polar Circle. boarded the tanker and escorting icebreakers before to carry oil from the De-Kastri export were performed on the ice which was the vessels sailed out to the sea. Primorye was literally One of the key challenges of commercial development terminal to markets in the Asian-Pacific. laden with multiple sensors continuously recording data. actually present in the strait . of such remote field as Prudhoe Bay — with a peak production During the trip, researchers disembarked onto the ice of 2 mln barrels per day — proved to be crude transportation. on numerous occasions, conducting studies measured The hulls of tankers built especially for In the summer of 1969, Exxon Mobil Corporation, in an attempt The experimental voyage lasted 12 days. various parameters. Reconnaissance flights over the aquatic to determine the feasibility of tankering crude in the Arctic Sakhalin-1 operations were reinforced . area were performed by a helicopter based on one Best practices from ExxonMobil's environment, set commercial tanker Manhattan on the first of the icebreakers. That was a challenging operation but The vessels were equipped with ice representative voyage through the Northwest Passage. past experience with harsh climate critical in confirming the correctness of the selected route The importance of that voyage was proven in 1972, when it was scanners to determine the thickness and in finding the ways to ensure its safety. Today, nine conditions were collected in preparation noted for its considerable contribution to the development full ice seasons and 700 accident-free voyages later, ice of the ice . Modern satellite radar of offshore technologies and the history of seafaring for the cruise . The knowledge and escorts have become a routine activity. However, at the Offshore Technology Conference.. technology was used to obtain precise the groundwork for them was laid during the very experience of Russian design institutes first trial trip. information on the state of the ice fields. was also brought to bear . The company’s 1969 2002 ExxonMobil successfully carried Experimental voyage of Primorye “ out the experimental voyage tanker was carried out in the of SS Manhattan tanker through ice-covered Tatar Strait to confirm the Northwest Passage along the safety of the chosen route for the Canadian Arctic Archipelago — the Sakhalin-1 tanker operations the first such voyage in the history of the industry 38 39 The tankers’ route Up to six months lies in the Tatar Strait. of ice a year with ice thickness reaching 80 cm.

De-Kastri

The first trial tanker Regular tanker escort took place transportation in the winter of 2002. of crude oil started in the fall of 2006.

Russia’s First Year- Since the start 1995–2015 of operations, a total round Tanker of 750 accident-free Transportation and zero-sea-spill trips have been made. of Crude Oil in Near-Arctic Record of Achievements Record Ice Conditions

o Korea T

o Japan T sakhalin-1 40 41

Chapter 6

he project operator faced time for the company . Then the rig Tthe next challenge: selecting was disassembled, its parts packed Creation of Yastreb a drilling rig . The rig had to be into containers and sent on three powerful enough to rotate the drill cargo ships to Sakhalin, some string efficiently in wells which 11,000 km away. were over 11 km long . It was also In August 2002, the cargo arrived necessary for the rig to be capable at Korsakov . The Sakhalin-1 drilling of withstanding strong earthquakes, operations logistics support group and drilling 24 / 7 in temperatures initially had planned to deliver approaching negative 40 degrees the cargo to Chayvo on barges, Celsius . Fabrication of Yastreb rig traveling along the east coast at New Iberia factory, Louisiana, USA, 2002 With these requirements in mind, of Sakhalin . However, a series a tender was announced, and three of typhoons and equipment problems contractors took part in it . On October forced them to come up with 3, 2001, the contract was awarded an option for delivery by land . 1995–2015

to the Parker Drilling Company; The modules were transported by rail

its rig was designed specifically for to Nogliki, and from there by trucks . the Sakhalin-1 Project . The situation was complicated by the lack of a bridge across Chayvo The equipment and components were Bay; that bridge would appear only manufactured in four U .S . states, two years later . Therefore, in order and in five countries. The result was to get to the well site, a detour the largest and most powerful drilling of 130 km (81 mi) had to be taken, rig in the world; its height comparable skirting all water obstacles, and to that of a 22-story building . Before finally, to travel roughly another delivering this giant to Sakhalin 80 km (50 mi) along a coastal road. Record of Achievements Record during the short summer season,

Disassembled Yastreb rig Parker first completed the rig’s Later it was calculated that the winter arrived at Korsakov port, August 2002 assembly and commissioning at its land-delivery option saved the project plant in New Iberia, Louisiana . This about US $10 million by preventing was done in just 8 .5 months, a record the postponement of the drilling start sakhalin-1 42 43 Yastreb Drilling Rig at Odoptu North Well Site, April 2010

date to the following summer, when the cargo sealift Commenting in layman's terms on Yastreb's Yastreb rig-up operations at Chayvo spit, March 2003 option by barges would be possible again . impressive accuracy, Sakhalin Project Completions Advisor Andy Veselka who worked on Sakhalin The drilling rig was given a Russian name with at that time said: “It’s like picking a cherry with Yastreb's Top Drive a clear, aspirational reference to flying high, Yastreb a fork from a tree branch at the opposite end (“Hawk”) . The documents do not reveal whose idea of the orchard during a wind storm ”. it was to make an analogy between a bird of prey and a drilling rig fabricated to carry out some ambitious In addition to the improvement in accuracy, there plans . At Chayvo, Yastreb was tasked with drilling 33 was a reduction in drilling time and cost for the ERD ERD wells. well drilling program . The average drilling rate for wells drilled during the first year was 100 m per The first two ERD wells were drilled at the Chayvo day, but in subsequent years, the rate was increased 1995–2015

field in the fall of 2003. With power comparable to 200 m per day and the cost of drilling was reduced

to that of large, semisubmersible offshore rigs, by approximately 40% . The acceleration was possible Yastreb handled the task successfully . The wellbores due to a change in the well completion procedure — had total lengths of 9,375 m and 10,182 m, avoiding costly perforation and liner cementing . respectively. Both figures were records at the time for ExxonMobil affiliates, and were seventh and fourth In addition, the drilling project group used in the world in terms of ERD well length. the Fast Drill technology specially developed and patented by ExxonMobil, which combines improved However, the operation produced a more important methods for control (based on real-time data) achievement: the drilling of the first wells provided and a structured approach to work planning and a clear answer to the question of accuracy in hitting execution . A number of factors that limit the rate

Record of Achievements Record a specified target zone with an ERD well. Tests of drilling were identified in this process. Specifically, confirmed that the first well entered the zone within such factors included hard and compact mineral three meters of the target point, while the second formations, where drilling is 30–50 times slower than was within five meters. This was considered in the surrounding rock . Drilling rates in mineral a resounding success . The level of accuracy in drilling spots were increased by using the Fast Drill process,

sakhalin-1 of the ERD wells that followed was even higher. 44 45 and achieving optimum bit load and Yastreb Drilling Rig at Chayvo, summer of 2005 rotation speed .

Another factor that promoted improved drilling efficiency in the Sakhalin-1 Project was the availability of repair centers set up by contractors at the Chayvo field well site. Without the centers, repair and maintenance of the principal drilling equipment would have been performed at regional centers in Singapore, which would have affected the timely fulfillment of the drilling schedule . 1995–2015

October August June 2001 2002 2003 In 2003, work began in Sakhalin to convert narrow-gauge (1067 mm) Parker Drilling was Sea vessels carrying Commencement railway tracks to Russia's continental standard wide-gauge awarded the contract dismantled Yastreb of drilling operations (1520 mm) tracks. This was a part of an overall revamp of railway to build Yastreb drilling rig arrive on the Chayvo field facilities, including construction of new bridges and water drain drilling rig — the most in Sakhalin powerful drilling rig structures, the straightening of railways and reinforcement of tunnels. in the global industry

Record of Achievements Record To enable permanent use of the railway, it is built based on triple-

track panels in which the distance from one outer rail to the other, and to the middle rail is 1067 and 1520 mm respectively. Over 60 bridges have been built and over 560 km of railway tracks have been re-gauged as a result of Sakhalin railway revamp program. sakhalin-1 46 47 Location: north- Top drive power east Sakhalin rating: 2680 hp Island, Chayvo field

Date rig was put Height: 71 m in operation under the Sakhalin-1 Project: Summer 2003 Yastreb, 1995–2015

World’s Most Powerful Drilling Rig Record of Achievements Record

sakhalin-1 48 49

Chapter 7 Voyage of Orlan

o matter how good Yastreb [“Hawk” an existing structure, and repair and upgrade During the summer of 2000, the Russians agreed Orlan platform tow-out to Amur Shipyard for upgrades, in Russian] was, it was not realistic it. We also knew where we could find that kind that the platform was quite suitable for use N summer of 2001 to recover the reserves of the Chayvo field with of structure ”. in the Chayvo field, and could be used for many that rig alone. Accordingly, another “bird” flew years to come . According to estimates, using In 1999, Plugge took the design group working to the aid of the first. The second “bird” was just an existing drilling platform could save more 1995–2015 in Houston to Alaska to inspect the reinforced as strong, and only native to the Far East region than $100 million .

concrete Glomar Beaufort Sea drilling platform, of Russia, and neighboring Japan . which had been mothballed in the North Slope Later events proceeded according to plan . Orlan [“Sea Eagle” in Russian] was the name area . Built in Japan in 1983, the reinforced The Amur Shipyard in Khabarovsk Krai was given to the massive, ice, earthquake, and wave- concrete drilling platform was designed for awarded a contract to dismantle the topsides resistant platform . year-round exploration drilling in Arctic waters, of the reinforced concrete drilling platform . at depths up to 15 m . This included the drilling rig, which was too “When the Sakhalin-1 Project took small to drill the ERD wells at the Chayvo field. on a more definite form in the late 1990s, The members of the inspection teams found The contract also involved the construction we expected at first that development would the platform to be in adequate condition . of a large wave deflector around be accomplished exclusively from gravity- Before making a final decision however, they the platform perimeter, and the strengthening

Record of Achievements Record based offshore platforms in the shallow shelf decided to invite Russian specialists to inspect of the platform base to provide seismic waters of the island,” recalled John Plugge the platform as well . “After all,” said Plugge, resistance . of ExxonMobil-then lead of the offshore “nobody knows the ice and the Artic better than part of the project . “It seemed obvious the Russians ”. First, however, the platform had to be delivered to everyone that the best option to ensure from Alaska to Sovetskaya Gavan in Russia . Orlan Platform at Chayvo,

sakhalin-1 winter of 2007 viability of the project would be to purchase This was no easy task . There are years in which 50 Installation of Orlan Topsides Drawings the ice in the North Slope area (where Engineering, and the N. Melnikov Central at Ulsan shipyard, South Korea, of Orlan Topsides the platform was located) does not Research and Design Institute of Steel 2004 disappear completely, and years in which Structures . there is a two- to three-week “clear Orlan was ready for towing to the window” in late summer . Such a window Republic of Korea in the summer of 2004 opened during the third week of August for installation of topsides modules and 2001, and Plugge, who was directing a new world-class drilling rig . It was the platform towing operations, gave July 4. Before departure, there was the order to begin . a grand ceremony that attracted many A contract was signed for the use of three city residents . Workers and their families superclass tugs to tow the platform came to celebrate their achievements to Russia . Calculations actually showed and express their gratitude for the that two tugs would be sufficient. opportunity to take part in the project . However, poor weather conditions are Topsides weighing 12,000 metric likely when crossing the Bering Sea and tonnes, including a fully automated the North Pacific Ocean in late summer, fifth-generation drilling rig, so it was decided to add a third tug for a 10-megawatt power plant, and living safety's sake . This proved to be a wise quarters for 120 people, were installed decision . The expedition was overtaken on the Orlan platform in Ulsan . on the way by seven extremely strong 1995–2015

All structures are enclosed, insulated storms with winds at times exceeding

and heated to a comfortable temperature 50 kt, and wave heights up to 10 m . (+21 degrees) during the long Sakhalin However, there were no accidents . winters. Orlan took on its final form The stormy towing voyage confirmed in the summer of 2005 . It had become that the platform design was very stable . a gigantic structure with a unique The platform spent most of the next design and unique characteristics . With three years in Sovetskaya Gavan . a length of 96 m, a width of 89 .9 m, and During that time, it was relieved an overall base structure height of 50 m, of old, useless baggage, and acquired the platform was built to withstand a new steel base before being renamed extremely low temperatures, as well

Record of Achievements Record the Orlan Platform . The work to upgrade as seismicity up to 8 points, waves

the platform was performed according up to 13 m high, and ice ridges up

to designs by-and with construction to 6 m. The arrangement of equipment and engineering support from-the on the Orlan platform is extremely Rubin Central Design Bureau for Marine dense per unit of area: denser than sakhalin-1 52 53

at practically any machine Russian Federation Minister of Natural Resources Yuri Trutnev building enterprise . visits Orlan, September 2005

When the platform arrived at the Chayvo field, personnel immediately began hooking up the pipelines through which

1995–2015 oil and gas from platform’s

wells would go to the Onshore Processing Facility . There was also work to place a large amount of rock fill around the perimeter of the platform, August – July June November in order to protect the pipeline September 2004 2005 2005 connections against washout 2001 Transportation of the Transportation Commencement by the strong currents in the Sea Orlan platform from and installation of drilling Transportation of the Sovetskaya Gavan of the Orlan platform operations on the of Okhotsk . It was a matter Glomar Beaufort to the shipyard in the Chayvo field Orlan platform Sea platform from in Ulsan (South of weeks before drilling began Alaska (USA) to the Korea) for additional Sovetskaya Gavan modifications and Record of Achievements Record on the first well. shipyard (Khabarovsk topsides installation Krai, Russia) where, once the modifications of the gravity based structure were completed, it became the Orlan platform sakhalin-1 54 55 Construction of Chayvo bridge, 2003

Chapter 8

etween approximately 2000 Consortium, announced that and is used for daily delivery Band 2005, development was a contract for construction of personnel and cargo to the well Links of One Chain conducted according to a mosaic of the Chayvo Bridge had been site . The bridge played an important principle: major parts were awarded to the Russian company role in the safe transportation assembled from individual jigsaw Dalmostostroy (Khabarovsk) . of heavy production equipment pieces at Chayvo, De-Kastri and Engineering and design were intended for installation at the OPF other locations, and the links performed by designers from in mid-2006 . Specialists claim that of a unified process chain were St. Petersburg, Moscow and the Chayvo Bridge is the strongest formed from the parts . Khabarovsk . Construction was in eastern Russia . It can withstand completed in mid-2003. A bridge strong earthquakes and heavy ice In 2001, Exxon Neftegas Limited, 830 m long now connects loads . the operator for the Sakhalin-1 the Chayvo well site with Pipeline construction, 2005 the Onshore Processing Facility, 1995–2015

Record of Achievements Record

Chayvo bridge,

sakhalin-1 summer of 2005 56 57 Construction of De-Kastri Construction of Chayvo OPF — Oil Export Terminal, De-Kastri OET pipeline, 2005 February 2006

The structure is 61 m high from sea of the schedule to begin level to boom end . This formidable hydrocarbon production and piece of machinery was operated delivery to consumers from a remote control panel . in the Russian Far East. To bring this opportunity to fruition, Construction of a pipeline to connect the decision was made the yet-to-be-built Chayvo OPF to construct an Interim at Chayvo, and the Oil Export Processing Facility (IPF) Terminal at De-Kastri, also began at the field. The concept was in the fourth quarter of 2004 . simple: it would be a processing The pipeline is 225 km (140 mi) long, plant that could be quickly including a 19-km (12-mi) section deployed . that crosses the Tatar Strait . The numerous river crossings A general contractor was presented major difficulties. selected in May 2004: Expro

1995–2015 The design and layout of each Group . Modules from which crossing were endorsed by Russian the IPF would be assembled were

environmental protection agencies . built in the USA and Canada . Equally sound structures were in advance to enhance the seismic executing the Sakhalin-1 Project, Russian companies — manufacturers The modules were then delivered needed in De-Kastri . Work began resistance of the facility . and proved its important role and contractors — performed by sea to Korsakov on Sakhalin there in 2004 at the Oil Export in increasing production rates the basic design and installation and shipped from there The facility was ready for Terminal site, and the construction during its brief 14-month service of the surface pipeline . More than by rail and by truck . According operation by August 2005, and site for the Single Point Mooring life . 50% of the pipe was provided to the data available, IPF modules began processing oil and gas for for loading tankers in Chikhachev by the Russian Vyksa Metallurgical weighing a total of more than the Sakhalin-1 Project less than Processes for the approval Bay . The terminal was built under Plant . Nippon Steel Corporation 2,500 tonnes were the largest 18 months after the contract was of overall plans and final extremely difficult climate conditions was selected as the main contractor combined shipment carried awarded . The IPF had a capacity objectives for the project and completed in record time, which

Record of Achievements Record for the laying of the pipeline . by the rail system . After the IPF of 6,300 metric tonnes of oil continued in other parts was facilitated by the use of unique The pipeline was commissioned components were delivered (50,000 barrels) and 4,2 million of the world — chiefly Moscow technological solutions . The Single in August 2006 . to the site at Chayvo, experienced cubic meters of gas (150 million and Houston — concurrently Point Mooring 6 km from shore was Russian personnel installed cubic feet) per day . The IPF was with the practical work the world's largest facility of its Drilling successes created conditions the modules on piles driven a clear example of the importance at Chayvo and De-Kastri . A work kind for the oil and gas industry . in Chayvo for the acceleration sakhalin-1 of the phased strategy for program, and a budget for field 58 59 Delivery and load-out of Chayvo OPF modules, summer of 2005 1995–2015

Assembly of Chayvo OPF development and hydrocarbon modules, summer of 2005 production up to 2046 were On August 20, 2003, Governor of Sakhalin Oblast, Igor Farkhutdinov and approved at a meeting several top officials died in a tragic Mi-8 helicopter crash over Kamchatka Peninsula. On December 21 of the same year, 50-year old Ivan Malakhov, of the authorized state body former First Vice-Governor, was elected as Governor of Sakhalin Oblast. for the Sakhalin-1 Project Oblast ran for Governor in a two-round process. During the first round, Malakhov ran against 13 other candidates, and received over 35 per cent on April 2, 2003 . In February of the votes, which was not enough to win the election. In the second 2004, the Ministry of Natural round, he captured 53 per cent of the votes. Resources (Minprirody) approved a positive State Environmental Expert Review conclusion for the Sakhalin-1 Project . This Record of Achievements Record

was encouraging news for

the Russian and foreign members of the Consortium .

Soviet Sakhalin newspaper,

sakhalin-1 December 23, 2003 60 61

Chapter 9

eginning in late 2003, the key facilitated by a number of cost- As was mentioned, the period of peak Befforts of the Sakhalin-1 Project effective steps, including ones not productivity for field operations Heart of the Project group focused on construction directly related to construction on Sakhalin is limited by the short of the Onshore Processing Facility . of the OPF . summer season, but the OPF team The OPF was designed to process was resolute about continuing The decision to fabricate the plant 34,000 metric tonnes of oil and the work flow, even under harsh winter modules at Hyundai Heavy Industries 23 million cubic meters of gas per day . conditions . For this purpose, tarpaulin proved extremely successful . The decision to build the OPF from shelters were constructed at the work Calculations showed that when prefabricated modules was strategically sites, and warm air was delivered from modules are built under controlled Loading of Chayvo OPF module important . diesel electric heaters . In all, about at shipyard in South Korea factory conditions: without 75% of the work during the winter transport to Sakhalin, As part of implementation of this idea, interference in the form of adverse May 2005 Fluor Daniel was awarded a contract weather conditions, and with to design the OPF in December 2003 . convenient access to equipment and In less than 34 months, 36 modules labor, the cost of the work is 25% less weighing a total of 40,000 tonnes than at a remote site . 1995–2015

had been fabricated, and two

Startup of the OPF was scheduled for major sea shipments had been late 2006 . The site had to be prepared completed and offloaded at Chayvo; by that time: earthmoving operations the modules had been hooked up, had to be completed, piles had to be the facility had been turned over installed, and foundations had to be for operation and production had laid . In addition, storage facilities, begun . The accomplishment of this a sewer system, firewater pipeline, task was a new industry record for electrical distribution networks and major onshore processing facilities tanks all had to be built . The work erected at remote sites . The modular began in 2004, under the supervision approach made it possible to cut Record of Achievements Record of a Russian design group and was

at least 18 months from the project performed with high efficiency.

and save more than US $300 million . This outstanding achievement was

Installation of Chayvo OPF

sakhalin-1 modules, summer of 2005 62 63 Arrival of Chayvo OPF modules, transportation across the Chayvo Bay bridge, summer of 2005

of 2005–2006 was done under controlled temperatures, and productivity was only 10–15% below the level achieved during the summer .

Planning for the offloading of heavy modules onshore, and transportation of the modules to a point about 9 km west to the OPF site was critical . The mooring at Chayvo was built so that barges could approach it at high tide and then ballast down to settle on the sand bottom . The modules were then offloaded onto trailers . This innovation made it possible to reduce barge offloading time from Rostislav Kolotov, three days during the summer delivery Chayvo OPF Production Supervisor in 2005 to one day in the summer of 2006 . 1995–2015

The next problem was just as difficult: Chayvo OPF construction

works, summer of 2006 Despite his young age, Rostislav can be considered Limited; he had been well-trained to work how to haul the ultra-heavy modules a veteran at Exxon Neftegas Limited. He joined at Sakhalin-1 Project facilities. Rostislav does across the new bridge . The bridge the company at 2002, when a large production not regret having come a long way to join modules comparable in height to a five- networks, and structural and pipeline organization started hiring. Back then, he was a large international project. capacity of 300 tonnes was not sufficient a 26-year old mechanical engineer who had story building . At one point, about 30% connections were completed . The OPF, My job at Exxon Neftegas Limited — he says — to support the weight of the modules, already graduated from a college of forestry, has become a major professional and life of the worldwide fleet of such special- which experts refer to as the heart of the Far East Railway University, and worked as an auto which was as high as 1700 tonnes in some „ experience for me. Being exposed to people mechanic at Yuzhno-Sakhalinsk Thermal Power purpose trailers was at Chayvo . project, was all ready for startup . of different ethnicities and cultures helps cases. Specialists from ExxonMobil and Station 1. He would later become an operator you better understand others and respect trainee and undergo extensive training which Mammoet, a heavy equipment transport their knowledge and skills. Sakhalin-1 Project The last module was delivered to the would include basic English and fundamentals is all about a team play, where the overall contractor, assembled multi-wheel of petroleum engineering. The initial training took installation site on July 15, 2006 . There success depends on everyone’s contribution. place in Yuzhno-Sakhalinsk, followed by a 15-month modular transporters so that the weight Being able to realize that helps us achieve were 78 days remaining before the first special course in Calgary, Canada. He then took

Record of Achievements Record outstanding performance and maintain high of each module was distributed over yet another 15-month course of in-depth training delivery of hydrocarbons to the OPF .

safety standards. Due to efficient operation at a gas processing plant near Edmonton, also three lengthwise, and four crosswise, of OPF equipment, we have been able to keep At that time, after installation of the

in Canada. unplanned downtime at one of the company’s rows of bridge piles . Safe crossing By 2005, Rostislav had become a highly skilled base modules, the last 20,000 tonnes lowest levels. specialist and a real asset to Exxon Neftegas of the bridge required 700 hydraulically of process modules were installed, and controlled wheels . Assembled into hookup of the modules to electrical sakhalin-1 “ a special transporter, they moved OPF 64 65

Chapter 10

n 2005, an event at Chayvo marked what would be a key Iachievement of the Sakhalin-1 project: oil and gas First Oil production began at the Yastreb rig .

On October 1, Sakhalin-1 began delivering gas to consumers in Khabarovsk Krai . Prior to that, the Consortium had entered into a supply agreement with JSC Khabarovskenergo and JSC Khabarovskkraigas . Gas from Sakhalin provides heat and power to industrial facilities and communities of Khabarovsk, Komsomolsk-on-Amur, Amursk, Nikolayevsk-on-Amur and other cities in the Krai .

This event ushered in an important stage in implementing the Russian Far East Gasification Program. Utilities which provide the communities with heating and power, the aircraft plant, and many other mid-sized, and small businesses

1995–2015 in Khabarovsk Krai would now be able to use cleaner fuel for

their needs .

The first oil produced by Sakhalin-1 was now also available Interim Production Facility on the Russian domestic market, based on a short-term and Yastreb drilling rig at Chayvo, autumn of 2005 agreement with Rosneft-SMNG .

Meanwhile, the consortium engineers continued finding new evidence which proved that the selection of the Interim Production Facilities option was the correct solution . It was clear that IPF made it possible to start hydrocarbons production a year before production would have started, given Record of Achievements Record

the OPF construction schedule. Early production allowed Signing of Sakhalin-1 gas

the early conclusion of long-term sales contracts with Russian sales agreement to supply gas to Khabarovsk Krai, consumers, and that enhanced the regional project support . September 2005 Viktor Ishayev, then-Governor of Khabarovsk Krai, pointed out that Sakhalin-1 gas gave the region a new fuel security, which sakhalin-1 66 67

Kommersant, October 1, 2005 By the Right of First Oil By М. Kravchenko and O. Shulga

Today, Sakhalin will see the start of gas per year. Sakhalin Oblast Governor Ivan begin as soon as this year. While no details of commercial oil and gas production under Malakhov, Minister of Industry and Energy of the deal were released by the parties, Sakhalin-1 Project, operated by Exxon Neftegas of Russia, Victor Khristenko, Rosneft President according to Khabarovskenergo top official Ltd. (ENL). The Chayvo pipeline valves will Sergei Bogdanchikov, as well as government Valery Levit, the price of a million cubic meters be opened in an official ceremony to be officials from India, Japan and USA are of gas is nearly half than the world market attended by Minister of Industry and Energy, expected to take part in the ceremony. Messrs. price. Thus, Khabarovsk Krai will be paying 70 Victor Khristenko. Khabarovsk Krai is going Khristenko and Bogdanchikov have already to 80 dollars per thousand cubic meters of gas, to be the first consumer of hydrocarbons with arrived at Sakhalin yesterday. No media which is a lot higher than the price of gas gas supplied to public gas utility systems, representatives have been invited to Chayvo, on the Russian market (30 dollars on average). and oil shipped to the Komsomolsk refinery as the main part of the ceremony will take ”Strategic supplies of gas to Khabarovsk (Rosneft), from which the fuel will be exported place in Yuzhno-Sakhalinsk on Sunday. Krai will be an important milestone for to countries outside of Russia. Over 4 billion In the regional capital, Steve Terni, President the project. We started out by shipping gas dollars have been invested in the Sakhalin-1 of Exxon Neftegas, is going to speak at a press to Russian consumers. We were faced with Project. briefing dedicated to the Early Oil and the task of supplying gas to Khabarovsk Krai 1995–2015 The Sakhalin-1 fields hold 307 million Gas Festivities (the name given by Exxon by the beginning of the 2005/2006 heating

metric tonnes of oil and 485 billion cubic Neftegas to production startup celebration season, and it has been accomplished", an EN

meters of gas. The Consortium is formed activities), which will be followed by a gala representative told Kommersant. Initially, by ExxonMobil-controlled Exxon Neftegas dinner and a major concert at Chekhov Center. Khabarovsk Krai will buy approximately (30%), subsidiaries of Rosneft (20%), Indian Yesterday, trial production of oil and gas into 1 billion cubic meters of gas. The gas supply Delegation of ExxonMobil management ONGC (20%) and Japanese SODECO (30%). the flowlines took place on the oil production is expected to reach 3 billion cubic meters per led by Rex Tillerson visits Chayvo, The first phase of the project includes platform Orlan, and land drilling rig Yastreb year in 2009. June 2005 production at Chayvo field, and 2007 will mark at Chayvo Bay. Exxon Neftegas officials According to a source in Exxon Neftegas, the commencement of Odoptu oil reserves referred to that event as “business as usual”. the early Sakhalin-1 oil will also be shipped 1979 2000 October 1, development. To date, over 4 billion dollars First hydrocarbon shipments under to Khabarovsk, specifically to Komsomolsk would further improve as gas became more at least a month of the commissioning have been invested in the project including Sakhalin-1 Project will be sent to Khabarovsk Oil Refinery (Rosneft KNPZ). De-Kastri Oil Discovery Chayvo-6a exploration 2005 readily available to the local communities . process . When the time came to start-up OPF, of the Chayvo field well was drilled. exploration, engineering, and infrastructure Krai. Currently, that region remains Terminal is not yet ready to receive oil, The data confirmed Commencement upgrades. the only buyer of natural gas from EN as construction has not been fully completed it was a seamless process, due to the ability the presence of of production and Commercial oil and gas production under (negotiations are underway between there. This is expected to occur in 2006, when Additionally, the experience of operating supply of oil and gas to use oil and gas from IPF, which provided for significant (about Sakhalin-1 Project will start today. On this the members of the Consortium and China’s EN builds its own flowline. Until then, oil will 1 billion barrels) oil from the Chayvo the IPF proved quite useful for OPF, its big field to customers occasion, an official ceremony will be held National Petroleum Corporation — CNPC). be shipped via Okha — Komsomolsk-on-Amur stable levels of process tank fill-in. reserves in the Chayvo field in Khabarovsk Krai

Record of Achievements Record at Chayvo field. A total of seven extended- On September 26, Khabarovskenergo and pipeline. After processing at KNPZ, fuel will be brother . With IPF performance data at their

reach wells have been drilled in the bay Khabarovskkraigas struck a deal with exported to international markets. According disposal, the specialists were able to verify and some of these wells have already been the offshore operator. Supplies of gas from to Kommersant, the Komsomolsk Refinery will brought online. The design capacity of Chayvo Chayvo to several towns of Khabarovsk Krai be initially receiving 630 to 700 thousand the design assumptions for OPF . Fuel gas, Oil Processing Facility is 250 thousand barrels (via the flowlines of Sakhalinmorneftegaz, metric tonnes of oil each year. which came from IPF, was used by the OPF of oil per day and 8 billion cubic meters a Rosneft subsidiary-and Daltransgas) will team to efficiently test the power plant’s

sakhalin-1 turbo-generators, and, ultimately, to save 68

Chairman Of the Government of the Russian Federation October 5, 2005 No. МF-P26-8 Moscow To: Sakhalin-1 Consortium

Dear Friends!

On behalf of the Government of the Russian Federation and in my personal capacity please accept most sincere congratulations with the commencement of oil and gas production. The fact that Sakhalin 1 project entered the commercial production stage demonstrates a potential for establishing efficient and mutu- ally beneficial cooperation between the Russian Government and leading Russian and foreign energy companies within the framework of the international consortium. The Government of the Russian Federation believes that commence-

1995–2015 ment of energy supplies to foreign consumers under the Sakhalin-1

project will promote structural diversification of Russian energy exports and provide additional contribution of the Russian

Federation to the stabilization of global energy markets. Participation of a leading US energy company in the Project gives particular substance to the Russian-American energy dialog. Production start-up is also a significant project implementation phase because it marks the milestone when the Russian Federation starts to receive its share of oil and gas. I am well-assured that this will positively influence the reliability of energy supplies to Russian consumers and contribute to the accelerated social and economic development of Russian Far East regions. Wishing you further success in your business, as well as happiness and health to you and your families.

M. Fradkov Record of Achievements Record

Russian Federation Minister of Industry & Energy V. Khristenko, Sakhalin Oblast Governor I. Malakhov, and representatives of Sakhalin-1 Consortium at the Chayvo First Oil ceremony,

sakhalin-1 October 1, 2005 n the 13 years since I started working Co-venturers, contractors, government on the Sakhalin-1 project, we have made ministries — worked together as a team an epic journey from an awe-inspiring, with a single vision: to safely deliver a world I daunting, harsh, and empty sub-arctic class project. We are very proud that some landscape to a cutting-edge, record-breaking of the solutions we developed jointly with world class operation. our contractors will help future engineers in tackling similarly complex projects around ExxonMobil’s vision was to safely deliver the world. a world class project; but we had almost no roads, short weather windows and very few This was, and is, a challenging project, and people trained to manage such a complex probably one of the most difficult I have undertaking. So we brought our best people, worked on in my career with ExxonMobil, and trained others on the island, and worked that is why the safe and successful completion as one team. Together we found solutions for of each phase has been such a rewarding each and every challenge we encountered. experience.

Over the years, our team gathered more than I can say with the utmost admiration and 12 awards, including the prestigious IPTC respect for all our workers that the Sakhalin-1 award. We have been selected for ExxonMobil project is the safest place to work in our President’s Safety Awards for every phase industry. of our project. It is gratifying to be recognized I am extremely proud to be a part of the team as being the best in ExxonMobil and Jim Flood that has delivered the safe, highly successful, Vice President, in the industry. record-breaking Sakhalin-1 project. Arctic and Eastern Canada, I believe that the main reason for this success ExxonMobil Development Company was that everyone involved — employees, 72 73

Chapter 11

ow is a good time to return be drilled from the onshore and Access to World Markets Nto our birds, Yastreb and the offshore locations . This Orlan . We took them out of our was an unprecedented number story temporarily to address of such wells drilled from other important components a single well site . of the global Sakhalin-1 Project, Orlan is located at a distance but we cannot lose sight of them of 11 km from the shoreline, completely . Indeed, that would in about 14 m of water in the Sea be hard to do, given their of Okhotsk. The first well spud impressive dimensions . here was in December, 2005 . While Yastreb was developing These wells turned out to be the northwest parts no less complicated than those of the Chayvo field from its drilled from the onshore onshore location in October location, but less extended —

1995–2015 2005, Orlan was almost ready up to 9 km (5.6 mi), and averaged in azimuth to penetrate the pay At a temperature of under loads, and was designed for year- to embark upon developing from 4 to 6 km (2.5–3.7 mi). zone. –35º C, and with wailing winds, round operation .

the same field’s southwest part. Drilling was initially vertical, the personnel of the Russian Orlan was enduring its first The single point mooring A total of 33 ERD wells would and at a certain point, turned Koksokhimmontazh tested two winter offshore Sakhalin quite eliminated the need for a dedi- oil storage tanks, each with well . The steel and concrete cated tanker berth, and offered a capacity of 100 thousand structure easily withstood the benefits of a cleaner envi- cubic meters (650 thousand the onslaught of 5-foot thick ronment and reduction of costs, barrels), to verify their structural ice floes and gigantic ice ridges thanks to a reduced dredging integrity . Construction reaching the height of a 6-story work scope . of the pipeline and oil export building . terminal was also nearing Successful testing of the SPM

Record of Achievements Record completion. The fixed tower The new year of 2006 again and tanker hook-up facilities of the single point mooring took us to De-Kastri, where took place in June 2006 . The oil structure-the world’s largest, was the oil export terminal export terminal-with an annual taking its final shape. It weighed construction and commissioning capacity of 12 million tonnes, 3200 tonnes . The cone-shaped neared completion . was nearly ready for operation .

sakhalin-1 base could withstand heavy ice 74 75

Construction site layout of De-Kastri Oil Export Terminal

Due to its remote location, it was to the height of a 17–18 story building . designed as a self-contained installation . About 2,000 De-Kastri dwellers came The terminal was equipped with its own to gaze at the sea giant. A large 50 kg power generation units, a water supply cake was prepared for folks to celebrate system, a waste disposal system, and this festive occasion . 1995–2015

personnel accommodation .

The first oil was sent to a refinery On August 29, oil began to flow from in Japan . Subsequent batches went the Chayvo well site to the terminal, to each Consortium member, in turn . while on September 30, 2006, the long As production rates increased and awaited historical event took place — full project capacity was reached the first sweet Sokol oil of Sakhalin-1 in early 2007, a . tanker would pull off was pumped into the Viktor Titov tanker . the De-Kastri terminal mooring every This vessel was one of the five newly- three to four days For the first time built double-hull, Aframax class tankers ever in the Russian Far East, Sakhalin-1

Record of Achievements Record chartered to the project . Viktor Titov, established the routine of year-round

Russian Federation Deputy Minister of Industry & Energy as well as its brethren, could load aboard oil transportation . In Chikhachev Bay, I. Materov, Rosneft President S. Bogdanchikov, Exxon Neftegas Limited President Steve Terni, and representatives up to 110,000 tonnes of oil . The tanker ice-breaker class support vessels were of Sakhalin-1 Consortium at the official reception dedicated is a quarter of a kilometer long, over placed on year-round standby duty, while to the start of Sakhalin-1 crude oil export, October 2006 40 m wide and over 54 m from keel in the winter, tankers crossing the Tartar De-Kastri Oil Export Terminal,

sakhalin-1 to top button, which is comparable Autumn 2006 76 77

Russian Federation Deputy Minister of Industry & Energy I. Materov, SODECO President M. Hayama, and Exxon Neftegas Limited President S. Terni at the official reception dedicated to the start of Sakhalin-1 crude oil export, October 2006

Strait were escorted by ice breakers for safety purposes . Yuri Dankan, Access to world markets considerably Mayor of Ulchi District, Khabarovsk Krai 1995–2015 improved the finances of Sakhalin-1,

which in February 2007, reached its

full scale production target of 34,000 When the construction of the De-Kastri as soon as the construction phase tonnes of oil (250,000 barrels) per day . Oil Export Terminal had just begun, began. New jobs were created; road Commenting on this achievement, „ we had mixed feelings of concern infrastructure was improved; new and anticipation. Our concerns had power plant was built in De-Kastri; and Stuart McGill, senior Vice President to do with the environmental footprint hospitals received modern medical of Exxon Mobil Corporation, lauded of a facility this size. On the bright equipment. After nearly a decade Summer December 2004 July September 30, side, we looked forward to all the good of operating the terminal, the Sakhalin-1 Exxon Neftegas Limited as the Operator. 2003 2003 Commencement 2006 2006 things this major project could bring Project Consortium has earned of construction According to him, achievement to our district: new jobs, budget revenue, a reputation for being a dependable Completion Commencement of De-Kastri Oil Completion of Start-up of De-Kastri of construction of module offloading and Oil Export Terminal, and social projects. All our fears are and responsible social partner, so far Export Terminal of the target production peak “became of the bridge over construction for delivery of the commencement of a thing of the past because we have it has completed over 300 social projects with Single Point Chayvo Bay Chayvo oil and Mooring and an Chayvo OPF Sokol oil deliveries seen the high environmental standards a convincing example of how the energy worth a total of 60 million rubles, gas Onshore oil pipeline modules to the to international of Exxon Neftegas Limited at work. Not or an average of 30 projects a year Processing from Chayvo installation site markets by the

Record of Achievements Record sector and the exporting countries can a single drop of oil was spilled into in various sectors: healthcare, education, Facility to De-Kastri followed by the Sakhalin-1

installation and Consortium cooperate to ensure supply of fuels the sea over the entire period of offshore culture, and support of indigenous commissioning

operations, and locals are fishing minorities of the North. The De-Kastri to the world markets” . at the OPF right next to the terminal without any Terminal has now become an integral concerns. part of the Ulchi District economy, and As to the economic aspect, the Ulchi a good neighbor that is always willing District saw fundamental changes to extend a helping hand. sakhalin-1 “ 78 79

Location: De-Kastri Height above sea Sokol, the Biggest Oil Export Terminal, level: 60 m

1995–2015 Chikhachev Bay,

Single-point Khabarovsk Krai Water depth: Mooring Facility 22 m

First oil offloaded Date installed:

Record of Achievements Record in the fall of 2006 summer 2005

sakhalin-1 80 81 On the Yastreb rig floor

Chapter 12

pril 2007 provided a new occasion outcome analysis . This is a process which Setting Records Ato extol the successful operation repeats itself until the obstacle is fully of Exxon Neftegas Limited. The onshore eliminated . If another malfunction appears, Yastreb drilling rig, located at the Chayvo the process kicks in again . field, drilled the Z-11 well, with a wellbore The next world drilling record would soon be of 11,282 m (37,016 ft) long . Nowhere as a Business Need set . In January 2008, again, it was at Chayvo in the world had a longer ERD well been and Yastreb . The wellbore of the new Z-12 drilled . well was 11,680 m long (38,322 ft) . The Z-11 well took 61 days to drill, which Well, understandably, complicated ERD wells was more than 15 days ahead of the target, are not drilled to set records . What is much at a lower cost than expected, and without more important is the fact that they are any safety or environmental incidents . environmentally safer and less costly . When During well construction, the project conventional drilling techniques are used implementation team used ExxonMobil’s (for vertical wells, for example), multiple patented technologies, including the final 1995–2015 well sites have to be set up, with access roads Integrated Hole Quality (IHQ) and Fast Drill

and utilities . Cutting edge technologies, technologies . by contrast, make it possible to drill wells The IHQ technology helped to successfully from one well site, in different directions, design and drill the well based on a large and to use one well to cover the entire field. number of parameters, such as rock strength, One well site is set up, instead of several, load size, and the hydraulic characteristics thus reducing the footprint on the land for of the wellbore . Fast Drill helped oil and gas development . Not only does personnel optimize the drilling of each it heavily decrease the environmental foot of the wellbore . Fast Drill is a cyclic impact, but it also saves money which process designed to identify and eliminate otherwise would be spent on additional

Record of Achievements Record factors hindering the drilling process; drill offshore facilities, pipelines, and other

bit vibration, for example . It comprises process infrastructure .

X-Mas trees multiple stages such as limiting factor on Z-11 and Z-12 wells Such benefits helped made Sakhalin-1 analysis, development of the limiting factor an economically viable project . In the fall elimination method, use of the method and sakhalin-1 82 83 of 2007, just two years after the Chayvo Consortium co-venturers . Onshore and development start up, the Consortium offshore oil spill response equipment achieved the point of return was fully deployed in De-Kastri, along on investment in the field. with about a dozen vessels and boats. Fast Drill Process The exercise demonstrated the company’s Another noteworthy event took place serious approach to environmental The three following factors determine negatively affecting the drilling at this time — on September 27, 2007, protection, and its ability to control any a rate of penetration (ROP) of rock rate is discovered, the applicable the De-Kastri terminal offloaded oil onto bits: torsional force, rotary speed remediation method is developed and non-routine situation . and weight on bit. Previously, documented. Often, an improvement the 100th tanker . Since tanker operations it was the prevailing opinion among in one area can result began a year earlier, not a single incident In 2007, the Consortium started planning the drillers that decreasing ROP in an inefficiency in another. For is determined by the hardness of rock. example, an increase in ROP will also occurred, despite the turbulent weather . Sakhalin-1’s next stages . The lessons But, in fact, there are many examples result in an increase in the amount learned early in a global project help of ROP limiters; drillstring vibrations of drilling waste and appearance Specialists, however, do not regard very often cause decreased ROP and of a new limiting factor: capacity push the project forward . Stephen Terni, can even be a major contributor of equipment for cuttings removal this as an indication to relax entirely . then-Exxon Neftegas Limited President, to downhole tool failure; poor drilling from the well. Overcoming the new In the summer of 2007, Exxon Neftegas efficiency can also limit ROP, often limiter becomes the next focus for speaking about the most important influenced by fine rock cuttings the drilling crew and engineering Limited conducted a scheduled large-scale factors which contributed to the Chayvo clogging bit cutters or adhering personnel. This continuous oil spill response exercise . The exercise to the bottom-hole. The ExxonMobil cycle of upgrading was taken success emphasized the company’s ability Upstream Development Co. has as a basis of the Fast Drill Process. involved about 200 people from De-Kastri, to develop and apply state-of-the-art developed the Fast Drill Process (FDP) At the present time, this process Yuzhno-Sakhalinsk, Moscow, London, to facilitate advances in drilling has implemented onall drilling rigs, technologies across the project, and its technology targeted at eliminating and adopted by all drilling groups Singapore and Houston . Observers continuous drive for excellence . ROP limitations. When a factor of the ExxonMobil Corporation. included government officials and 1995–2015

On August 7, 2007, the Russian President signed District Municipality, was appointed as acting the decree dismissing the Sakhalin Oblast governor of Sakhalin Oblast and presented Governor, following Ivan Malakhov's resignation to the Sakhalin Oblast legislature for approval. April January December as governor. That same day, 47-year-old The lawmakers approved him as the regional Alexander Khoroshavin, head of the Okha Urban governor on August 9, 2007. 2007 2008 2008 First world record Another world record Sakhalin-1 of Sakhalin-1 Project: achieved in extended Project received Z-11 extended reach reach drilling at the the Excellence well drilled at the Chayvo field: the new in Project Integration Chayvo field. It is record-setting Z-12 Award from 11,282 m long — well is 11,680 m long the International

Record of Achievements Record a world record in the Petroleum Technology oil and gas industry Conference (IPTC)

Record breaking Z-40 ERD well completion photo, spring 2014 Soviet Sakhalin newspaper,

sakhalin-1 August 14, 2007 84 85 2009 and 2012: Best Terminal of the Year award was presented by the Oil Terminal 2008: High Quality International Congress of Project Integration in St. Petersburg. award was presented at the International Petroleum Technology Conference (IPTC) on behalf of the professional ExxonMobil associations that Development Company founded IPTC: AAPG, and ExxonMobil Sakhalin-1 EAGE, SEG, and SPE Production Company 1995–2015 received over

Project Awards 10 excellence in safety awards Record of Achievements Record

Jim Flood receives IPTC award

sakhalin-1 for Excellence in Project Integration 86 87

Chapter 13

xxon Neftegas Limited’s Two months before the opening, Riverside Office Equest for the best employees had a contest for technologies and most efficient the best building name . About work practices appeared not only a hundred names came in . After offshore Sakhalin. On August 2, much deliberation, Riverside 2007, the company opened was the winner . The name its head office in Yuzhno- came from Anna Samoplyasova, Sakhalinsk . Four years after the company’s senior translator . the awarding of the contract, Anna explained that her Bouyguesstroy LLC (the Russian proposal came about as a result subsidiary of the French of the office location in the bend construction contractor Bouygue of the Rogatka River . The name Batiment) and the locally was an excellent match for renowned Transstroy Sakhalin the new building . Indeed, CJSC built a spacious, five-level

1995–2015 the shape of the five-story new office building. construction follows the river

The building was conceived line . The embankment also as having three spaces — received some improvements — the eastern part, the western it was reinforced and adorned part, and the central office. with concrete steps . Along Designers believed that the river was now a brightly lit this would greatly improve walkway connecting Prospekt resistance to seismic activity . Mira and Dzerzhinsky Street. The office came equipped At the office inauguration with a computerized climate ceremony, someone remembered

Record of Achievements Record control system, and a state-of-

an old Russian adage that the-art fire prevention system.

“in a lifetime, one must build The building was designed for Exxon Neftegas Limited office a house, plant a tree, and raise in construction 50 years of continuous service a child ”. It turned out that without major repairs . all parts of the old wisdom sakhalin-1 88 89

This little old building had been located at 28 Sakhalinskaya street in Yuzhno before A magnitude 6.8 earthquake in the residents whose homes became unsafe, Exxon Neftegas Limited office was built epicentral area struck off the Sakhalin or were destroyed by the earthquake Island’s southwest coast on August became the number-one priority. Acting

1995–2015 2, 2007. Magnitude 6–7 shocks were on behalf of the Sakhalin-1 Project

recorded in Nevelsk, 5–6 in Kholmsk; Consortium, Exxon Neftegas Limited could be implemented for the office. parents to 166 children: 87 boys and and 3–4 in Yuzhno-Sakhalinsk. made the builders' rotation camp The “house” was already here: a new 79 girls . The most popular names were The Nevelsk earthquake caused the most in De-Kastri available to those affected devastation: many residential and office by the earthquake. office for 400 employees, and so were Anastasia and Alexander . Some children buildings were damaged beyond repair the shovels to plant trees . After were even present at the opening and had to be torn down; the water and An additional $150,000 was allocated power supply was disrupted, along with on behalf of ExxonMobil Corporation a few words of welcome, Steve Terni, ceremony. In English and Russian, some of the telephone lines; worst of all, for the program to rebuild Nevelsk. President of Exxon Neftegas Limited, they congratulated the employees and people suffered. Exxon Neftegas Limited staff supported the relief effort, holding fundraisers, and Ivan Materov, Deputy Minister visitors on the office opening. Toasts A relief effort was launched immediately as well as clothing, footwear and toy of Industry and Energy of Russian were also made with juice and lemonade; in the wake of the earthquake. donation drives. The donations were handed over to Nevelsk residents Federation, planted on the office the no-alcohol-in-the-office rule was The Sakhalin-1 Project Consortium and via the Social Security Department grounds two birch trees, a symbol strictly enforced . the project operator were among the first of the Sakhalin Oblast Administration. responders. Providing shelter for Nevelsk of Russian nature . There were also no Record of Achievements Record

issues with the adage’s third point .

According to the statistics presented by the Company at the ceremony, since Exxon Neftegas Limited came to Sakhalin, employees became sakhalin-1 had the honour of assuming As president of Exxon Neftegas Limited for the leadership of Exxon Neftegas the better part of a decade, I clearly believe Limited’s production organization that the successes of the Sakhalin-1 project I in 2006, when the Sakhalin-1 project would not have been possible without had just begun its crude export operations, a crucial factor: its people. All companies and was producing only from its first Chayvo must rely on their staffs, but Exxon Neftegas field. I retired from ExxonMobil nine years Limited combined an exceptional wealth later, shortly after production start-up of experience, gathered over decades, of the project’s third field, Arkutun-Dagi. with one of the most motivated and professional workforces employed anywhere Over the years, as we were building capacity in the industry; united by our “one-team” of the Sakhalin-1 production facilities, we were ethos. equally successful in building a strong production organization, and implementing I would like to pay special tribute to all our staff nationalization program. Many those who worked with Exxon Neftegas beginning engineers, technicians, and young Limited over the past twenty years for their professionals started their careers with Exxon professional expertise, commitment to safety, Neftegas Limited, and were progressively and operational excellence. promoted to supervisory and managerial I am proud to have personally known positions. The personal successes of individual many of these exceptional individuals Exxon Neftegas Limited team members over the years, and even though I no James Taylor contributed to the overall success of our longer have the privilege of working with Exxon Neftegas Limited President production unit: over 500 million barrels you on a day-to-day basis, I am delighted in 2006–2015 of oil were produced and over 750 tankers to share in the celebrations this 20th delivered, without serious safety incidents anniversary brings. I wish everyone at Exxon and spills. Over these nine years, the Exxon Neftegas Limited the continued legacy Neftegas Limited team was recognized several of success, safety, and progress in the decades times in receiving ExxonMobil Production to come. Company’s “President’s Award” for its commitment to the safety and reliability of production operations. 92 93

chapter 14

n 2006, Sakhalin-1 entered a new stage, site, including area development and access road Ithe stage of developing the second construction to well locations . Secrets of Odoptu of the three offshore fields in the north A survey indicated that unlike Chayvo, this was of the island — the Odoptu field, about 75 km an area with occasional permafrost . However, north of Chayvo . this type of permafrost is known as “warm,” that The initial-stage production period included is, if it thaws as a result of construction work the drilling of 10 wells: one disposal well and or facility operation, it will not freeze over again. nine ERD wells. This made it important to compact the soil while preparing the drilling rig foundation . The piles The well site was selected on a sandy, for building drilling and production facilities were windswept shoreline between Piltun Bay and designed and driven, based not only on seismicity, the Sea of Okhotsk, about 10 m above sea but also on the thickness of the permafrost, and level . The different transportation logistics its thawing, due to the heat from the producing and the natural environment that was quite wells . different from Chayvo required a large scope

1995–2015 of engineering work and planning. But Exxon But the most impressive action unfolded around

Neftegas Limited and its contractors were the Yastreb drilling rig: The 70 m tall mammoth ready for the challenging task ahead, and made weighing nearly 5,000 tonnes had to be a seamless transition to the project’s second disassembled into small parts, loaded onto huge stage . The experience gained over many years trucks and transported over 180 km to a new work of Chayvo operations proved invaluable for Exxon location . Neftegas Limited specialists as they started The equipment required careful handling, development of a new oil and gas area offshore and it took the truck drivers several months Sakhalin . to deliver 380 truckloads of cargo to Odoptu In September 2006, construction began in over 1,500 trips. This move, underpinned

Record of Achievements Record on a workers’ early camp on the shore of Piltun by all required safety precautions, and completed

Bay, with cold-proof tents, warehouses and ahead of schedule, marked Sakhalin-1’s transition

a 14-km-long motor road. Seven months later, in 2009 to the next stages of development and a rotation camp emerged, where a lot of care production . Odoptu North Construction of the processing facility was put into the construction of the Yastreb well Wellsite, at Odoptu NWS,

sakhalin-1 winter of 2009 spring of 2009 94 95 Installation of Yastreb rig at Odoptu NWS, December 2008 Carl Brooks, Exxon Neftegas Limited Certain adjustments had to be made drilling operations superintendent to account for the fact that the pay zone depth here is 30% (about 800 m) less than at Chayvo . The well’s dogleg The horizontal displacement of the Odoptu For operations at Odoptu, the top drive has severity, or the change in the inclination, wells is similar to the Chayvo wells. However, been replaced with a new unit that provides would have to be steeper . Running „ a key difference is that the Odoptu wells are approximately 40 percent more torque output 800 m shallower, meaning that significant well capability as opposed to the prior top drive equipment would also be more difficult, design changes were required. used at Chayvo. In order to accommodate and in many situations, the drill string More specifically, the shallower depth means the new top drive, the entire derrick was that wells must build angle more aggressively, replaced and fitted with a new mast which and casing would have to rotate in order which translates to higher torque requirements. is three meters taller than the old one. to run . This makes it significantly more difficult New pipe-handling equipment, located to lowerequipment into the well and in many on the rig floor, has been installed to speed cases will require that drill pipe and casing be up the process of making up and breaking out To improve drill string rotating rotated into the well. the new high-torque drill pipe and drilling characteristics, the Yastreb top drive When drilling an extended reach well assembly connections. the top drive is probably the most critical rig was replaced with one which had a 50% component as it provides the energy required higher torque than that of the old to rotate the drill string. drive installed for Chayvo’s operation . “ This was done for better drill pipe To speed up pipe screwing and rotated in 12-hour shifts, four weeks environmentally responsible manner . sites, sped up drilling, and slashed control, as certain sections required unscrewing, and extend the drill string, on/four weeks off . By being involved The construction of this challenging the capital and operational expenses 1995–2015

drilling at an angle in the upward new process equipment was installed in the pioneering project, the rotation engineering facility required a large work for large offshore facilities; pipelines

direction . The top drive now had two on the drilling rig work site . Additionally, personnel (75% of whom were Russian force . About 200 people were constantly and other operational infrastructure . AC motors instead of one . The motors most infrastructure facilities required for nationals) acquired invaluable manning the well site . On-line help came The negative impact of field were equipped with a water cooling drilling operations were also relocated experience in doing unprecedented types from the engineering team in Yuzhno- development on the environmentally system instead of an air cooling system . to Odoptu, including a tank farm (for of work . Sakhalinsk, as well as from expats . vulnerable coastal areas was also As a result, the drilling mast grew diesel fuel, oil base, and drill cuttings They analyzed well data, identified minimized. On April 29, 2009, the first vertical by three meters . All of this was done re-injection systems), offices, and other drill-rate bottlenecks and offered well ОND-1 was spudded at Odoptu, to enable Yastreb to drill a horizontal buildings . This required precise planning recommendations for mitigation . for re-injection of drill cuttings, and well underneath the Sea of Okhotsk and allocation of the responsibilities it produced water . Its completion ExxonMobil’s cutting edge technologies to tap the oil pay zone at a point to the drilling team, project execution inaugurated the drilling of more were also used at this field to drill multi- in the Odoptu field, over 9 km (5 mi) team and the production organization. Record of Achievements Record complicated ERD wells. lateral wells in different directions from

from the shoreline . The field became one huge construction one drill pad, and to use one well for full In early June the first ERD well (ОР- site, employing 9,000 people . They pay-zone coverage. This considerably 7) spud took place at Odoptu . From included drillers from Australia, USA, reduced the footprint of the area the shore, it ran under the sea floor, Africa, Canada and Russia . They designated for oil and gas production

sakhalin-1 to oil and gas deposits, in a safe and 96 97

chapter 15

akhalin-1 gave VSK-VEKO Sustainable Development Sa challenging task . The company would need to build an 80-km-long Odoptu-Chayvo flowline in July of 2008 . The challenge was not only in the fact that the flowline route was to cross a large number of water bodies and swampy areas, but also in the need to cross 10 km of water in Piltun Bay .

Following a number of workshops involving ice designers, engineers Нужна подпись. Нужна подпись. and construction specialists, Нужна подпись. Нужна подпись a detailed design was drafted . The design emphasized personnel

1995–2015 the contract was awarded to Okha- Construction of Odoptu — Chayvo

safety, minimal environmental OPF flowline, Piltun bay crossing, based Sakhalinmorneftemontazh January 2009 impact, and schedule discipline . OJSC (SMNM) . Its personnel Despite the severe weather and surprised everyone by rapidly the line length (10 km), VSK-VEKO mastering the new technology, demonstrated faultless compliance only took two months to complete and acquiring the necessary skills with safety and health standards, and the project . The pipe was laid by mid- for cementing the pipeline . Soon high quality of work and discipline . April 2009 . thereafter, SMNM became a stable The planned tasks were always done producer with sufficient numbers The project called for weighing properly and ahead of schedule . of cement-weighted pipes, which down the pipe with cement — for Thus, both contractors played were every bit as good as their security, stability and to prevent a major role in helping the project

Record of Achievements Record western equivalents and fully met pipe buoyancy . At the time neither progress towards the drilling stage . global standards . Sakhalin, nor, for that matter, Russia At Odoptu, the flowline would be had a single contractor experienced Throughout the entire period connected to yet another important enough to handle an operation of working together with Exxon installation — the Onshore Oil and of this scale . Upon consideration, Neftegas Limited, SMNM

sakhalin-1 Gas Processing Facility . So, that was 98 99

Discussion of the Odoptu — Chayvo OPF flowline route and construction schedule with reindeer herders from Val settlement in Nogliki District, 2008 1995–2015

constructed simultaneously . start-up at Odoptu. The field In terms of size, the facility was put on-stream, on time was second only to the earlier and on budget, and received installation previously built approval from the Sakhalin-1 at Chayvo . Hundreds of workers Authorized State Body. September Summer Winter April September were busy building the pipe New jobs had been created 2006 2008 – 2008–2009 2009 2010 rack to be used to carry oil for Russian nationals . Commencement winter Construction Commencement Commercial from the field to the processing The government entitlement of construction of a flowline of drilling oil production activities as part 2009 connecting operations at started as part of Odoptu Stage 1 Odoptu with the Odoptu field of Odoptu Stage 1 modules . of oil and gas under Sakhalin-1 Yastreb Drilling Development Chayvo OPF Development Rig moved from also increased . Chayvo and Record of Achievements Record In September, at the 2010 installed at the

Sakhalin Oil and Gas Odoptu field

Conference, the virtual START button was pushed, thus announcing the production sakhalin-1 100 101 Odoptu start-up ceremony at the Sakhalin Oil & Gas Conference, October 2010

Gubernskiye Vedomosti newspaper, September 30, 2010 Stepping Stones on a Long Journey Sergei Chinarov

Commencement of commercial oil production Drilling operations at the Odoptu Field began last year, at the Odoptu Field coincided with the fifth in May. Just like at the Chayvo Field, a multi-kilometer anniversary of the first gas supplies ERD was drilled here. Now has come the time to begin to consumers under the Sakhalin-1 Project commercial oil production. The Yastreb drilling rig is being prepared to be taken down. In August next year, this Commercial oil production has started at the Odoptu ­5,000-tonne giant will be transported 75 km to Chayvo, Field. This represents yet another phase of the Sakhalin-1 from where it had been delivered to Odoptu in the first Project. Speaking at a press conference dedicated to this place. New wells will now be drilled at Chayvo — the first milestone event, Stephen Terni, the project operator, project field to have been developed. To quote Steve Terni, Chairman of the Board of Directors at Exxon Neftegas achieving the highest efficiency of utilization of natural Limited, the said that operations at the field have entered resources remains the top priority for the Consortium. the startup and commissioning phase. Three wells were

1995–2015 already put on-stream, with oil circulating through Next year, Odoptu is expected to yield 1.1 million tonnes

the entire system. This makes it possible to start-up of oil. Mr. Terni hastened to add that oil production rates the equipment and prepare production facilities will naturally decline, but oil from the Arkutun-Dagi Field

to transport oil via an 80-km flowline to the Chayvo will more than make up for any drop in production. Phased Onshore Processing Facility. From there, commercial development of the three fields ensures both the required product will flow to consumers. Odoptu commercial stability of production and the capability to develop development represents the second phase of a project that the fields in the most efficient manner. To quote Lev calls for the development of three oil and gas fields off Brodsky, General Director of Rosneft-Shelf Far East- which Sakhalin Island. represents Rosneft in the Consortium, the Sakhalin-1 Project is one of the top-priority projects of Rosneft not “Oil from the Arkutun-Dagi Field will also begin flowing just in the Far East but in Russia as a whole. This project to consumers approximately in 2014. The integrated exemplifies reliable and long-term cooperation with approach will allow stable production of hydrocarbons international partners — fellow members of the Consortium. through 2050,” Steve Terni said. Incidentally, one of them — SODECO—explored the Odoptu The potential reserves of all three project fields are Field back in 1970, cooperating with Soviet-era Rosneft. estimated at 307 million tonnes of oil and 485 billion cubic It was, in many ways, thanks to this research that today's meters of natural gas. Incidentally, it was exactly five years

Record of Achievements Record project has become possible. ago that the Sakhalin-1 Project Consortium, which includes Russian oil company Rosneft, started gas shipments. According to Mr. Terni, since the beginning of commercial

As of today, the annual volume of gas shipments exceeded production at Chayvo, the Russian Federation has received 6 billion cubic meters. some $3.8 billion in bonuses, taxes, and royalties. sakhalin-1 102 103

chapter 16

astreb had successfully Technological Leadership Yperformed directional drilling of a development well going under the Sea of Okhotsk seabed from the shore . This success reinforced ExxonMobil’s reputation as an industry leader in the development of fields under complex conditions . After OP-7, similar work was performed for eight other wells according to their sequential numbers . As drilling was completed, the wells were handed over to Operations . drilled with maximum speed and Yastreb rig was modified and a new 1995–2015 Top Drive was installed to drill more While drilling OP-8, Exxon efficiency. complicated Odoptu wells.

Neftegas Limited specialists used Multiple benefits were also the advanced SwivelMASTER provided by the special drilling technology (a special swivel simulation software patented by the Exxon Neftegas Limited mechanism) . With this ExxonMobil (a unique application drilling team was able to resolve technology, the drilling crew was that is intended for use by drilling a number of issues related to able to accomplish much more specialists and geophysicists drilling technically complex wells . than had been initially planned . for comprehensive analysis and In June 2010, the drilling of Another technology that brought engineering) . This software is OP-9 (at 11,036 m being the fifth positive results at Odoptu was regularly updated to reflect the

Record of Achievements Record longest well in the world, and the “Fast Drill” process tested latest developments and best second in Russia at the time) was at Chayvo . This process made it practices based on what has completed at Odoptu three days possible to make sure that each been learned from the worldwide ahead of schedule . It's measured centimeter of the well bore was implementation of projects . depth was second only to the Thanks to these technologies, sakhalin-1 104 105

As part of Odoptu Stage 1 program Yastreb drilled a record breaking OP-9 ERD well.

Z-12 well commissioned in Chayvo in It was no accident that, based on the In January 2011, another world record The entire program was completed as 2008 . Notably, the OP-9 was drilled at results for the year, the Odoptu team was registered during the construction planned . After that, the Yastreb rig was a reduced budget and without a single received the award from the President of the OP-11 well, whose measured again dismantled and moved to the 1995–2015

recordable incident . of ExxonMobil Development Company depth reached 12,345 m . At that time it expanded Chayvo Wellsite .

for safety, health and environmental became the longest one in the world . In November, while drilling OP-10 (SH&E) achievements. Also, the Odoptu (11,238 m), world records were set for “For us, such achievements do not project development group received measured depth and ERD well core represent something astounding,” an award for outstanding safety sampling depth . said Nate Lupold, Drilling Operations performance from the President of Supervisor. “Every time we hear that ExxonMobil Development Company. World-class operations to drill a total we will be setting a new record, we of seven ERD wells were performed as The experience gained by the specialists know that the work will be interesting part of the field development. Despite became a useful aid in drilling new and challenging . We are not afraid of the fact that the natural resources were wells in Odoptu, Chayvo, Arkutun- records — we are fully prepared for

Record of Achievements Record being developed in harsh, subarctic Dagi and all other arctic projects being them ”. conditions, Exxon Neftegas Limited implemented worldwide by Exxon maintained leading occupational safety From May 2009 until February 2011, Neftegas Limited and ExxonMobil and operational performance in the oil world-class operations were completed affiliates. Odoptu NWS after Yastreb and gas industry . at Odoptu to drill seven ERD wells was relocated back to Chayvo,

sakhalin-1 with record-breaking performance . summer of 2011 106 107 Location: northeastern Well measured shelf of Sakhalin Island, depth: 11,238 m Odoptu Field, ERD Well OP-10 Core length: 10 m

Sampling period: Core intervals: fall 2010 10,807–10,817 m

Core Sampling Ultra-deep Core 1995–2015 Optimizing field development requires great depth. The great distance between

obtaining the largest possible the core sampling point and the wellhead

amount of information about zones made this operation one of the most from Record of the field reservoir. A fairly complete challenging undertakings of its kind set of well logging data was collected in the petroleum industry. at the Odoptu Field during the first phase of development drilling from Core sampling was preceded by almost 2009 to 2011. However, certain six months of planning by leading minds Depth — aspects remained unclear, particularly at ExxonMobil. As a result, a full 100% those related to water saturation ten-meter and excellent quality core and permeability. Core sampling was sample was collected in the interval from suggested, to fill the gaps and calibrate 10,807 m to 10,817 m in October 2010. well logging data based on the extracted It turned to be the deepest core sample Well OP-10 rock samples. ever collected. The core was analyzed at the SakhNIPI institute in Okha. Well OP-10 was selected for core The analysis’s findings enabled a deep

Record of Achievements Record sampling. It has a measured depth understanding of physical and chemical

of 11,238 m and a true vertical depth properties of oil and gas bearing rocks of 1,820 m. It is one of the longest wells at the Odoptu Field, and subsequent both in Russia and internationally. OP-10 planning of the most efficient field became the first well where horizontal development strategy. core samples were collected at such sakhalin-1 108 109 Construction of Berkut GBS in Vostochny port, Primorski Krai, spring of 2011

chapter 17

n October 2005, Exxon Neftegas Limited Icommenced project operations to develop Treasures of Arkutun-Dagi the Arkutun-Dagi field and build a gravity-based structure in order to implement the third stage of the Sakhalin-1 project .

This oil and gas condensate field on the continental shelf of the Sea of Okhotsk was discovered in 1989, about 20–25 km from the northeast coast of Sakhalin, under the seabed with water depths of 15–40 m .

In 2010, step-by-step preparation work began in order to implement one of the ambitious and unique projects involving production of hydrocarbons at Arkutun-Dagi . Due

1995–2015 to the long distance from the field to the shore,

Laying of offshore flowlines

a multistage development plan was proposed . to Arkutun-Dagi field, First, events would unfold in its northernmost summer of 2011 part, where a fixed ice-resistant oil and gas production platform would be required . From In preparation for the production start-up, the platform serving as the central point, the Arkutun-Dagi project team already spent ERD wells will extend in radial directions all of 2011, building the offshore flowline. And in a pattern resembling a 7 km-wide hand fan . in March of 2011, in a dry dock at Vostochny But before they reach oil hydrocarbon deposits, Port, near the town of Nakhodka in Primorsky a 25 km Full Well Stream flowline shall be Krai, construction began on a giant gravity-based completed to transport crude oil to Chayvo OPF structure (GBS) for the offshore platform that

Record of Achievements Record for processing . The processed oil and gas will would operate in the new field.

then continue their journey, entering the export The following numbers demonstrate the scale pipeline . Produced water will be re-injected of this new construction: in just over a year, in order to maintain formation pressure . Towing of Berkut platform GBS the reinforced concrete structure, with an area to its installation point at Arkutun-Dagi field,

sakhalin-1 June 2012 of 133 x 100 m and weighing 160,000 tonnes, 110 111 Pouring of cement to the Berkut GBS legs During construction of Berkut platform, GBS Vostochny dry dock became the largest construction site in the Russian Far East region.

1995–2015 had to accommodate 50,000 cubic “normal” conditions these special being Russian nationals . Considering According to the “Sakhalin-1

meters of concrete and 27,000 supports help reduce the wave loads that companies and specialists tradition,” this platform (the SOUTHWEST SOUTHEAST NORTHWEST NORTHEAST tonnes of reinforcing bar . According on the platform and its equipment . from all over the world, working largest offshore platform SHAFT SHAFT SHAFT SHAFT to specifications, the platform’s base in different time zones, were involved in Russia) was given the proud Construction was coordinated by Exxon structure was required to be able in the contract operations, the GBS name of Russia’s biggest eagle, Neftegas Limited's head contractor, to withstand harsh operating conditions construction work was performed Berkut (which means golden eagle) . the Norwegian company Kvaerner . existing in the Sea of Okhotsk, with wave around the clock without stop . The President of Exxon Neftegas The work was performed by more heights of up to 18 m, temperatures The same pace was maintained Limited, James Taylor, described than 2,000 people from forty local as low as –44 degrees, and possible at the construction site, since the work it as an example of successful contractor companies capable of meeting earthquakes up to a magnitude of 9 . with concrete made it necessary cooperation on an unprecedented the operations schedule, delivering high to follow all of the specific process scale between Exxon Neftegas Limited Interestingly enough, the friction quality work and complying with all

Record of Achievements Record requirements, and could not be and its contractors around the globe .

pendulum-bearing technology was safety requirements . suspended . As a result, construction

used for the first time by ExxonMobil “The Arkutun-Dagi development of a world-class facility was completed Approximately 4,000 people on this unique facility, with the friction team,” he noted, “spent a good half on time and in full compliance with were involved at certain stages assemblies providing enhanced seismic of the last decade implementing this STORAGE RISER SEAWATER DRILLING high quality standards . of construction, with 90% of personnel SHAFT SHAFT INTAKE SHAFT SHAFT stability for the structure . Under project while meeting the highest sakhalin-1 112 113 Berkut GBS at Arkutun-Dagi field safety requirements . Berkut construction With the assistance of three tugs operated before topsides were installed, created hundreds of new jobs, both by a joint venture between Van Oord-a winter of 2013 on the platform itself and onshore . Norwegian company-and Sovcomflot, And we must demonstrate professional in almost 2 weeks the giant structure leadership, perseverance and knowledge covered 1,870 km (1,024 mi) before so that the project could be expanded reaching the location in Arkutun-Dagi to its full potential . While admiring field about 25 km offshore Sakhalin with the platform, we should not forget water depth reaching 25 m. The operator that its successful operation depends of one of the tugs used a remote control on us to the same extent as it does panel to open the sea chest valves, on the reliability of its steel and concrete . and there were no personnel onboard Berkut will become a new test of our the GBS . The tanks in the platform base commitment to performing all work gradually filled up with ballast water, in a safe manner ”. and the structure was installed in place . Only the top of the 64 m legs were visible When the last cubic meter of concrete was above the sea surface, while waiting poured in, about 2,000 workers walked for the topsides to be installed with all down to the bottom of the dry dock the equipment required for drilling and to leave their signatures on the industrial production of hydrocarbons, safety and giant that stood as high as a 20-story life support systems, and living quarters . high-rise . In May 2012, the offshore 1995–2015

platform’s base structure fabrication was

Start of GBS installation completed . at Arkutun-Dagi field, June 2012 Before releasing Berkut out to sea, an enormous amount of water was pumped into the dock .

Roger Higham, To ensure safe towing and installation Sakhalin Projects Senior Manager, of the GBS, the multiyear climatic data Exxon Neftegas Limited Vice President in 2010–2015 was analyzed and the best weather window was selected, based on climatic

Record of Achievements Record data making it possible to perform

an exceptionally high quality offshore Oil and gas production at the Arkutun-Dagi Field will begin in 2015, which will start a new chapter in the history of Far East shelf development. We have no operation . „ doubt that its pages will feature new records and achievements by the Berkut Platform and the Sakhalin-1 Project for the benefit of Russia's only island For the entire trip, the weather was region and the international petroleum industry as a whole.. favorable, with the sea remaining calm . sakhalin-1 “ 114 115 Berkut GBS sail away ceremony in Vostochny dry dock, Primorsk Krai, May 25, 2012 1995–2015

Sakhalin Film Festival “On the Edge” March Summer December June Growth in the revenue stream to the regional budget was accompanied by fundamental changes in the cultural life of Sakhalin Oblast. 2010 2011 2011 2012

The first film festival was held in Yuzhno-Sakhalinsk in August 2011, Commencement Installation Dry dock Berkut’s GBS towing of construction of flowlines from at Vostochny Port and installation and eventually became an annual tradition. of the Gravity the future site flooded after the at the Arkutun-Dagi In 2013, this festival screened over 100 films produced in Russia, and Based Structure of the Berkut completion of the field 25 from other countries. The festival was named On the Edge and (GBS) for the Berkut platform GBS construction. platform at the dry to Chayvo OPF Commenced Record of Achievements Record became an international event. dock of Vostochny preparation for Eleven films from ten countries qualified for the festival competition Port — installation GBS towing to the of a steel skirt installation site

in 2014, in addition to the screening of some 90 films from five at the Arkutun-Dagi continents seen by over 25,000 spectators. field Nine full-length feature films by Chinese, South Korean, Russian, Armenian, and Indian directors qualified for the competition in 2015. sakhalin-1 116 117

chapter 18

he fabrication of the platform cargo barge in the world . Accompanied Ttopsides was started at the end by three powerful tugs, it delivered Time of Berkut of 2010, at the Daewoo fabrication the platform topsides in 12 days yard in Okpo (Republic of Korea) . to Arkutun-Dagi . The design team and Exxon Neftegas It was now June 20, 2014. Later, Exxon Limited Operations specialists worked Neftegas Limited specialists confessed as a single unit . A major engineering that this one day was the culmination effort was required to create a one-of- of four years of labor: the day when a-kind topsides for the offshore drilling the topsides (the heaviest and largest rig, outfit it with state-of-the-art 1995–2015

Berkut Topsides at DSME shipyard in Okpo, South Korea, spring 2014 Record of Achievements Record

equipment from leading manufacturers in the history of the global oil and gas 420,000 tonnes is a historic step Sakhalin-1, and we can really view

and suppliers, and then transport industry) was installed (by floating in the development of the industry,” it as an exemplary world-class offshore it from South Korea to Sakhalin . For over the gravity-based structure) noted Jim Flood, Exxon Neftegas project being implemented under this unique operation, it was necessary was unforgettable . “The installation Limited Chairman of the Board . “This subarctic conditions ”. to use Heerema H-851 — the largest of platform topsides that weighs is another major accomplishment for sakhalin-1 118 119 Installation of the Berkut drilling module — a unique Patrick Gorman, complex operation, Berkut topsides offshore Installation, January 2015 Hook-Up and Comissioning Manager

It was an incredible day of events, and the largest topsides installation operation we have ever been involved in. „ But Mother Nature gave us almost perfect sea conditions, and the mutual support and trust that we developed during the preparation work left no room for doubts or misunderstandings. Thanks to thorough planning, everything went extraordinarily smoothly, according to the design, safely, and ahead of schedule. “ “The significance of the event that slots, has every chance of becoming we witnessed for Sakhalin-1 project the highest production capacity offshore cannot be overestimated,” said Jim drilling platform in the world ”. Taylor, Exxon Neftegas Limited president In August 2014, the floating island’s

1995–2015 that time . “The installation of the Berkut

drilling rigs finally tapped the oil and topsides is no less important than gas condensate reserves . The plans any of the existing engineering call for reaching the peak production accomplishments in the global oil and at 3.5 million tonnes of oil by 2017 gas industry . This is demonstrated and reliably maintaining this level by the unique technical aspects, as well of production for the next five years. as by what we can see with our own eyes — how this platform is soaring over the Sea of Okhotsk! Without a doubt, this is a highly symbolic step that got us closer to the commencement of full-

Record of Achievements Record scale hydrocarbon production from all

three Sakhalin-1 fields. Considering

the planned production of 4 .5 million tons of oil and gas per year, the Berkut rig, which is equipped with 45 drill sakhalin-1 120 121 1995–2015

Record of Achievements Record

Berkut topsides jack-up operation broke one more industry record — 42,000 tonnes were lifted 24 m high for 11 hours, which was almost twice as heavy

sakhalin-1 as the previous record 122 123 Location: Berkut Platform, northeastern shelf of Sakhalin Island, Arkutun-Dagi Field

Topside weight: over 42,000 tonnes

Distance to shore: The Berkut platform 25 km 1995–2015

topsides is the world's Distance from the ship­ largest integrated yard to the installation site: 2,800 km structure installed

in the open sea, using Date installed: June 2014 Record of Achievements Record floatover method

sakhalin-1 124 125

chapter 19

n August 27, 2012, the Sakhalin-1 of whom worked in each of the two 12-hour From one World Record OProject Consortium announced shifts. The worksite and office personnel a new world record set in the construction did their best to make sure that Z-44 of the Chayvo Z-44 well . construction would be completed without any incidents. Exxon Neftegas Limited had The borehole length of the new ERD well once again lived up to its impeccable SH&E to the Next was 12,376 m (with the actual total vertical performance record . depth at 2,344 m and the horizontal extension measuring 11,371 m), which Drilling and athletics do not have a lot is equal to the height of 23 Ostankino TV in common . But certain similarities can towers in Moscow . be found . Sergei Bubka, a celebrated pole vault athlete, set 35 world records between The Z-44 was a one-of-a-kind well, because 1984 and 1994 . At some point in time each it was drilled with only one drill bit, attempt was perceived as a claim to a new which was one foot long and 8 .5 inches height . In some ways, Sakhalin-1 is also like in diameter, with 91,000 pounds of torque . that. Each new Chayvo well is potentially 1995–2015 From the Yastreb onshore rig, the drill bit a new drilling record. At Exxon Neftegas

cut into the earth’s crust under the seabed Limited, outstanding achievements have at a rate of 44 .8 m/hour, with a maximum become run-of-the-mill events, and took 73 days to drill, at a high drilling The sidetrack was drilled from the wellbore possible rate of 45 m/hour . an individual accomplishment may take accuracy — the bottom hole was within 4 m of a producing well in operation, addressing time to gain recognition . However, building the longest well is only of the target depth . a number of unique technical challenges . half the job, as the wellbore must actually Specifically, the drilling team was able That, for example, was what happened with An equally important result in 2013 was reach an oil or gas zone. With Schlumberger to preserve the integrity of the original Z-43 . In April 2013, its wellbore reached achieved on the Orlan Platform, from which as its drilling support contractor, Exxon wellbore, cut out a window through a length of 12,450 m, which surpassed a multilateral well was drilled; the most Neftegas Limited, for the first time ever, the metal wall of the casing at a depth the previous world record held by Z-44 . complicated well ever drilled on the Russian used the method of surveying and collecting of about 4 km, as well as install a custom- The record, however, was not reported until shelf . This event initiated a multilateral well

Record of Achievements Record information from individual pay zones, designed connection coupling and September 2013, by which time the next

drilling program at Sakhalin-1’s Chayvo which reduced the margin of error from a production packer . record was already in the news, one set

field. A multilateral well drilling technology ± 18 m to only ± 1 m . in June by Z-42. The wellbore was 12,700 m helps to increase production from one Today multilateral wells represent one long, with the horizontal part extending The new world drilling record was achieved wellhead by drilling sidetracks to penetrate of the most advanced technologies 11,739 m . The record setting well only by a team of over 400 people, a hundred oil and gas pay zones in the field. capable of increasing production . sakhalin-1 126 127 record of 13,500 m . The well was There has been a lull in pole-vaulting; drilled from Orlan platform towards no recent world records . But we have no Sergei Balandin, the southeast tip of the Chayvo field. doubt that a few years down the road Lead Geologist, Exxon Neftegas Limited The drilling and completion took will see new outstanding champions . 156 days . The construction process It is equally likely that new drilling involved the use of ExxonMobil‘s technologies will make their debut . leading experience for optimum What is a limit today can be a new Sergei Balandin is a lead Exxon Negtegaz subsurface layers. This irregularity results . “This well,” said Igor Sechin, opportunity tomorrow . Limited geologist. He has been with requires drilling additional wells to avoid the company since December 1996, and was leaving any undeveloped field patches. Rosneft President, “is another step involved in many milestone events under It is the job of a geologist to determine and in the successful progress of our the Sakhalin-1 Project, such as drilling the first show the place where the well should be wells at Chayvo, Arkutun-Dagi, and Odoptu drilled. 3D and 4D seismic surveys and other outstanding project ”. North Dome. In 2002, he accompanied a large studies are conducted to get a better idea team of experts to the future deployment site about the structure of fields. All of this allows Counting the О-14 record, of the Yastreb drilling rig and sites of other us to extract hydrocarbon reserves to the fuller key facilities. What does a geologist do after extent, and in the most efficient manner, the Sakhalin-1 Consortium has drilled production at the field has started? Sergei said. 9 of the 10 world’s longest wells . The same thing as before. A geologist Sergei believes that the successes The company points out that drilling performs a lot of analytical work and studies of the Sakhalin-1 Project are, in many ways, due „ of core material. This is done to optimize to the great deal of attention that ExxonMobil a deeper well is practically impossible, field development. The subsurface structure pays to regular staff training and refresher “ as О-14 is already pushing the technical of layers at the Chayvo Field is not disturbed, training. After joining the company, he spent making it easier to develop than the other two two years studying in Houston, followed limits of the world’s top drilling project fields. Odoptu and Arkutun-Dagi have by annual trips to the ExxonMobil training technologies . tectonic faults. In other words, their subsurface center for two-week trainings where computer structures exhibit folds and irregularities applications were used to model various

1995–2015 caused by the movement of deeper-lying operational situations.

It is a very complicated process, Meanwhile, the time had again because the drilling angle accuracy come to hail Sakhalin-1’s new world requirement is within one millimeter . record . In April 2014 the total length Highly sophisticated equipment of Well Z-40 at Chayvo measured is run down the hole to manage well an unheard-of 13,000 m (42,651 ft), stream flows. There may be multiple while its horizontal reach measured sidetracks, in which case a well cross- 12,130 m (39,370 ft) . section looks like the root system A year later, however, technology of a tree . The result is a higher Record of Achievements Record proved a longer wellbore could

oil recovery factor with the same be drilled. In April 2015 Exxon

number of slots . A more effective Neftegas Limited reported successful oil and gas recovery represents April January January August September May April drilling and completion of the О-14 an important advantage of such 2007 2008 2011 2012 2013 2014 2015 well, with a new total depth world wells . Z-11 well — Z-12 well — OP-11 well — Z-44 well — Z-42 well — Z-40 well — O-14 well — sakhalin-1 MD of 11,282 m MD of 11,680 m MD of 12,345 m MD of 12,376 m MD of 12,700 m MD of 13,000 m MD of 13,500 m 128 129 Location: Northwestern Seven world records Sakhalin, Chayvo Field, were set for the length Orlan Platform of ERD wells between 2007 and 2015. Measured depth: 13,500 m

Horizontal displace­ment: Nine out of ten 12,033 m of the world's longest ERD wells were drilled True vertical at Sakhalin-1 fields depth: 2,625 m

Completion date: World's Longest April 2015 1995–2015

Sakhalin-1 ERD wells vs. global oil and gas industry Horizontal displacement, m ERD Well — O-14 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 1000011000 12000

1000

2000

3000

4000

5000

Vertical depth, m Record of Achievements Record

6000

7000

8000 Global industry Chayvo WS Orlan platform Odoptu WS sakhalin-1 130 131

chapter 20

onstantin Seryshev, a facilities This sentiment is broadly shared Berkut platform’s drilling program Berkut Production Startup Kengineer, was one of those by all who work on the Sakhalin-1 has been just recently started, but who witnessed first oil lifted Project, which, since first oil this is a first step towards developing onto the Berkut platform from from Arkutun-Dagi, moved to its huge resources. Of the fields the Arkutun-Dagi field. It happened third phase . Stable hydrocarbon which are under development at 12:04 on January 4, 2015. production through 2050 from by Sakhalin-1, Arkutun-Dagi has To commemorate this important the project’s three fields will be a key the largest proven reserves, which milestone in his career the specialist feature of this new phase . The time may in fact prove to be much larger keeps at his workplace a vial filled is here for harvesting a huge crop, with future studies . The platform with a dark, thick liquid . Konstantin with most of the preparatory work is in for a busy drilling program, is genuinely proud of having been already behind . Berkut rig floor, a part of an important historic event . August 2015 1995–2015

Record of Achievements Record

sakhalin-1 132 133

Kolby Burmaster, Offshore Drilling Engineering Supervisor

Compared to other similar platforms, Berkut is a luxury facility. It has state-of-the art equipment that will help us achieve all our goals. „ Berkut is going to have a very intense drilling campaign that will last for at least ten years, and it is very likely that it will go on beyond that. As a matter of fact, the platform is design to drill 45 wells and Arkutun-Dagi has a very complex structure. This is an exciting project where we can utilize the lessons we learned from drilling wells under Sakhalin-1 project. Besides, Berkut is the best place to train our staff — young specialists trained on such a state-of-the-art platform will be able to go out and become On June 27, 2014 Rosneft President I. Sechin successful anywhere in the world. visited Berkut platform and reported successful start-up of Berkut topsides and main systems to President Putin “ during a teleconference

Sakhalin-1 is not yet in the middle Drilling on Berkut started shortly

1995–2015 after Topsides hook-up was completed of its lifecycle, but it has already

and the main systems became operational provided numerous benefits

to Russia and its people . Since 2005, the project’s fields have at least for 10 years . At its peak capacity, Berkut was ramped up from 24 million to 32 .5 million produced over 70 million tonnes is expected to produce 4 .5 million tonnes of oil cubic meters per day . of oil; consumers in the Russian condensate per year . Putting the Arkutun-Dagi field on-line brings Far East have received 15.5 billion Just like the hydrocarbons from the project’s closer the formal booking of the reserves cubic meters of natural gas . Since other fields, the production from Arkutun- of Sakhalin-1, one of Russia’s largest direct first oil, Sakhalin-1 has added Dagi is first directed to the Onshore Processing foreign investment projects . The project’s US $11 billion to Russia’s federal Konstantin Seryshev, Facility; from there it is piped to the oil export future stages call for expansion of development and regional treasuries, including Facilities Engineer on the offshore platform November June August January 4,

Record of Achievements Record terminal at De-Kastri . OPF is the project’s of the Chayvo gas resource base, unrelated US $4 .3 billion to the treasury

2010 2011 2011 2015 infrastructure hub designed to process to the current oil production . The project’s total Every single project constructed and commissioned by Exxon Neftegas of Sakhalin Oblast . It is anticipated Commencement Berkut topsides Commencement First oil produced

Limited has been adapted for Sakhalin’s unusual conditions. Berkut takes crude oil and natural gas before they are reserves are estimated at 307 million tonnes that during the project’s lifetime, of topsides towing of drilling from the in Arkutun-Dagi „ into account the wealth of experience accumulated in the sub-Arctic over construction for and installation, Berkut platform from the Berkut shipped to consumers . To successfully handle of oil (2 3. billion barrels) and 485 billion cubic the past decade. All the best practices have been considered. Every new the Russian Treasury will receive the Berkut platform commencement platform project at Sakhalin-1 is improved, and this is the best one yet. the incremental oil from Arkutun-Dagi, meters of natural gas (17 .1 trillion cubic feet) . over US $89 billion in taxes, royalty at DSME yard of commissioning in Okpo, South Korea sakhalin-1 the capacity of the gas processing installation “ and the State’s share of oil and gas . 134 135

Sakhalin-1 Project Begins Oil 1995–2015 Production at Arkutun-Dagi Field

Moscow, January 19, 2015 — RIA Novosti / Prime

Member companies of the Sakhalin-1 Consortium “First commercial oil started flowing from have started commercial oil production the Berkut platform. Production will reach at the third project field, Arkutun-Dagi, which will 4.5 million tonnes a year once the field is ramped boost overall daily production to 27,000 tonnes, up to design capacity. Owing to production according to Rosneft (which owns a 20% stake at the Berkut Platform, the federal and regional in the Consortium). budgets will receive an additional $9 billion Other Sakhalin-1 Consortium members are in revenue over the next ten years,” Rosneft said. the US company ExxonMobil (30%), Japan's The Arkutun-Dagi Field is located in the Sea SODECO (30%), and India's ONGC Videsh (20%). of Okhotsk, about 25 km off the northeastern Production at the other two project fields, coast of Sakhalin Island. Oil produced at the Chayvo and Odoptu, began in 2005 and 2010, Arkutun-Dagi Field as part of the Sakhalin-1

Record of Achievements Record respectively. The potential recoverable reserves Project will be sent to the existing Chayvo

at all three project fields are estimated at about Onshore Processing Facility on Sakhalin Island 307 million tonnes of oil and 485 billion cubic and then routed to the De-Kastri Oil Export meters of natural gas. Terminal in Khabarovsk Krai. sakhalin-1 136 137 Location: northeastern shelf of Sakhalin Island, Arkutun-Dagi Field

Date installed: June 2014

Water depth: 35 m Russia's Largest 1995–2015 Max. height

Offshore Plat- above sea level: 89 m

form, Berkut Total platform weight (gravity-base substructure and topsides): Record of Achievements Record

over 200,000 tonnes

sakhalin-1 wenty years ago, Russia and Neftegas Limited, but has improved local lives. an international consortium headed Over $250 million has been spent on upgrades. by ExxonMobil, signed a Production For example, new bridges, embankments and T Sharing Agreement, thanks to which culverts along the Yuzhno-Sakhalinsk–Okha the world has seen one of the most impressive federal highway have speeded up travel and promising projects in the whole oil and gas between the two sides of the island; an upgrade industry. 10 years have passed since Chayvo of Nogliki airport has made it more convenient; came on-stream, and 5 since Odoptu did. With previously unaffordable medical equipment first oil from Arkutun-Dagi struck this year, installed at local hospitals has saved many lives. there is now commercial production at all three Almost $28 million was purposefully poured of Exxon Neftegas Limited’s oil fields. These are into 1,300 social initiatives. very important dates, yet they tell about only By recognizing Exxon Neftegas Limited’s one side of the Sakhalin-1 story. outstanding performance and leadership One of them is about an endeavor that has, over role in the industry, I would like to extend my the past two decades, become the crown jewel gratitude to all company employees for their of ExxonMobil affiliates. A project that has hard work and strong commitment. Some pumped more than half billion barrels of oil, of them might have already left the project for and broken at least 7 extended reach well length a well-deserved rest or maybe a different job, records. but these 20 years of success and records will keep the memory of the personal achievements The other side of the project story Wayne Warwick of everyone who has been with Sakhalin-1. Exxon Neftegas Limited President is well known, and close to almost everyone on Sakhalin, because in these 20 years, There will be no slowdown. With ongoing Sakhalin-1 had a tremendous transformative upgrades at Odoptu and with the magnificent effect on the region and its communities. Berkut still on its way to reaching capacity, more milestones are ahead. But for now, Russia and Sakhalin region received over there is a chance to look back at the last two US $11 billion in taxes, royalties, and state decades, and marvel at what has been achieved share in production from Sakhalin-1 project. at Sakhalin-1 over 20 years! The infrastructure that has been built as part of this project does not just serve Exxon 140 141

chapter 21

akhalin-1, one of the most ambitious projects It’s All About the People Sever undertaken in the global petroleum industry, has reached its 20th anniversary . Impressive achievements are evident, but not only in drilling and field operation. In addition to proving itself as a model for using state-of-the- art development technologies and management practices, Sakhalin-1 has also shown superb performance in environmental protection and work safety, and has established a new kind of humanitarian relations based on respect for the local communities, their traditions, and their cultures .

For the thousands of people inhabiting the Russian Far East, the project provided an impulse for pursuit 1995–2015

of new knowledge, new opportunities, and new

self-realization possibilities, which would not have been possible under different circumstances . It has Sakhlain-1 technical trainee program improved the quality of life immeasurably . was launched in 2002. Over 250 specialists successfully finished this training and were employed by the Company One of the challenges the company faced at an early stage was in determining its staffing needs and training the new hires. Once the hiring of first In addition to work-related skills and mastering technician groups was completed, Exxon Neftegas the newest equipment, the Russian employees were Limited sent the new employees, including able to practice speaking English. Upon completion operation technicians, electricians, mechanics, of practical training, some of the technicians

Record of Achievements Record and instrument technicians, to technical colleges went to the Republic of Korea to participate

in the USA and Canada for professional training . in the acceptance testing and commissioning of OPF

The next training stage included being sent for 6 facilities fabricated by Hyundai Heavy Industries . to 18 months to ExxonMobil facilities, where the new This became the best training for future work . hires were coached by more experienced personnel . sakhalin-1 142 143

Anatoly Velichko, Senior Field Superintendant De-Kastri Terminal & Pipelines

In twelve years of working for Exxon Neftegas Terminal is the last link in a big process chain, Limited, Anatoly Velichko has transformed from so you cannot let anybody down, otherwise a new trainee without any knowledge of English the effort of the whole team would be for nothing. into a supervisor of one of the key elements The main effort is focused on ensuring the safety of Sakhalin-1 project. Since November 2014, of the process. “Over 760 tankers have already Velichko has been in charge of De-Kastri Terminal, been dispatched from De-Kastri Terminal without from which oil tankers offload oil for export. a single instance where offloading delays could He learned about Exxon Neftegas Limited be blamed on the terminal. Our employees recruitment from a newspaper. “I was curious understand and accept the standards of safety and to find out what makes them better than us,” says production culture. They believe that it works and Anatoly. He submitted his application, passed brings results,” stresses Anatoly. He believes that the tests, was invited to an interview. They liked him, the Terminal team means more than a working probably for his determination to strive for the best team; that it is a family where supervisors and possible results. In only nine months, the graduate regular employees have dinner at the same table, of a Sakhalin nautical school was able to learn where they share their joy, their worries and eagerly English. Following his studies and traineeship take part in the life of the local community. in Canada, he gained practical experience at Chayvo, In a certain sense for Anatoly, his current position with continuing studies and self-improvement. represents a mission. “Before me, only foreigners The best-trained person should be the manager used to be Terminal managers. So, this is the proof Similar intensive study programs programs and were subsequently hired Exxon Neftegas Limited has Safety of operations is a cornerstone to make sure that the entire workforce right? Velichko was appointed as an operator of the professional level of the Russian personnel,” of Sakhalin-1 success of the central control room, then as a senior says Velichko, answering the question that he had 1995–2015 were offered to the graduates of some as technicians . By 2006, the share in place a global system of work participated in the safety programs . Regular operator, then as operations manager, and then asked himself twelve years ago. “At the same time

Russian technical universities — of Russian specialists in the Exxon safety monitoring-standard for all walk-throughs of workplaces took place came the offer to become the manager of the oil I understand that by doing my work today, I am export terminal. setting the standards for those who will come Bauman Moscow State Technical Neftegas Limited workforce was 67%, ExxonMobil operations. The use to monitor safety, and the annual contractor De-Kastri, the project logged 26 million First and foremost, Velichko considers his work after me. It is a situation that involves a great University, Gubkin Russian State while at present, this percentage has of Operations Integrity Management forums discussing higher safety and health from the point of view of reliability. De-Kastri responsibility.” man-hours without a single lost-time Oil and Gas University, and State gone up to 80% . Over 700 Russian System (OIMS) has become mandatory standards were unquestionably useful . incident . By late 2006, this parameter Petroleum Technical University nationals were directly hired by Exxon for all operations within Sakhalin-1 would be nine times higher than Exxon Neftegas Limited’s commitment in Ufa . The engineers invited to work Neftegas Limited . Project . One of the system’s key the world industry average . to safety did not go unnoticed . The company for Sakhalin-1 Project were posted elements is risk assessment and But hiring and training an employee has been recognized as the safety leader at ExxonMobil facilities in Texas (USA), prevention, with the motto "No One An impressive result, given the fact that is only half the journey. Employees among ExxonMobil’s affiliates many times. Australia and Canada, where they Gets Hurt". Exxon Neftegas Limited the work was done by an international need to be taught to work without In 2015, a separate recognition on safe acquired experience as part of highly has the vision of reducing on-the-job team, several thousand men strong, affecting their health and the health operations was awarded to “Odoptu Phase 2” .

Record of Achievements Record skilled engineering design teams . injuries to zero, and its performance in severe weather conditions .

of the people around them . Safety is consistently one of the most Leadership demonstrated by the

Since 2005, over 250 Russian at work is a way of life, not just a few impressive in the industry . Thus, project’s senior executives played nationals, including quite a few words on the bulletin board . In this in 2005, at the time of vigorous an important role . Safety had been residents of Sakhalin, were selected aspect, the company enforces very construction activities at Chayvo and their life credo, and they were driven to attend special technician training strict standards . sakhalin-1 144 145

chapter 22

iring qualified Russian companies Hto the greatest extent possible New Opportunities is an important part of the international Sakhalin-1 Project's overall strategy . As of early 2015, Russian companies and joint ventures had for Russian Companies been awarded contracts worth a total of around US $13 .8 billion . This represents more than 70% of all contracts awarded to third party suppliers .

Exxon Neftegas Limited's strategy was initially built around conducting intensive training and holding seminars for Russian suppliers and subcontractors . Participants in seminars held in Yuzhno-Sakhalinsk, Khabarovsk and Moscow were introduced to new norms and standards; the procedures under which bids and tenders are 1995–2015

evaluated, and the objectives of the Sakhalin-1

Project, especially as they relate to industrial safety and environmental protection . on over 3,500 potential suppliers was created. In 2002, the company Sakhalinskie Aviatrassy Thousands of jobs were created as part of Sakhalin-1 The information was provided by members (SAT Airlines) received a contract to provide Exxon Neftegas Limited created a website construction projects, of the Consortium, Russian government aviation services . At the time, this was the largest and most of them on Sakhalin. to inform contractors about employment On the photo you can see agencies and contractors, as well as directly contract signed between Exxon Neftegas opportunities and future tenders . Among other Odoptu construction site by the interested parties themselves . This in turn Limited and a Sakhalin company . SAT Airlines in 2010 information, the site contained the rules for created a mechanism by which the most qualified was contracted to provide exclusive services submitting bids, the selection criteria and major contractors could be identified, selected, and for making flights within Sakhalin Island and contracts . hired . to mainland Russia, as well as international

Record of Achievements Record Exxon Neftegas Limited eventually gathered flights to Japan. To fulfill these missions, two

In the end, the winners were both Sakhalin-1 information on more than 100 potential 34-seat turboprop planes were purchased,

Project and the Russian service providers . They Russian contractors in order to determine and about 30 employees from among the local SCF Sakhalin, Vitus Bering and Alexei were able to gain a foothold and raise themselves Chirikov are hi-tech multipurpose which ones had the necessary qualifications population were trained to operate and provide icebreaker vessels chartered from up to new heights . Some were able to do this and which ones still required more training . technical maintenance to the airliners . SCF group to support operations in the truest sense of the word .

sakhalin-1 at Berkut and Orlan At the same time, a database containing data 146 147 SAT Airlines won, and Sakhalin Oblast Krai . The Consortium helped local won, having received additional tax entrepreneurs to not only receive revenues at a time when the budget was loans, but to also conduct training and running a deficit. In the early 2000s, to acquire more knowledge about various Sakhalin Oblast Revenues it was difficult for regional authorities aspects of economics and industrial to solve ongoing problems; Exxon management . From 2004 to 2009, (billion rubles) Neftegas Limited offered a helping the Sakhalin-1 Consortium allocated hand. In August 2002, Exxon Neftegas a total of US $1 .5 million to a targeted Limited signed an infrastructure program to support small business development agreement with in the Sakhalin Oblast and Ulchi District the regional administration for of Khabarovsk Krai . the amount of US $40 .3 million . Under But certainly the regional economy's this agreement, the Baltic Construction main benefits from the Sakhalin-1 Company carried out an extensive Project come from the direct income amount of work to renovate and upgrade provided by the Production Sharing bridges, roads, and drainage structures Agreement . Three years after the start in northern Sakhalin . of oil production, the Sakhalin-1 Exxon Neftegas Limited was actively Project recouped all of its investments, involved in upgrading the Western and the regional treasury began Seaport in Kholmsk . The main upgrade to grow at record rates, which made 1995–2015

of an important cargo hub, which was it possible to solve important social and

carried out in cooperation with Sakhalin infrastructure problems. Suffice it to say Energy from 2004–2006, increased that today the public health expenditures Speaking at the Oil and Gas of Sakhalin oil and gas production started under the port's utility for offshore projects and in the Sakhalin Oblast, on a per capita conference on September 23, 2014, the Sakhalin-1 Project) and 2013. the Sakhalin Oblast’s governor reported In 2014, budget revenue doubled for Sakhalin’s entire economy . basis, exceed similar indicators in other a 7.6-fold increase in oil and condensate from 2013, exceeding the 100 billion Russian regions many times over and production and export, and a 13-fold ruble mark for the first time. Sakhalin Another area is the support of small increase in gas production since Oblast ranks 1st among other Russian are comparable with the levels achieved the commencement of the investment regions in terms of the composite index business . In 2004, the Consortium in Moscow . phase of offshore projects in 2000. of regional budget tax revenue, the bulk began funding a small business loan Oil production is expected to grow of which are oil and gas proceeds. further by 1.3 times and gas production It also ranked 2nd in Russia in 2013. program in the Okha and Nogliki by 1.5 times by 2020. According to Sakhalin Oblast Finance Districts of Sakhalin Oblast . Under this Sakhalin Oblast’s budget revenue has Minister T. V. Karpova, development Record of Achievements Record also grown many times over during of the social sphere in Sakhalin Oblast program, around 100 small businesses this period: regional budget revenue accounted for some 45% of budget and over 500 jobs were created

increased 4-fold between 2005 (when spending in 2014. (or saved) over the course of four years. In 2009, the program was expanded to the Ulchsky District of Khabarovsk sakhalin-1 148 149 Exxon Neftegas Limited provides funds to support Steller's sea eagle monitoring & protection program. This rare bird inhabits northern areas of Sakhalin chapter 23

he Sakhalin-1 Project received meets the strictest requirements of Russian Tthe right to exist in the interior environmental laws and international Caring about Nature of a unique northern environment . standards . Special attention has been paid This circumstance imposed a special to protecting the Western Gray Whale responsibility on the developers, requiring population, and Steller's sea eagles . an entirely environmentally-friendly It is significant how, for example, attitude toward operations . The main environmental protection measures objective and first priority was to minimize were implemented during construction potential damage during all phases of the pipeline connecting the Onshore of the project . Processing Facility and the De-Kastri Oil As part of the Sakhalin-1 Project, more Export terminal. Before digging the trench, than US $2 .2 billion has already been the construction team carefully removed invested in protecting surrounding the topsoil along the entire route and wildlife and habitats, as well as in regional placed it into special storage . It was later shutting down the pipeline in the event Gray Whale Monitoring Program helped land management. This figure includes put back into place during backfilling

1995–2015 accumulate unique research data used of a leak or other emergency . To provide capital expenditures and direct costs for operations, in conditions as close to protect these rare animals that live near Sakhalin-1 facilities communications along the entire pipeline environmental protection measures, such as possible to the original . Construction route, a fiber optic cable was laid along as the cost of purchasing equipment, was minimized at river crossings and the onshore part of the pipeline, and as well as expenses for conducting performed seasonally (usually in winter) microwave antennas were installed various types of studies in areas such in order to minimize the impact on fish on either side of the Tatar Strait . as archeology, ornithology, meteorology resources . Directional drilling was employed and seismology . In addition, consortium when constructing underground crossings Another noteworthy action was taken: when funds have been spent on studying of protected bodies of water . This also the Steller's sea eagle nesting sites were the natural soil layers, fish resources, included using the most advanced leak unexpectedly discovered on the pipeline and the possibility of building crossings detection system, whose effectiveness route, the route was changed to avoid this of water obstacles; for removing wastes to date has been confirmed by more than 10

Record of Achievements Record location .

and conducting biological remediation; for years of widespread ExxonMobil use.

ensuring readiness to respond to oil spills The eagle has had a position of special Environmental protection measures and to use the required equipment; and importance for the offshore project also included the installation of eight finally, for remediating land tracts. All work participants for many years . The rare and remote-controlled valve stations for easily performed under the Sakhalin-1 Project majestic bird is listed in the Red Book sakhalin-1 150 151

of Endangered Species. Since 1995, in the world completely devoted the Sakhalin-1 Project Consortium to the Steller’s sea eagle and the Far has funded ornithological research East endemic species. The book, in the vicinity of the project with a print run of 1,500 copies, facilities and within the pipeline’s was published with the support path . The data obtained of the Sakhalin-1 Consortium and by the specialists in this research the project operator, Exxon Neftegas A Unique Publication were used to determine the habitat Limited . of the Steller's sea eagle (and other This unique publication will on a Unique Bird rare bird species) and to map their undoubtedly help to strengthen Apart from the extensive Steller's sea eagle monitoring A monograph titled The Steller’s Sea Research Library, Vladimir Masterov, hunting and nesting locations . program Exxon Neftegas Limited also supports a number Eagle: Ecology, Evolution, Conservation PhD Candidate in Biology and Research the environmentally responsible Based on this data, Exxon Neftegas of other birds programs contributing to conservation by Vladimir Masterov and Michael Fellow at Lomonosov Moscow State approach to natural resource of the wildlife Romanov was presented on November University, gave a lecture for students and Limited developed and implemented 25, 2014, in Yuzhno-Sakhalinsk. This teachers at the Natural Sciences Institute development and foster awareness a comprehensive plan to protect is the first book in the world completely of Sakhalin State University. about the issue of conserving rare dedicated to Steller’s sea eagle, the Far Vladimir Masterov: “The area the Steller's sea eagle population . State University's Marine Mammal In 2010 and 2011, Exxon Neftegas

1995–2015 East endemic species. The monograph, of the Sakhalin-1, 2, and 3 projects wildlife species and their habitats . In 2004, it was supplemented with with a print run of 1,500 copies, is home to nearly 70% of the island Institute . For example, the special Limited co-sponsored Western gray was published with the support population of the Steller’s sea eagle. a monitoring program to study Sakhalin-1’s support of the Western “Marine Mammals Protection Plan” whale satellite tagging programs that of the Sakhalin-1 Consortium and That's why we developed a scientifically the population trends and habitat the project operator, Exxon Neftegas substantiated monitoring program for gray whale population research was developed, with detailed actions provided our first understanding of their Limited. this species. Since 2004, Exxon Neftegas of this winged predator, as well and monitoring program to follow, when a whale or a pinnipedian migration routes and winter habitat . The book is intended for a wide range Limited started regular monitoring as a program to build nests and roost of readers. It may be interesting of the Steller’s sea eagle population dates back to 1997 . Since then, was observed in an area . It describes It has demonstrated the connections to biology students and professional in the areas of pipeline and onshore sites . Under this program, 19 new the Sakhalin-1 Consortium has when specific attention is required, between the Western (detected near ornithologists, because it contains facilities construction. During the design nests and 52 roosts were established . a significant amount of new, original phase, I already realized that the pipeline spent almost US $35 million to study or, alternatively, when all operations Sakhalin Island) and the Eastern data and a fairly complete survey route will pass through the eagle nesting In addition, 62 metal frames were the population . The studies have should be stopped to allow the animal (California) gray whale populations . of the literature covering Steller’s area on Chayvo Bay. Exxon Neftegas installed around nests in trees sea eagle. At the same time, it will be Limited responded to our petition been conducted in cooperation with to safely pass through the operations’ One tagged female whale named Varvara understandable and useful to all who and rerouted the pipeline to bypass to protect them against brown bears . prominent Russian and Western area . These multi-year cooperative swam from Sakhalin to Baja California, love nature and who like to contemplate the nesting area of the Steller’s sea eagle. pivotal natural science questions. We managed to preserve the nesting area. gray whale scientists from Moscow efforts appear to be effective, and Mexico, and then returned back

Record of Achievements Record Based on the results of multi-year It features over 70 illustrations and In addition, the habitat improvement

State University, Sakhalin State there is evidence that the population to Sakhalin, during her ­172-day numerous photographs of Steller’s sea measures allowed to attract two more studies, the book “Steller’s Sea Eagle:

eagles during nesting and wintering pairs of Steller’s sea eagles that have University and institutes of Russia’s of the western grey whales is growing migration, logging 22,511 km Ecology, Evolution, Conservation” periods. nested successfully next to industrial Academy of Science: Pacific more than 3% each year . (14,000 mi). This is the longest Following the presentation at the facilities of the Sakhalin-1 Project. by Vladimir Masterov and Mikhail Sakhalin Oblast Multi-Disciplinary Oceanology Institute and Institute documented mammal migration ever Romanov, was compiled and of Biology of Marine, and Oregon recorded . sakhalin-1 published. This is the first book 152 153

chapter 24

he more than 130-year history Representatives of the Indigenous Tof Exxon Mobil Corporation Minorities of Northern Sakhalin Oblast . Harmony of the North is not only about the long and Exxon Neftegas Limited annually challenging journey of the business, allocates funds to organize but also about the rich history of social summer camps where children partnership and establishing strong, of the indigenous Sakhalin residents positive community relations around learn traditional crafts, hunting, areas of operations. Exxon Neftegas fishing, and reindeer herding Limited also bases its work on these skills . The company has actively corporate principles . Being aware supported competitions in national of the value of the unique and original sporting events, in which children culture of the indigenous minorities of the indigenous minorities of the North, Exxon Neftegas Limited of the North compete in hatchet actively works with organizations throwing, archery and other participate in the Oblast and Krai’s representing their interests competitions popular with the northern folk art festivals . This assistance was

1995–2015 in the Sakhalin Oblast and Khabarovsk

peoples. Educational, recreational and especially opportune for the amateur Krai . Special attention is given other types of equipment is regularly performers from Nekrasovka, where, to projects aimed at preserving cultural purchased for educational and childcare in 2004, a fire destroyed their club and traditions, customs, language and ethnic institutions. Exxon Neftegas Limited all their costumes, equipment and art. Exxon Neftegas Limited regularly also regularly supports the publication folkloric materials . Two years later, with sponsors traditional ceremonies and of books in the indigenous groups' Exxon Neftegas Limited's assistance, celebrations, as well as art contests and native languages . the group was able to completely restore exhibitions designed to display and their collection of national costumes, maintain the lyric, scenic and decorative Thanks to Exxon Neftegas Limited, and get new equipment . art of the Indigenous Minorities the folk groups “Pila Ken,” from For a long time Exxon Neftegas Limited of the North . the village of Nekrasovka in the Okha The celebration of the feeding has been the major sponsor of the regional

Record of Achievements Record IMPN festival called Feeding of the Sea District of Sakhalin Oblast, and of the Spirit Lord of the Sea has become

Coordinating numerous initiatives has Master Spirit. In June 2015, this festival “Giva”, from the village of Bulava an important event in the cultural life was attended by the world famous Nivkhi

become more effective, thanks to our writer V. Sangi and acting Governor On the way to the summer pastures, Uilta reindeer in the Ulchsky District of Khabarovsk of Sakhalin Oblast in recent years . participation in a trilateral partnership of Sakhalin Oblast O. Kozhemyako. herders from the settlement of Val twice annually cross Krai, were eventually able to update This is in large part due to the efforts the Chayvo Bay bridge built as part of the Sakhalin-1 project. with the Sakhalin Oblast Government The special vehicle traffic on the bridge is routinely suspended their performance accessories and of Exxon Neftegas Limited, which and the Regional Council of Authorized

sakhalin-1 during this time in order not to frighten the animals. 154 155 became a general sponsor of the celebration . Representatives of the indigenous minorities of the North get together from locations all over their small area of the Oblast every year for the festival in Poronaisk .

As early as 2003, Exxon Neftegas Limited created a network of local community coordinators in order to efficiently exchange information with the indigenous population . They can always turn to them with their questions, since the coordinators themselves are local residents and possess Gubernskiye Vedomosti newspaper, February 20, 2014 all the information related to the Sakhalin-1 All Risks May be Assessed Project . E. Averin The company tries to listen attentively to the indigenous residents’ opinions . Their Expansion of the Sakhalin-1 oil and gas on cooperation with Exxon Neftegas Project requires expanding the project Limited, the regional government, and recommendations, as experts in Sakhalin’s areas along with the infrastructure. administrations of the northern munici- wildlife and habitat, are invaluable . That In particular, it requires building palities recently visited the site of future the South Wellsite at the Odoptu Field. construction. According to Vladimir is why local reindeer herders and fishermen are

1995–2015 Since construction and production Agnyun — member of the consulta- employed as specialists upon their completion of hydrocarbons will be taking place tive committee and representative near areas where Sakhalin’s indigenous of the indigenous minorities of the North of appropriate training . minorities of the North are conducting at the regional legislature-based on all their commercial activities, the public that the delegation has seen allows found it important to study in more detail us to conclude that the scenario pro- the environmental aspect of the upcoming posed by the company minimizes adverse operations. impacts on the indigenous island's habitat. Piltun Bay Case “We could see that the project team is, The project operator initially explored in fact, concerned about environmental two cases for transporting construction safety and preservation of the habitats,” modules to the south wellsite — from Mr. Agnyun said, adding: “We are plan- the Sea of Okhotsk (the way it was done ning a similar meeting in summer, before during similar operations at the Chayvo the operations begin, with residents Field) and via a temporary offload- of the village of Val, Nogliki, District, who ing facility to be built on the eastern traditionally practice reindeer breeding. shore of the Piltun Bay. The project The reindeer pastures are located not far Record of Achievements Record designers consider the latter option away from the future facility. It was also to be optimal. Members of the Regional proposed to notify residents of Okha and

Council of Authorized Representatives the ethnic village of Nekrasovka about of the Indigenous Minorities the progress of operations and hold regu- of the North, the consultative committee lar meetings with them.” sakhalin-1 156 157 Starting in 2013, Sakhalin-1 Consortium and ExxonMobil have been providing funds to purchase $2.8 mln high-tech medical equipment for the Sakhalin cancer clinics . chapter 25

ig business entails big intensive care anesthesiologist In Good Health Bresponsibility . This includes of the Sakhalin Oblast . “Our number a responsibility to foster a positive of unfavorable outcomes has been social feeling in the region where reduced by 40%” . the business is being conducted . Since In 2013, as part of the social project the start of the Sakhalin-1 Project, “Together — for the Children!” Exxon Neftegas Limited has felt the Children's Hospital received high- it necessary to actively participate tech equipment costing more than in upgrading the infrastructure 31 million rubles . This created new facilities that are important to the local work stations for the ENT specialist, populations . These priorities include gynecologist and ophthalmologist . public health and education . An innovative ultrapure air purifier, In the course of its history Sakhalin-1 an electrohydraulic operating table, has provided US $6 .4 million for a multifunctional MRI monitor, Construction of a women's health charitable health care projects . and other equipment were acquired clinic in Yuzhno-Sakhalinsk was 1995–2015

The Oblast Children's Hospital to support health professionals . suspended in the late 1980s due

in Yuzhno-Sakhalinsk became one to a lack of funding . Seventeen years For young patients immobilized of the first to receive funding support later (after the Sakhalin-1 Consortium by cerebral palsy, four “Atlant” neuro- from Exxon Neftegas Limited. invested US $3 million in resuming orthopedic rehabilitative suits became The company supported the grant construction), the facility opened . And real lifesavers . Children one year and project “Preserve Life — Secure in March of 2007, the clinic received Irina Zakharova, older could learn to walk in these Radiation Therapist, the Future” and allocated funds for its first patients in a spacious 4-story spacesuit-like garments, which helped Sakhalin Oblast Cancer Center state-of-the-art multifunctional building equipped with world-class them to overcome their serious monitors for the neonatal pathology medical equipment, ultrasound Brachytherapy involves a process whereby the tumor disabilities . is irradiated locally without affecting healthy unit of the Children's Hospital's . examination rooms, a diagnostic „ tissues and organs. Previously, patients had to be laboratory, and three blood-drawing transferred to the Khabarovsk Cancer Center or clinics

Record of Achievements Record The Yuzhno-Sakhalinsk Maternity “Obtaining the equipment produced located in Central Russia. The new equipment

rooms . Clinic also received support from enables doctors to perform up to 56 hi-tech surgical a real revolution in caring for infants

interventions per year. Exxon Neftegas Limited. Charitable born prematurely with a critically High-tech equipment purchased with donations led to the acquisition low birth weight — from 600 grams,” Exxon Neftegas Limited funds also of an ultrasound unit for the hospital . noted Viktor Nemets, chief pediatric helped to outfit the cancer detection

sakhalin-1 “ 158 159 From 2007–2015, Sakhalin-1 Consortium and ExxonMobil have donated over $2.6 mln to the Sakhalin Children's Hospital to purchase various medical equipment

center . This made it possible to carry out He performed 14 surgery demonstrations a number of complex operations under in the new complex . On July 19, 2015, Russian Federation Minister of Health Veronika Skvortsova visited the Sakhalin Oblast Cancer Center. less harsh conditions . Previously, patients Exxon Neftegas Limited first provided She attended the ceremony to open the renovated X-ray wing were sent to the Khabarovsk Cancer Center at the regional cancer center and inspected the latest medical an ambulance and the latest equipment or to clinics in central Russia for these equipment for cancer diagnostics and treatment. to the Central District Hospital in Nogliki, procedures . The new equipment allows “This center is fantastic. The latest international medical whose services are used by village residents solutions are combined on Sakhalin. Only leading Russian Sakhalin physicians to perform more than institutions — the Blokhin Cancer Institute in Moscow, and as well as the members of the Sakhalin-1 50 hi-tech operations a year. the Gertsen Cancer Institute in St. Petersburg, have equipment Project . In fact, doctors there now have three like that,” the Minister of Health said. Medical facilities in Okha, Nogliki, and electrocardiogram (EKG) units for diagnosing De-Kastri were also significantly updated cardiovascular conditions . with Exxon Neftegas Limited's help. Under Exxon Neftegas Limited President James cooperation agreements, state-of-the-art Taylor once said: “We are doing everything equipment and instruments were purchased we can to preserve the health of our employees and personnel training programs were funded .

1995–2015 and Sakhalin residents . This is especially true

In Okha, for example, one of Russia's leading of children . If our donations can save just one

surgeons, Grigory Rutenburg, was invited child, even this would be a success ”. from St . Petersburg to train local physicians .

Vita Yaroslavskaya, Head of the Blood Transfusion Wing, Okha Central District Hospital

The aim of our project is to instill a sense of compassion Record of Achievements Record in young people and promote a healthy lifestyle. Blood „ donations should become a norm for the young generation.

We have established several drives and flashmobs and mobilized dozens of young Okha natives as blood donors. This is just the beginning. We will have many more volunteers. sakhalin-1 “ ver its 20-year history, Sakhalin-1 has The Sakhalin-1 team is focused on maximizing been a tremendous source of pride recovery of reserves, and efficiently for ExxonMobil. With oversight for developing oil and gas through optimizing Othe company’s producing assets existing production and pursuing additional in Russia, I get to see first-hand the team’s drilling programs. In early 2015, we set a new commitment to safety and operational world record for extended reach drilling integrity. Working with our consortium with the O-14 well at Chayvo, which partners: Rosneft, SODECO and ONGC measured a total depth of 13,500 meters and Videsh Ltd., our employees and contractors a horizontal reach of 12,033 meters. With this at Sakhalin-1 have developed an exceptional accomplishment, Sakhalin-1 currently holds safety culture, and enormous capacity the record for 9 of the 10 world’s longest wells. to tackle technical challenges in extreme Beyond our commitment to operational weather conditions. excellence, is a commitment to conduct our Within ExxonMobil, we have designed business in a way that benefits the people processes for sharing best practices among of Sakhalin. To this end, we contract with our global operating sites. I am proud as many Russian companies as possible, to say that Sakhalin-1 has been the source and provide hundreds of jobs for Russian of many of these best practices. In addition nationals. We also make it a priority to invest to an exemplary safety record, the Sakhalin in the development of Sakhalin’s youth. team maintains extremely reliable operations, Working in cooperation with the Sakhalin Kathy P. Pepper with unscheduled downtime averaging Oblast government and Sakhalin State Vice President, less than 2 percent in most years. We have University, the Sakhalin-1 consortium has Middle East and Russia, also loaded more than 750 tankers from provided nearly US $15 million to support ExxonMobil Production Company the De-Kastri terminal without a single major educational projects that will develop offshore spill. Sakhalin’s future generations of engineers, technicians and scientists. 162 163 December 2012 was marked by the opening of Technical Oil & Gas Institute. Exxon Neftegas Limited President J. Taylor gives a memorial plaque to the President of Sakhalin State chapter 26 University B. Misikov

or many years, oil industry specialists professional growth and later employment Fand instructors at Sakhalin State in the oil and gas industry . Investing in the Future University (SSU) dreamed of creating Within the frames of this major a technical institute to compensate for educational project, Sakhalin-1 the shortage of engineering personnel . Consortium has invested over These dreams would have remained US $14.7 million in upgrading unrealized for even longer if Exxon the technical oil and gas institute . Neftegas Limited had not entered Its classrooms began to resemble into an agreement with SSU in 2011, mini industrial sites, and the institute on behalf of the Sakhalin-1 Consortium . as a whole took on the features The university was granted US $5 million of a modern oil and gas enterprise to create a technical oil and gas institute . in miniature. Exxon Neftegas Limited This was said to be the first and only also made sure that the training program Today, more than 1,000 students receive educational STEM Center at Sakhalin example of a partnership between for the future oil industry workers also classroom and field education through State University became a notable event a private company and a Russian included the intensive study of technical the technical institute . The courses are throughout the Russian higher education

1995–2015 institution of higher learning .

English. This is because it is the primary offered in several areas: ecology and system . It began thanks to the help

This was an investment in the future means of professional communication natural resource use; geology; oil and of Exxon Neftegas Limited. of Sakhalin's youth . In 2012, the new in the international oil and gas sector . gas business; the operation of transport The abbreviation STEM is formed from Technical institute opened its doors and engineering vehicles and machinery; Creating practically from scratch a new the English words “science”, “technology”, to students . construction; and other areas . higher educational institution with “engineering” and “mathematics” . At the same time in 2012, Okha's very the support of the Sakhalin-1 Consortium It is vital that Exxon Neftegas Limited The center brought together more than first institution of higher learning was resonated widely . During his visit shares the most advanced industrial 120 talented undergraduates and graduate established — the oil and gas college was to Sakhalin Island, the Russian Federation expertise with undergraduates and students of the oil and gas technical converted to a satellite campus of SSU . Minister of Education and Science, graduate students . In addition to faculty institute in order to meet the challenges The Consortium also allocated funds for Dmitri Livanov, saw in this an example instructors, lecture courses are given of various related sciences .

Record of Achievements Record it to acquire top-tier training equipment, of business's responsibility to the needs by invited professors from leading Russian Exxon Neftegas Limited Weeks are held including state-of-the-art simulators of the region and its residents . He spoke educational institutions, and Memorial under the support of the STEM Center. and laboratories . This was done so that highly of the institute's facilities, which University of Canada . Training equipment for a new building On such days, the institute's instructors the youth of Sakhalin Island specifically meet the highest international standards . of the Technical Oil & Gas University was The 2014 establishment are replaced by highly qualified specialists purchased using charitable contributions could have greater opportunities for

sakhalin-1 allocated by Sakhalin-1 Consortium of a comprehensive innovative from Exxon Neftegas Limited — real world 164 165

Maxim Sadovnikov, Operator at the Control Center of the Berkut Oil Production Platform

Maxim Sadovnikov can go on talking as an aerological radio engineer, management. The corporate environ- about Berkut for hours. He was first he comple­ted the full course of training ment at Exxon Neftegas Limited also introduced to it during construction that included studies in Canada and provides a good to study. at the Deawoo shipyard in South Korea. an internship in the USA. Maxim has At some point, Maxim decided that his This work of modern engineering art observed that communicating with level of knowledge was no longer suf- is currently trying to pick the keys people of many ethnicities prompted ficient, so he applied to the Oil and Gas to the treasure trove of Arkutun-Dagi: him to keep an open mind about many Institute of Sakhalin State University. the first wells are being drilled. Future things, while observance of safety The new knowledge will help him plans include drilling multi-hole wells, rules transcends the day-to-day level to do a better job at work while also On August 30, 2013, the Russian Minister of Education and a cutting-edge petroleum technology. and becomes standard practice for giving him more opportunities to excel Science, Dmitry Livanov visited Sakhalin Oblast in an official Maxim joined Exxon Neftegas everybody working for the company. professionally and climb the career capacity. Limited in 2005. Born in the Sakhalin This is the result of an all-pervading ladder. Ambitions have to be supported of education . These are essentially has supported dozens of diverse the Sakhalin regional social foundation September 27, 2015 Exxon Neftegas Limited He visited several educational institutions to inspect the level town of Makarov and educated atmosphere created by the company's by a growing personal potential. Chairman J. Flood talks to the students of the region's preparation for the new academic year. One innovation complexes that interact with educational programs . Listing all “Achievements of Young People”, which of Technical Oil & Gas Institute of them was the Technical Institute of Oil and Gas of Sakhalin 55 supporting schools in the region . of them would require a great deal helps pupils develop the fundamentals State University, where the minister inspected spacious class- rooms and state-of-the-art study aids bought with sponsorship They provide educators with new of space . To highlight a few, there of entrepreneurship and economics; from the Sakhalin-1 Consortium. What he saw did not leave him teaching technologies, and allow is the annual “Teacher of the Year” and many other projects . Certainly indifferent: experts with advanced knowledge of offshore In order to maintain gifted children's interest the pupils to perform exciting research, competition, which supports talented investments in education are one “We and the regional authorities find it extremely important development issues . The theme of these lectures in science and mathematics, the company funded 1995–2015 to come up with a further development strategy for the uni- tests and experiments in physics, educators and raises the prestige of the best investments that can be and presentations encompasses a wide range the training of school teachers at the Moscow versity. We view it as a regional research and educational chemistry, biology and other disciplines . of the teaching profession; the annual made today, since our future largely center. We highly value what has already been accomplished of pressing issues in the oil and gas industry . Information Technology Center (they later in Sakhalin. I mean the Technical Institute of Oil and Gas that “Innova” academic and research student depends on the quality of education . became mentors for their colleagues) and was established to meet the needs of the island's labor market.” — Throughout the years of the Sakhalin-1 conference, which inspires young Exxon Neftegas Limited understands SSU and Exxon Neftegas Limited are confident noted Dmitry Livanov. equipped “Eureka” and seven more resource Project, Exxon Neftegas Limited people to pursue scientific activities; this well . that the STEM Center's work will contribute centers in the Oblast with Archimedes to providing the Far East economy with well- digital laboratories. Each of these includes trained, qualified personnel. 10 fourth-generation Macbooks with universal software and a set of Apple sensors . In 2013, Exxon Neftegas Limited's participation 15 Archimedes units were acquired and provided in promoting the long-term educational at no cost to general education institutions . project “Eureka — the Road to Success!” Exxon Neftegas Limited has allocated a total

Record of Achievements Record is an effort to improve future education . This

of US $500,000 over the five years of cooperation project was launched in 2010 . It was the result

under this long-term project . of the three-way cooperation of the Regional Ministry of Education, the Oblast Educational Over $14.7 mln was donated For this reason, an entire network of resource to the Sakhalin State University Development Institute, and Exxon Neftegas centers is working to improve the quality to purchase equipment

sakhalin-1 Limited . for 33 science labs 166 167 The Technical Institute of Oil and Gas of Sakhalin State University was opened in December 2012, as a product of the successful partnership between the Sakhalin-1 Consortium, the Sakhalin Oblast Government, and Sakhalin State University.

Between 2012 and 2015, the Sakhalin-1 Consortium donated US $14.7 million Russia's Biggest for the establishment of the Technical Institute of Oil and Gas and the Sakhalin 1995–2015 Technical, Natural Science, and Mathematics Public-Private Center (STEM). Partnership Formed to Establish an Institution Record of Achievements Record of Higher Education

sakhalin-1 168 169 Exxon Neftegas Limited volunteers became best friends to the orphanage kids from Gornozavodks, Krasnogorsk, Pravda, and Troitsk settlements chapter 27

oday it seems that there is no organization "Russian Red Cross" to help What the Heart Wants Thumanitarian sphere that Exxon victims of the natural disaster . These Neftegas Limited is not involved funds were used to obtain heaters, in . Demonstrating its commitment warm clothing, blankets, and other to the corporate principles of social goods and objects needed for the flood responsibility, the Sakhalin-1 Project victims. In addition, Exxon Neftegas Operator provides assistance to cultural Limited, on its own initiative announced institutions, libraries, and museums; the collection of voluntary donations, helps creators of culture and art, and transferred more than 100,000 rubles musicians, and gifted young people; to the “Russian Red Cross” . contributes to the development The volunteer activities of Exxon of local sports and the performance Neftegas Limited employees, who of environmental activities; and supports actively participate in the daily life organizations that work with people with of the surrounding towns and villages, disabilities . are a significant addition to the social 1995–2015

In 2013, when there was catastrophic projects of the Sakhalin-1 Consortium

flooding in the Amur region, and Exxon Neftegas Limited. They Exxon Neftegas Limited, on behalf give lectures at higher educational In spring 2015, volunteers from Chayvo OPF, and Val of ExxonMobil, donated US $100,000 institutions and lessons in schools, residents cleaned the mouth of the spawning Val river to the Khabarovsk Krai social volunteer at orphanages and residential to remove trees washed in over the years Record of Achievements Record

sakhalin-1 170 facilities, and do volunteer weekend cleanup 171 activities to clear the area of snow and trash . Exxon Neftegas Limited volunteers regularly hold blood drives . For example, in 2013, the number of employee donors increased by 400% . This occurred due to the new blood drive format: a month-long campaign was announced, and once a week, all the donors could go as a group to the blood donation site . The company provided a bus for transportation .

The volunteer movement has been going on at Exxon Neftegas Limited for seven years now . For reasons of tradition, most of the activities are aimed at children without parental support . In establishing friendships with the orphanage caregivers, the volunteers find new ways to help them.

In recent years the newspaper “Vedomosti”,

1995–2015 together with the “Donors Forum” and PwC, have regularly included Exxon Neftegas

Limited under the rating “Leaders of Corporate Philanthropy in Russia” . To do good work has become a system at the company — a system that is of the utmost importance for the company itself . For when you give back, you become stronger . Record of Achievements Record

Exxon Neftegas Limited employees and contractors are always happy to support volunteers and take part in various campaigns in De-Kastri,

sakhalin-1 Yuzhno, Odoptu, and Chayvo. 172 173

chapter 28 A Glance into the Future

ver twenty years, Sakhalin-1 has Over time, all 45 slots in one of the GBS Omade tremendous progress: from legs will be used to drill new wells . This

1995–2015 a mere idea to a concept, from a concept is a huge scope for several years to come . Tom Lindley, to the pioneering steps, and finally Manager of the Odoptu Stage 2 We will continue our efforts to a full-scale development . Now with all Development Project in comprehensive development three Sakhalin-1 fields online we think of resources from Chayvo and other of what awaits us in the future: What news Sakhalin-1 fields. will the oilmen bring? What vistas are More than 2,500 people all over new project, we apply our accumula­ looming over the horizon? At this stage, some portion the world are currently involved ted experience and continue „ in the Odoptu Stage 2 development to evolve. We do so while upholding of the produced gas is supplied Let’s take Odoptu . It will soon have project. The majority of them are our reputation and improving our to consumers in the Khabarovsk Krai, based in Sakhalin. We have worked performance in safety, environmental, a new drilling rig, even more advanced some 7 million man-hours on this and regulatory requirements, as well and the rest is re-injected in subsurface than Yastreb . The existing wells drilled project without lost time and record- as in relations with our partners, formations . Our specialists are able incidents. inspection and oversight authorities, from the onshore well site now reach

Record of Achievements Record Work is progressing at a fast pace, and contractors. This proves that already developing strategies that will

the northern flank of the field. The next which is further proof of the success we have earned the trust of peo- allow the utilization of all produced of the entire Sakhalin-1 Project, and ple. They know that we will succeed,

step is to cover the entire field. the reputation we have earned over and they trust us. gas to maximize benefits, both for the past 10 years of growth. In every The recently installed Berkut platform will the Consortium and for the Russian The southern part of Piltun Spit before commencement of Odoptu Stage 2 also have an extensive drilling program . Federation . sakhalin-1 construction activities, summer 2012 “ 174 175 However, the start of production is only half the battle . It is just as important to maintain uninterrupted supplies, and remain a reliable and robust partner for your customers . This will require regular inspections, servicing, and occasional maintenance and replacement of sophisticated equipment . These tasks are successfully managed by a team of technicians who have completed special training .

According to the estimates, Sakhalin-1 will continue producing hydrocarbons through 2050, and will bring in around 89 billion dollars of revenue in the form of taxes, the State share of produced oil and gas, and royalties . More to that, the Project provides new job opportunities, new contracts for local providers, and new social initiatives . Some time ago, offshore production projects seemed very distant, like other planets . People were hesitant about the advantages On May 13, 2015, Oleg Kozhemyako, acting “We are pleased with the recent launch of production sharing agreements . Today, after Governor of Sakhalin Oblast, met with of production at the Arkutun-Dagi Field. ten years of hard work, the oilmen’s dreams about Wayne Warwick, President of Exxon Neftegas We expect the region to receive additional Limited, the Sakhalin-1 Project operator. benefits as a result of this by year's end. the offshore opportunities transformed into 1995–2015 The meeting discussed cooperation between We would like to see the entire resource the world's largest international oil and gas project, the executive authorities and major potential of fields developed by you to be international businesses. fully utilized. I am referring to the natural bringing benefits that will be enjoyed by their children The Regional Governor expressed his gas component and opportunities for and grandchildren . satisfaction with the fact that American monetizing it, which would yield additional and Russian companies are active on benefits for both the company and our Sakhalin, implementing ambitious projects. region. We are prepared to assist you in this He believes that the Sakhalin-1 Project matter.” being implemented with the involvement In turn, Wayne Warwick stated that the of Rosneft is an outstanding example of success of the Sakhalin-1 Project would have cooperation that benefits the consortium been impossible without strong support members, the island region, and the Russian from the Sakhalin Oblast Government. He Federation. Oleg Kozhemyako thanked expressed the hope that this support would Wayne Warwick for the active involvement of continue because the consortium has big Exxon Neftegas Limited in charitable events plans for the region. and social projects in Sakhalin Oblast: Record of Achievements Record

Statement from the Sakhalin Oblast

sakhalin-1 Government press service, dated May 13, 2015 hen I came to the Sakhalin-1 Twenty years after the signing of Sakhalin-1 Project, it held much promise Production Sharing Agreement, global W and opportunity — but little energy needs continue to grow. This long- infrastructure — in an area considered to be term increase in energy needs is perhaps one of the most challenging sub-arctic regions the most important reality our industry in the world. We took this challenge to heart, faces. It presents enormous challenges and and in 2005, delivered first oil from Chayvo, opportunities. followed in 2010 by first oil from Odoptu. This year the consortium started production The unique qualities, complementary at Arkutun-Dagi, the third of the three strengths, and long-term shared vision Sakhalin-1 fields, adding to the significant in the global relationships we have built with benefits already enjoyed by the Sakhalin our partners can help us reach into the future community. to meet the energy needs, environmental goals, and economic aspirations of the world. And we still have more to accomplish. Having already expanded Chayvo, we are working We have had great success in Sakhalin, and on Odoptu Stage 2, which will soon be home there will be more to come as we continue to a new drilling rig, one of the most powerful to set the standards for safety and execution in its class. It will tap the southern flank in our industry as we develop the remaining of the Odoptu reservoir, adding even more Sakhalin-1 hydrocarbon resources. Neil Duffin volumes to total production. In addition President, to ongoing domestic gas sales, we are studying ExxonMobil Development Company the best options to monetize Sakhalin-1 gas resources. Sakhalin-1. Record of achievements. 1995–2015.

The text was written by a team of contributors from the Soviet Sakhalin newspaper. Photographs: G. Ivannikov, G. Belyakov, V. Masterov, S. Krasnoukhov. Archival materials of the Soviet Sakhalin newspaper, information department of Priamurskiye Vedomosti newspaper, RN-Sakhalinmorneftegaz press service, Japanese Consortium SODECO, and Exxon Neftegas Limited Public and Government Affairs department were used in the book Sakhalin-1 Project Map

Odoptu field

Odoptu Odoptu South production well site facilities

Arkutun-Dagi field Chayvo Chayvo offshore field processing facility SAKHALIN

De-Kastri oil export Orlan Berkut terminal platform platform

Yastreb drilling rig