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 .