Sakhalin-2 Project

SAKHALIN-2 PROJECT

YUZHNO-SAKHALINSK 2010 аb

Contents cd

Biological reinstatement...... 20 gh a Block valve stations ...... 21 Acoustic monitoring ...... 15 Block valves ...... 21 ij AEA ...... 15 Board of Directors ...... 22 Aerial seeding ...... 15 Boom ...... 22 kl Aframax ...... 16 Booster stations ...... 22 Aniva Bay...... 17 Approvals ...... 17 mn Archaeological discoveries ...... 17 c Associated gas...... 18 Caisson...... 25 op Auger-bore method ...... 18 Central control building ...... 25 Commencement date...... 25 qr Commissioning...... 26 Committee of Executive Directors...... 26 b Community Grievance Procedure ...... 26 st Barrel ...... 19 Community Liaison Officers...... 27 Big bore gas production wells ...... 19 Compass...... 27 uv Biodiversity Action Plan (BAP) ...... 19 Concrete Gravity Base Biodiversity Group ...... 20 Structures ...... 28 wx

5 yz аb Condensate ...... 28 Environmental Impact Assessment...... 35 Indigenous People...... 51 Corporate Philanthropy 2008...... 28 Environmental Monitoring g Indirect vertical fracture (IVF) ...... 52 cd Cryogenic heat exchangers ...... 28 Project (EMP) ...... 35 Information Centres ...... 52 Cuttings re-injection...... 29 Environmental Project Gazprom ...... 45 Infrastructure ef of the Year 2008...... 36 Gazprom Transgaz Tomsk...... 45 upgrade projects ...... 53 Environmental, social, General Business Principles ...... 46 Injection well...... 54 health impact assessments Integrated Safe System gh d (ESHIA)...... 36 of Work (ISSOW) ...... 54 Derrick...... 30 Extended reach drilling...... 37 h International Finance ij Development Date ...... 30 Heads of Agreement ...... 46 Corporation (IFC)...... 54 Dispersant...... 30 Health impact assessment ...... 46 International organization kl Double mixed Health, Safety and Environmental for standardisation (ISO)...... 55 refrigerant process ...... 30 f Policy (HSE) and Commitment...... 47 Dredging...... 31 Fault crossings...... 37 Health Safety Environment mn Drill cuttings ...... 31 Fibre Optic Cable...... 38 and Social Action Plan...... 47 j Drilling advanced Flaring ...... 39 Hook-up...... 47 op rig training (DART)...... 32 Float-over...... 39 Horizontal directional drilling ...... 48 Japan Bank for International Drilling fluid ...... 32 Flotel ...... 39 Hurry up for good deeds ...... 48 Co-operation...... 55 qr Dry cut crossing...... 32 Flume pipe ...... 40 Hydrocarbons ...... 48 Joint Committee...... 56 Fountain system ...... 40 Hydro-seeding ...... 48 Frac-Pack...... 40 st e Free gas ...... 41 Educational Grants...... 35 Friction pendulum bearings...... 41 i k uv Energy TV programme...... 35 FROG ...... 41 Ice scour...... 51 Kholmsk Supply Base...... 59 Environmental Action Plan...... 35 FSO Okha...... 42 Impact assessment...... 51 Korsakov...... 59 wx

6 7 yz аb Memorandum Onshore pipelines...... 82 Production system capacity...... 90 l of understanding (MoU) ...... 72 Onshore processing facility ...... 82 Project finance...... 91 cd Landslides ...... 60 Mission ...... 72 Project history...... 91 Licence Areas...... 60 Mitigation measures...... 73 Public Consultation and Disclosure Plan...... 96 ef Liquefied natural gas...... 60 Mitsubishi Corporation (MC)...... 73 p Liquefied natural gas flare...... 61 MITSUI & Company Ltd...... 73 gh Liquefied natural gas imports...... 62 Molikpaq ...... 74 Permit to Work...... 83 q Liquefied natural gas jetty ...... 62 Mono-ethylene glycol...... 75 Phase 1 ...... 83 Liquefied natural gas laboratory ...... 63 Multiphase line...... 75 Phase 2 ...... 84 Quality assurance ...... 99 ij Liquefied natural gas Multiplier effect ...... 75 Pig trap stations ...... 84 Quality control...... 99 measurement methodology...... 63 Piltun-Astokhskoye-A (PA-A)...... 85 kl Liquefied natural gas plant ...... 64 Piltun-Astokhskoye-B (PA-B)...... 85 Liquefied natural gas processing trains ...... 65 n Piltun-Astokhskoye field...... 86 r Liquefied natural gas tanker ...... 66 Non-destructive testing Piltun feature Real-time operations centre...... 100 mn Liquefied natural gas transportation...... 66 of pipeline welds ...... 76 of Piltun-Astokhskoye field ...... 86 Recoverable reserves...... 100 Liquefied natural gas storage tanks ...... 66 Non-financial reporting...... 76 Pipeline inspection gauge (PIG) ...... 86 Reinstatement measures ...... 100 op Lunskoye-A...... 67 Pipeline maintenance depots...... 87 Remedial action plan ...... 102 Lunskoye field...... 68 Pipelines ...... 87 Reserves in place ...... 102 qr Lunskoye landfall area...... 68 o Plan of Development (POD) ...... 87 Reservoir ...... 103 Offshore pipelines...... 79 Pressure Maintenance Project ...... 87 Resettlement action plan ...... 103 Oil export terminal ...... 80 Pressure testing ...... 88 Right of Way (RoW) ...... 103 st m Oil spill response...... 80 Prigorodnoye production complex...... 88 River crossings ...... 104 Manual seeding...... 71 Oil storage tanks ...... 81 Prigorodnoye seaport...... 88 River restoration project ...... 104 uv Marine Mammal Protection Plan ...... 71 Oil transportation...... 81 Production season — Phase 1 ...... 89 Royal Dutch Shell plc...... 104 Massive Hydraulic Fracturing...... 72 Online bidding ...... 81 Production Sharing Agreement ...... 89 Royalties...... 105 wx

8 9 yz аb Russian Content...... 105 Small Grants — Big Deeds...... 116 Steller’s sea eagles ...... 123 Russian Party...... 106 Smart Wells...... 116 Supervisory Board...... 124 v cd Social Impact Assessment ...... 117 Supervisory control Vendor development programme ...... 134 Social Investment...... 117 and data acquisition (SCADA)...... 124 Vesti...... 134 ef s I Educational Grants...... 118 Supporting Fleet ...... 125 Vision ...... 134 Safety exclusion zones ...... 109 I Employee Charitable Sustainable Development ...... 125 Vityaz crude oil...... 134 Sakhalin climate...... 109 Support programme...... 118 Sustainable Development Chair ...... 126 Vityaz production complex ...... 134 gh Sakhalin Energy Investment I Sakhalin Indigenous Company Ltd...... 110 Minorities Development Plan ...... 118 ij Sakhalin Energy Priorities...... 110 I Sakhalin Road Safety Partnership...... 119 t w Sakhalin Indigenous Minorities I Sakhalin Salmon Initiative (SSI)...... 119 Taimen ...... 126 Western Gray Whales ...... 137 kl Development Plan ...... 110 I Small Grants-Big Deeds...... 120 Tanker loading unit...... 127 Western Gray Whales Advisory Panel ...... 138 Sakhalin Island ...... 111 I Sports Development Technical and economic substantiation Wet-cut crossing...... 138 Sakhalin Road Safety Partnership...... 111 Programme...... 120 for construction (TEOC)...... 127 What to do in emergency situations...... 138 mn Sakhalin Salmon Initiative...... 111 I Sustainable Development Chair...... 121 Technical Integrity ...... 128 Working Group (WG)...... 138 Sakhalin-2 ...... 111 I What to do in emergency Technical reinstatement...... 128 World Bank guidelines...... 139 op Sakhalin-2 records ...... 112 situations programme...... 121 Topsides ...... 129 Sales and Purchase agreement ...... 114 Social performance policy Training centres ...... 129 qr Sanitary Protection zone (SPZ)...... 114 and commitments...... 122 TransSakhalin pipelines ...... 129 x Seismic modelling...... 115 Sorbents...... 123 Treatment plan for objects X-ray of pipes ...... 140 Seismic monitoring system ...... 115 Sports against of cultural heritage ...... 130 st Seismic surveys ...... 116 juvenile delinquency ...... 123 Senya...... 116 Stakeholders ...... 123 y uv Shareholding structure...... 116 State Environmental u Single Anchor Leg Mooring...... 116 Expert Review (SEER) ...... 123 United Nations Global Compact...... 133 Yuzhno-Sakhalinsk ...... 143 wx

10 11 yz аb z Zero flaring...... 144 cd Zero drilling discharge...... 144 Zima Highlands ...... 145 ef

op аbfrom to qr ACOUSTIC MONITORING BOOSTER STATIONS st

12 yz аb AEA A UK-based energy and environmental consul- cd tancy. As an independent consultant to the po tential lenders of the Sakhalin-2 project, AEA wrote ef a comprehensive report in 2007 on Sakhalin Ener- a gy’s compliance to Sakhalin’s Health, Environ ment ACOUSTIC MONITORING and Social Action Plan. The AEA’s conclusions were gh Through fixed monitoring stations, Sakhalin Ener- positive, and the report cited examples of laud- gy monitors the ambient sound levels of the West- able best practice. The full report is available in ij ern Gray Whales in the sea of Okhotsk. Sakhalin the library of Sakhalin Energy’s website, at www. Energy implemented the programme starting in sakhalinenergy.com. See also Health, Sa fe - kl 2006, following recommendations of the West ern ty, Environment and Social Action Plan. Gray Whales Advisory Panel and in accordance with the Marine Mammal Protection Plan. See al - AERIAL SEEDING mn so Marine Mammal Protection Plan, Western Gray A technique used to sow seeds over large tracts Whales and Western Gray Whales Advisory panel. of land by plane or helicopter. Because of the op mountainous terrain of Sakhalin Island and the sinuous route of the Right of Way (RoW), the area qr cleared for the TransSakhalin pipelines, a helicopter was used. Seed was loaded into a hopper on the helicopter and then released over the requir - st ed area, sprayed from vents located on the base of the vehicle. Aerial seeding was used to pro- uv vide temporary vegetation cover until permanent reinstatement was achieved, and for biological wx

15 yz аb reinstatement of the RoW. See also Right of AFRA (average freight rate assessment), a sys- Way and TransSakhalin pipelines. tem Shell Oil developed. As a relatively smaller cd vessel with a deadweight of between 80,000 and AFRAMAX 120,000 tonnes, Aframax tankers transport oil ef Four Aframax tankers deliver oil to Sakhalin Ener - from harbours that are too small to handle Very gy’s customers. The tanker gets its name from Large Crude Carriers (VLCC). gh

mn ANIVA BAY tion. It includes preparing documents according Aniva Bay is the location of Sakhalin Energy’s li- to a legal process, for submitting to State regula- op quefied natural gas (LNG) plant and oil export ter- tory authorities for review and approval. Design, minal (OET) in Prigorodnoye, the southern part of procurement, and construction of Sakhalin Phase qr Sakhalin Island. The area is ice free in winter. It is 2 required some 10,000 approvals from local, re- also a popular fishing and recreation area. See gional, and federal bodies in Russia. also Korsakov. st ARCHAEOLOGICAL DISCOVERIES APPROVALS An archeological project Sakhalin Energy spon- uv A system of permits and licenses for different ac- sored to find, identify, and protect items of histor- tivities of a company required by Russian legisla- ical and archaeological interest along the Right wx

16 17 yz аb from 2004 to 2006. More than 35,000 artifacts were collected and then stored permanently in cd museums. Today, these objects are housed in the Sakhalin State Regional Museum and the Muse - ef um of Archaeology and Ethnology at Sakhalin State University. See also Right of Way and Trans Sa- gh khalin pipelines. b BARREL ASSOCIATED GAS A unit of volume traditionally used by the oil in - ij Gas, which is dissolved in the reservoir at reservoir dustry to measure oil. Cubic metres and metric pressure and then released during production. tonnes are also used. A barrel (bbl) of oil equals so that tubing 244 millimeters in diameter can be kl approximately 159 litres, or 0.159 cubic metres. installed in the reservoir. Because of the very wide AUGER-BORE METHOD To convert in the other direction from cubic metres tubing, big bore wells significantly reduce oper- One of two techniques, such as trenching, that into barrels, the factor is about 6.29. Converting ating costs and capital expenses and increase flow mn Sakhalin Energy used while installing the Trans- to metric tonnes depends on oil density, which area, so a higher gas flow rate can be achieved. Sakhalin pipelines to cross ecologically fragile varies between 820 and 905 in Russia, or 5 kilo- Each Lunskoye well is designed to produce 9–10 op areas without disturbing the land surface. The grammes per cubic metre. For Sakhalin-2 Vi ty az million m3 of gas per day. See also Lunskoye-A. company used the method mainly to install pipes crude, a light oil, a conversion factor of 7.4 can qr under roads and railway lines without disturbing be used for approximate values: 7.4 bbls equal BIODIVERSITY infrastructure. It involves using a large diameter one tonne. ACTION PLAN (BAP) of Way (RoW) for the TransSakhalin Pipelines. auger bit to drill a horizontal hole under the spe- Biodiversity comprises all plants and animals and st The project found 185 objects of significant cul- ci fied area. As the auger bit advances, a section BIG BORE GAS their habitats and ecosystems. Sakhalin Energy tural heritage during excavations for the Sa kha- of pipe gets pushed through the hole. See also PRODUCTION WELLS finalised its Biodiversity Action Plan in 2009. The uv lin-2 project from 1998 to 2007. 10 archaeolog - Dry-cut crossing, TransSakhalin pipelines and Wet- The Lunskoye gas wells, the largest producing plan complements the Environmental Monitoring ical sites within the RoW borders were excavated cut crossing. gas wells in Russia, are big bore wells, designed Project (EMP) and acts as a basis for Habitat wx

18 19 yz аb BIOLOGICAL REINSTATEMENT recovery of these sensitive ecosystems. See al - OPF can isolate, and if necessary, shut down any The last stage of the reinstatement process to so Technical reinstatement. part of the pipeline or the entire route in an emer - cd promote the growth of vegetative cover on the gency. See also Onshore processing facility and Right of Way (RoW) of the TransSakhalin pipe- BLOCK VALVE STATIONS TransSakhalin pipelines. ef lines. Several methods of biological reinstatement An integral part of the management and safety can be used. For Sakhalin-2, seeds were sown practices of the TransSakhalin pipelines, block BLOCK VALVES along the RoW by aeriel seeding, hydro seeding valve stations transmit online monitoring informa- Block valves allow sections of a pipeline to be shut gh or manual seeding, and through tilling the soil, tion from an instrument shelter to the control room for maintenance or in an emergency. These valves Action Plans (HAP) and Species Action Plans (SAP). applying fertilizer and laying erosion matting. Bio- of the onshore processing facility (OPF). Opera- are placed about every 30 kilometres along a pipe- ij See also Biodiversity Group and Environ ment al logical reinstatement minimises surface erosion, tors in the remotely-based control room at the line. Additional valves are placed on each side of Monitoring Project. returns the landscape to productive life after con- kl struction for use as farming or pastureland, pro- BIODIVERSITY GROUP motes the return of natural soil processes, and Formed in 2007 under the auspices of the Eco- improves the aesthetics of the RoW for local com- mn lo gical Council, an advisory body of the Sa kha lin munities. Oblast Government, made up of delegates from Although seeding was used along most of op Sakhalin Energy and representatives from envi - the RoW, ecological surveys identified a number r onmental groups, and non-governmental and of wetlands where seeding was not an option. qr scien tific organizations from Japan. The Group re - Natural colonisation of local species was used to ports to the Ecological Council, and serves in an reestablish vegetative cover in these areas. Tech- advisory role on biodiversity strategy, with the nical reinstatement of these areas was critical to st aim of applying biodiversity planning principles make sure the right physical conditions were in more widely on Sakhalin Island. The Group’s role place for natural colonisation to occur. Sakhalin uv may eventually include research and monitoring. Energy is monitoring these wetlands to identify See also Biodiversity Action Plan. any further remedial actions needed to ensure wx

20 21 yz BOOM Sakhalin Energy takes an integrated approach to cd oil spill response (OSR) that uses different booms for strong and sturdy containment. Marine, ri ver, ef and shore seal booms are kept close to the spill source for immediate deployment. See also Oil spill response. gh

ij an important watercourse or river along the oil kl pipeline route and near each side of most fault crossings. The oil pipeline has 104 valves, the gas pipeline has 47 valves, and four valves are placed mn along the multiphase pipeline between the on - shore processing facility (OPF) and the Lun- op skoye-A platform. See also Block valve stations, Fault crossings and TransSakhalin pipelines. BOOSTER STATIONS qr Pumps and compressors allow booster stations from to BOARD OF DIRECTORS to increase the pressure of gas or liquids in a pipe- cd CAISSON DRY CUT CROSSING The Board of Directors oversees the business ac- line between the onshore processing facility (OPF) st tivities of Sakhalin Energy. Shareholders appoint and the liquefied natural gas (LNG) plant. Boos- 10 directors, four principal directors and six prin- ter station 1 (BS1) is at the OPF and booster sta- uv cipal non-executive directors. See also Share - tion 2 (BS2) is at Gastello. See also Onshore holding structure. processing facility and TransSakhalin pipelines. wx

22 yz cd c ef CAISSON gh A caisson is a watertight chamber, from which water is kept out with air pressure, and is used in lay- ij ing foundations under water. A caisson is installed on the Molikpaq (PA-A) platform, the liquefied kl natural gas (LNG) jetty, and the oil export termi- CENTRAL CONTROL BUILDING nal (OET). See also Molikpaq, Liquefied natural Pipelines and gas processing are managed from gas jetty and Oil export terminal. the central control building at the onshore pro- mn cessing facility (OPF). See also Onshore processing facility. op

COMMENCEMENT DATE qr A term which generally refers to the date when work started on the Sakhalin-2 project. The commencement date, announced in June 1996, was st preceded by two years of preparations to fulfill conditions stipulated in the production-sharing uv ag reement. See also Production Sharing Ag - ree ment. wx

25 yz practices or its development of Sakhalin-2 are Yuzhno-Sakhalinsk. CLOs are the eyes and ears causing harm to the environment, the communi - for the project. They provide a conduit for the com- cd ty, or quality of life. pany to communicate with the municipal govern- Grievances are documented and resolved in ment and other stakeholders, and provide a means ef a specific time frame and can be registered by for stakeholders to contact the company. They phone, mail, e-mail, in person, or at a confidential maintain records of project impacts on commu- website (http://www.seiccon fi dential.com/ nities, and relay changes in a community profile gh default.htm) to key Sakhalin Energy audiences. In addition, they support and assist local project functions and ij COMMUNITY LIAISON OFFICERS pro vide the main administrative support for the A network of officers throughout Sakhalin Island, grievance process. kl COMMISSIONING business plans, and decisions on implementation. established by Sakhalin Energy in the districts af- The overall process of bringing into service a new In 2009, the Committee was made up of eight di- fected by the construction and operational acti- COMPASS or modified facility. The main purpose of commis- rectors: the CEO, deputy CEO, and the Produc - vi ties of the Sakhalin-2 project. CLOs are based A new development in liquefied natural gas (LNG) mn sioning is to ensure all the facilities function ac - tion Director, Technical Director, Commercial Di - in north, south and central Sakhalin Island and in information technology, Compass software is used cord ing to design. The commissioning phase in - rector, Human Resources Director, External Affairs to schedule crude oil and LNG cargoes. It can be op volves final system checks, initial startup, perfor- and Government Relations Director. customised for LNG customers, and aligns actu - mance testing, and stabilisation. al LNG production with the business plan for Sa- qr COMMUNITY GRIEVANCE khalin Energy through a statistical function, which COMMITTEE PROCEDURE can adjust for ambient temperatures. A stochas- OF EXECUTIVE DIRECTORS Developed by Sakhalin Energy to provide an in- tic model allows the software to factor in a dis - st The Executive Committee is responsible for the dependent channel for staff, suppliers, contrac- ruption or delay in a ship’s arrival due to bad wea- direct management of the company. The Chief tors, employees, joint venture partners, or com- ther. An additional embedded feature predicts the uv Executive Officer heads the committee, which sets munity members to raise concerns or make sug - quality of each cargo to be loaded according to the daily activity of Sakhalin through strategies, gestions, if they believe the company’s business the business plan, which takes into account a wx

26 27 yz time lag caused by a delay in a cargo’s passage CONDENSATE through the long pipeline. Condensate is separated from free gas light hyd- cd rocarbon liquid. At standard conditions it is made CONCRETE GRAVITY up of mostly methane, ethane, propane, butane ef BASE STRUCTURES and pentane. The foundations of the Lunskoye-A (Lun-A) and Piltun-Astokhskoye-B (PA-B) platforms are made CORPORATE gh of concrete gravity base structures (CGBS) that PHILANTHROPY 2008 consist of four massive legs for each structure, Russia’s foremost corporate charity ranking sys- ij which are used to support a platform’s topsides. tem for identifying the best charity programmes Aker Kvaerner Technology AS of Norway and Quat- designed and implemented by companies. Cor- kl tro Gemini OY of Finland carried out the engi- po rate Philanthropy in turn promotes these pro- neering and construction of these structures, the grams in business and government circles. The first of its kind constructed in Russia at a purpose- system is organized by the Vedomosti newspa- mn built dry dock in Vostochny port near Vladivos - per, PriceWaterhouseCoopers consultancy, and tok. See also Lunskoye-A, Piltun-Astokhskoye-B, the Board of Donors. Sakhalin Energy received a op Sakhalin-2 records and Topsides. Corporate Philanthropy ranking in 2009. so that LNG can be efficiently transported by tan - CUTTINGS ker to customers. Two associated pre-cooling RE-INJECTION qr CRYOGENIC HEAT EXCHANGERS cryo genic heat exchangers are also in place on At the Lunskoye-A (Lun-A) and Piltun-Astokh- There are two main cryogenic heat exchangers the processing train. The two main units are coil- skoye-B (PA-B) platforms, reinjection wells have installed on each liquefied natural gas (LNG) pro- wound heat exchangers. They made of aluminum been drilled to safely dispose of drill cuttings and st cessing train at the LNG plant at Prigorodnoye. and stand 40 metres high and weigh 133 tonnes oil-based mud. These platforms operate accord- Cryogenic heat exchangers are the final cooling each once installed. Pre-coolers are 32 metres ing to a zero drilling discharge policy, meaning drill uv step in the liquefaction process, taking gas from tall and weigh about 180 tonnes. See also LNG cuttings and drilling muds are never discharged o o approximately –50 C and liquefying it at –160 C processing trains. overboard. See also Zero drilling discharge. wx

28 29 yz DEVELOPMENT DATE dredging spoil was removed to an approved The date when Sakhalin Energy began develop- dis posal site 24 kilometres offshore and evenly cd ing licensing areas, a term that comes from the distributed in a 200-metre radius at a depth of Sakhalin-2 Production Sharing Agreement. The 65 metres. Dredging was completed successful- ef development date for Piltun-Astokhskoye license ly and ahead of schedule. The impact of the dredg- area was declared in 1997 and for Lunskoye li - ing was less than a 2003 Environmental Impact gh d cense area in 2003. As ses sment had predicted. Monitoring studies DERRICK have shown the impacts from the operation have A tower-like structure, which forms part of a dril- DISPERSANT been minimised, local, and short term, with no ij ling rig and is used to support drilling equipment, A liquid hydrocarbon used as a back-up method the Precool Mixed Refrigerant cycle (PMR) and per ma nent effects on fishing in Aniva Bay or e l - including bits and pipes. in tandem with mechanical recovery to respond the Mixed Refrigerant Cycle (MR). The new tech- se where. See also Aniva Bay and Environ ment- kl to an oil spill. Dispersants are capable of remov- nique involves use of the PMR cycle, a mixture of al Impact Assessment. ing large amounts of some oil types from the sea light hydrocarbons, mostly ethane and propane. To surface by transferring the oil to the water co- take advantage of the cold Sakhalin winter, LNG mn lumn. The Russian Federation allows only three production is maximized by modifying the compo- dispersants for use in the country. Approval is re- sition of the refrigerant in winter and summer. op quired before their use. Dispersants are spray - ed by boat or aircraft. See also Boom and Oil DREDGING qr spill response. To provide foundations for a jetty and ensure a water depth so LNG vessels could operate safely DOUBLE MIXED in Aniva Bay, Sakhalin Energy carried out dredg- st REFRIGERANT PROCESS ing operations in a prescribed part of the bay from A liquefied natural gas technology licensed by 2003 and 2005. The dredging was in full compli - DRILL CUTTINGS uv Shell for use in cold climates, such as Sakhalin. ance with the requirements of Russian authori- When a drill bit is used to drill a well, the cutting In this process, natural gas is cooled in two cycles: ties. In line with international best practice, the pro cess produces ground rock coated with dril ling wx

30 31 yz common drilling fluid is a mixture of clay and other minerals with water and chemical additives, but wells can also be drilled by using oil-based mud as drilling fluid. The mud is pumped down the drill ef pipe and then returned to the surface around the outside of the drill pipe. The main functions of drilling fluid are: cooling and lubrication, removal of gh cuttings and maintaining the well under pressure to control the influx of liquid and gas. ij fluid, which is removed from the hole and carri - ed to the surface by the fluid. DRY-CUT CROSSING kl A technique used to install a pipeline under a small DRILLING ADVANCED watercourse that minimises available water and RIG TRAINING (DART) reduces sediment displacement. Water is con- mn The drilling advanced rig training (DART) simu- tained upstream of the crossing point and divert- lator teaches drilling techniques from a safe en - ed to an area downstream with a flume pipe or a op vironment onshore. Equipped with three-dimen - pump, creating a dry section. Once the water is sional graphics and sound effects, DART is also diverted, a trench is dug through the dry bed of qr used to test well-drilling methods. Sakhalin Ener- the watercourse and a pipe is laid. After the ope- from to gy operators in Yuzhno-Sakhalinsk are trained ration is finished, the riverbed is restored and the ef EDUCATIONAL GRANTS FSO OKHA using this method. water flow resumes. During construction of the st TransSakhalin pipelines, the dry-cut crossing me- DRILLING FLUID thod was used for small watercourses in ecolo - uv Drilling fluid is also known as the “mud system”. gi cally sensitive areas. See also TransSakhalin It is an essential element of drilling a well. The most pipelines and Flume pipe. wx

32 yz compliance with environmental legislation. For more details, visit www.sakhalinenergy.com

ENVIRONMENTAL ef IMPACT ASSESSMENT e In 2003, global environmental consultants carri- EDUCATIONAL GRANTS ed out an independent Environmental Impact As- gh See Social Investment sessment of the Sakhalin-2 project. The evalua - tion was in keeping with corporate requirements ij ENERGY TV PROGRAMME and international best practice. An addendum was Launched in 2004, the Energy TV show keeps published in 2005. The report is available at the kl stakeholders informed about milestones and other Sakhalin Energy website, www.sakhalinener gy. significant events on Sakhalin-2. The program airs com on ASTV (local TV channel) every Thursday. mn

ENVIRONMENTAL op ACTION PLAN The Environmental Action Plan documents Sa - qr khalin Energy’s responsibilities for river crossings, fishing areas, land management and erosion control, and lists mitigation measures. The Russian st en vironmental authority, RosPrirodNadzor (RPN) ENVIRONMENTAL ap proved the plan in 2006. Russian Federation MONITORING PROJECT (EMP) uv Minister of Natural Resources, Yuri Trutnev, in Developing and implementing Environmental 2008 cited Sakhalin Energy as a role model of Monitoring was a condition set by the State wx

35 yz ENVIRONMENTAL PROJECT ment, and to identify all potential threats and find OF THE YEAR 2008 ways of reducing them to an absolute minimum. The Russian Natural Resources Ministry in 2008 created an award for best environmental project EXTENDED REACH DRILLING ef of the year. In December of that year, Sakhalin Extended reach drilling (ERD) allows wells to be Energy won the inaugural award “Environmental drilled in subsurface locations distant from exist - gh Project of the Year” for its Western Gray Whales ing platforms. Some hydrocarbon reserves are f protection programmes. A Sakhalin Energy con- lo cated around 8 to 10 kilometers from all three FAULT CROSSINGS tractor, Starstroi, received a diploma by the Mi nis- Sakhalin Energy platforms, which means these A fault crossing is made at an optimum angle to ij try for implementation of the Sakhalin-2 on shore outlying reservoirs, which would be unprofitable a fault line, also known as a planar rock fracture, pipeline system. to bring onstream with conventional drilling equip- to allow free movement of a pipe so it does not kl ment, can be profitably exploited using ERD from break or come under extreme stress in an earth- ENVIRONMENTAL, an existing platform. quake. To allow the required movement of the pipe - SOCIAL, HEALTH IMPACT line during an earthquake, trenches dug through mn ASSESSMENTS the fault crossing are constructed differently and (ESHIA) other backfill materials are deployed. Beads of op Sakhalin Energy has conducted three Environ - clay are used as backfill for the trench and sur- mental, Social, and Health Impact Assessments rounding the pipes, and special sand is used in qr (ESHIA), based on industry best practice, interna - some places. The trenches are designed to drain tional standards, and Russian regulatory re quire- freely and are lined with special waterproof ma- ments. The ESHIA was finalised and published in terial, a geomembrane, preventing early water en- st Environmental Expertise Review in 2003. The EMP 2003. The report reflects Sakhalin Energy’s com- try and ensuring water does not settle and freeze is required by Russian federal law and covers sur- mitment to maximise the benefits and minimise around the pipe in winter, which would inhibit uv veys and environmental monitoring of industrial all the potential negative effects from the develop- movement and place stress on the pipe during sites and offsite locally. ment of Sakhalin-2 on people and the environ - an earthquake. wx

36 37 yz ef

villages throughout Sakhalin benefit from the FOC was used. The topsides were transported by spe- kl because a local telecommunications company cially constructed barges and positioned be tween uses part of the FOC network to provide internet the legs of the substructure. As the barge was access in many areas. ballasted, the topsides were gradually allowed to mn float over to the correct position. See also Con- FLARING crete gravity base structures and Topsides. op A way to dispose of produced associated gas or relieve produced gas pressure. The gas is burn- FLOTEL qr ed safely when there is no way to transport or use A flotel is a vessel converted into an accommoda- The TransSakhalin pipeline system crosses FOC link to the Lunskoye-A (Lun-A) platform. The it for any other purpose. tion facility so more staff can be deployed than on 19 fault lines. See also TransSakhalin pipelines. onshore cable, a bundle of glass threads encased a drilling rig or production platform. Sakhalin Ener- st in an armoured cable, is buried underground. In- FLOAT-OVER gy used three flotels during the commissioning FIBRE OPTIC CABLE formation is converted into light waves for trans- To place the Lunskoye-A (Lun-A) and Piltun-As- works on Sakhalin-2 platforms. uv A fibre optic cable (FOC) connects all of Sa kha - mission over the fibre cores. The FOC was manu - tokhskoye-B (PA-B) topsides’ onto their concrete Safe Astoria was built in 1983 as a semi-sub- lin Energy’s main onshore facilities by an undersea factured in St Petersburg and Moscow. Towns and gravity base substructures, the float-over method mersible drill platform and converted to a flotel wx

38 39 yz in 2005. It provided acommodation for up to 245 FLUME PIPE hold fractures open after a hydraulic fracturing personnel from the Lunskoye-A (Lun-A) platform A length of pipe used to channel water across the treatment. To stop sand from being produced during the construction period in 2008. Right of Way (RoW) for the TransSakhalin pipe- after fracturing, a sand screen is set in the well Safe Bristolia is a retrofitted semi-submer- lines. Sakhalin Energy used flume pipes during across the fractured interval. Sakhalin Energy ef sible drilling rig that is now a flotel, with accommo- the construction of river crossings, to temporari- used this technique for three oil producers in the dation for up to 600 offshore personnel. Operat ed ly channel water flow downsream, allowing cross- Astokh area of Piltun-Astokhskoye field at the by Consafe, it was deployed at the Lun-A platform ing work to be carried out in virtually dry condi- Molikpaq (PA-A) platform. gh in July 2006 as a flotel for the hook-up crew and tions, called the dry-cut crossing method. See at the Piltun-Astokhskoye-B (PA-B) platform for also Dry-cut crossing. FREE GAS ij topsides installation and hook-up. Gas occurring above oil in a reservoir. Free gas is The Sanko Angel is a multi-purpose vessel FOUNTAIN SYSTEM present when more gas is available than will dis- kl which operated as an accommodation vessel at Fountain is a data, information and knowledge solve in the associated oil under existing reservoir of specialty steel produced in the USA. The bear- the Lun-A platform for construction work in 2007. system that simplifies and improves reporting, pressure and temperatures. ings also help reduce ice and wave loads on the The ship is 76 metres long with 700 m2 of work- analysis, and learning, an essential tool for Sakha - platform and its equipment. Sakhalin Energy is mn able deck space and accommodation for 130 per- lin Energy’s effective functioning and develop- FRICTION PENDULUM the first oil and gas company worldwide to use sonnel. ment. Modules of the system have been custom BEARINGS friction pendulum bearings on its platforms and op designed for use by business functions. Friction pendulum bearings are installed below it is the first time the bearings have been used the topsides of the Lunskoye-A (Lun-A) and Pil - offshore in Russia. qr FRAC-PACK tun-Astokskoye-B (PA-B) platforms. The bearings Frac-Pack is a form of massive hydraulic fractur- allow the topsides to move during an earthquake, FROG ing used for sand control that combines hyd rau- thus protecting the topsides from damage, while The FROG is a personnel transfer capsule with a st lic fracturing with a gravel pack treatment. The the concrete gravity base structure remains firm- capacity of three or six people, developed by UK- fracture is generated in the same way as a mas- ly anchored to the seabed. The bearings have based Reflex Marine Ltd. It was deployed on all uv sive hydraulic fracture, but to stop the proppant, been manufactured to withstand the freezing tem- three offshore platforms for moving staff from ac- sized particles are mixed with fracturing fluid to peratures in the Russian Far East thanks to use commodation vessels to the platform. The FROG wx

40 41 yz was named after the northern Sakhalin town of Okha. See also Molikpaq and Vityaz production complex.

ij is lifted by crane from one deck to the next. It protects against the major hazards of marine per- kl sonnel transport such as falling, whiplash, and la- teral and vertical impacts through robust seats and seat harnesses. It is capable of righting itself mn and floating on water. op FSO OKHA The floating storage and offloading unit (FSO) qr Okha was part of the Vityaz production complex from to and used during seasonal oil production. Crude gh GAZPROM HYDRO- oil was pumped into the FSO from the Molikpaq st SEEDING platform and stored until a tanker arrived and con nected to the FSO to offload oil. The FSO left uv Sakhalin at the end of 2008 when year-round oil pro duction began from the Molikpaq. The FSO wx

42 yz GAZPROM TRANSGAZ TOMSK A well-established western Siberia gas transmis - sion company with some 30 years of experience in pipeline servicing. In 2008, Sakhalin Energy and Gazprom Transgaz Tomsk signed a five-year g contract for operations and maintenance of the Sakhalin-2 pipeline system. In addition to assur- gh ing the safe and reliable operation of Sakhalin GAZPROM Energy’s 1,670 kilometers of oil and gas onshore ij Gazprom, the world’s largest energy company, pipelines, Booster Station 2, and 104 block valve became Sakhalin Energy’s majority shareholder stations, OAO Gazprom Transgaz Tomsk will also kl in 2007. The government of the Russian Federa - service and maintain all support assets, using four tion holds a controlling block of Gazprom shares — pipeline maintenance depots strategically placed 50.002%. along the pipeline corridor at Nogliki, Yasnoye, mn Gazprom produces 20% of the world’s na - Gastello and Sovetskoye. tural gas and around 85% of Russia’s. Gazprom op exports gas to 32 countries. Under a commission from the Russian Federation, Gazprom coordi- qr nates activities to create a unified system of gas production, transportation and supply in East ern Siberia and the Russian Far East with a view to st exporting gas to China and other countries in the Asia Pacific, which is known as the Eastern Pro - uv gramme. See also Project history and Share - holding structure. wx

45 yz GENERAL BUSINESS PRINCIPLES the health of its workforce and promote health Sakhalin Energy conducts its business according improvements in the community. to a set of general business principles. The company’s core values of honesty, integrity and res- HEALTH, SAFETY AND pect for people are the foundation of these prin- ENVIRONMENT POLICY (HSE) ciples, displaying responsibility towards sharehol- AND COMMITMENTS gh ders, the Russian Party, customers, employees, h Sakhalin Energy introduced in 2001 a new Health, with those it conducts business, and society. The HEADS OF AGREEMENT Safety and Environment (HSE) Policy and Com- principles cover economics, competition, business A Heads of Agreement (HoA) is an important step mit ment as part of the HSE Management Sys tem, ij integrity, political activities, health, safety, secu- leading up to signing a full contract or Sales and mainly to show HSE plays a leading role in the whether its commitments must be strengthened, rity and the environment, local communities, com- Purchase Agreement (SPA). A legally binding do- company’s business. The policy also demonstrates more clearly defined, or changed. Some mitiga- kl munities and engagement, and compliance. More cument between two parties, an HoA outlines the how seriously the company takes its approach to tion measures may be found redundant as the information is available on Sakhalin Energy’s web- general terms and conditions of a deal, to be fur- environmental protection and the health and safe- relevant activity such as construction has been site at www.sakhalinenergy.com ther developed in a full SPA. Part of the market- ty of its staff and contractors. completed. Regular reviews and audits are con- mn ing activity of Sakhalin Energy’s liquefied natural ducted by Health, Safety, Environment and Se cu- gas (LNG) project included signing an HoA with HEALTH, SAFETY, ENVIRONMENT rity (HSES), Social Assessment and Project teams op customers. AND SOCIAL ACTION PLAN and by shareholders and lenders. The Health, Safety, Environmental and Social Ac- qr HEALTH IMPACT ASSESSMENT tion Plan (HSESAP) details around 800 obliga- HOOK-UP Sakhalin Energy conducted a Health Impact As- tions for Sakhalin Energy to carry out. The plan was Hooking up wells on an offshore platform to the sessment (HIA) with the support and participation drawn up in 2005 and revised in 2007. Regular vessels, equipment and control systems involv ed st of the Sakhalin Island health community. The HIA monitoring of how the HSESAP is being imple- in processing. The procedures involve installing addresses the impact on the health of the island mented is done to determine the efficiency of the pipe works from the wellhead to the inlet sepa- uv population of construction and operation of the measures and as required by Project lenders. ration vessel and hooking up systems to control project. Sakhalin Energy’s objective is to ensure Through this process, the company determines and monitor the well. wx

46 47 yz HORIZONTAL mulch, water, tackifier and fertiliser over bare soil. DIRECTIONAL DRILLING The slurry mix is prepared in an agitator tank and Horizontal Directional Drilling (HDD) is similar to sprayed over prepared ground in a uniform layer. the drilling technique used for constructing oil and Hydroseeding is an effective alternative to manu- gas wells. HDD minimises impacts on the aqua tic al seeding, especially in difficult areas such as environment. Sakhalin Energy used HDD during slopes. It also promotes rapid germination and construction of the TransSakhalin pipelines to drill growth of the plant species used in the slurry mix bedrock underlying watercourses and complet- compared with other seeding methods, which in ely avoid contact with the water. The Company used turn reduces the potential for soil erosion. See ij HDD when crossing six of the largest rivers with the also Reinstatement measures. greatest potential for commercial fisheries. See kl also River crossings and TransSakhalin pipelines.

HURRY UP FOR GOOD DEEDS mn See Social Investment — Employee Charitable Support Programme op

HYDROCARBONS qr Compounds of hydrogen and carbon in various from to combinations present in petroleum products and ij ICE SCOUR JOINT COMMITTEE natural gas. st

HYDRO-SEEDING uv A biological reinstatement technique that uses specialised equipment to apply a slurry mix of seed, wx

48 yz i ICE SCOUR A geological term for long, narrow ditches in a ij seabed created by the collision of fast ice and pack ice. Ice scouring data obtained during the kl Sakhalin-2 project contributed to scientific knowledge and allowed Sakhalin Energy to model safe and reliable pipeline laying techniques. mn The data also contributed to Sakhalin Ener- gy’s decision to reroute its pipelines. Deeper tren- op ches were required to prevent excessive noise during construction. qr

IMPACT ASSESSMENT st The process of predicting the health, social, and INDIGENOUS PEOPLE environmental consequences of a current or pro- Four main groups of indigenous minorities live uv posed action and managing these through project on Sakhalin Island: Nivkh, Uilta (previously known design, mitigation and enhancement. as Orok), Evenk and Nanai. Traditionally, the Nivkh wx

51 yz cul ture is based around salmon fishing, dogbreed- INFRASTRUCTURE communications and waste disposal facilities. ing and hunting, while the Nanai culture relied on UPGRADE PROJECTS Work began in 2002 on the infrastructure up grade salmon fishing and hunting. The economies of the Sakhalin Energy runs extensive, ongoing infra- projects. In 2005, hospitals in Nogliki, Proronsky Uilta and Evenk peoples revolve around fishing structure upgrade projects totalling $500,000 of and Yuzhno-Sakhalinsk started receiving new me- as well as breeding and herding reindeer. See improvements to Sakhalin’s railways, bridges, dical equipment and six district hospitals were also Sakhalin Indigenous Minorities Develop - roads, ports and airports, and health care, tele - getting emergency response ambulances. ment Plan.

INDIRECT VERTICAL ij FRACTURE (IVF) A special technique used for well completion that kl allows the rate of oil or gas produced from a for - mation of either hydrcarbon to be increased or restored. The high-permeability layer above the company assets. Each centre works on the pre- mn perforated interval is indirectly connected with a mises of a local library, and is equipped with new vertical fracture. IVF is widely used by Shell but offices, internet access, and a fire and security op is new to Russia. Sakhalin Energy used this tech- alarm system. nique for most of the producers in the Astokh area The information centres are spread evenly qr of Piltun-Astokhskoye field at the Molikpaq (PA- across the Island, in the regional centres of Do - A) platform. linsk, Smirnikh, and Kholmsk and in rural locations with populations of only a few hundred. st INFORMATION CENTRES In addition to providing Sakhalin’s residents Sakhalin Energy successfully completed the chal- with a new means of communication, the centres uv lenging 20 information centres project in 2009, also make information available on the Sakhalin - opening centres throughout Sakhalin Island near 2 project and Company activities. wx

52 53 yz INTEGRATED SAFE are designed to ensure economic and financial SYSTEM OF WORK efficiency and effective solutions in these four (ISSOW) domains. Also known as the electronic permit to work system, Sakhalin Energy trialed the Integrated Safe INTERNATIONAL ORGANIZATION System of Work (ISSOW) for the first time in Rus- FOR STANDARDISATION (ISO) sia, for possible approval for use by the oil and An international accreditation programme that j gas industry operating in the Russian Federation. includes ISO 14001, an international standard for Monitored by RosTechNadzor, the Russian tech- environmental management systems. ISO award - JAPAN BANK ij nical safety authority, the ISSOW is the first of its ed ISO 14001 to Sakhalin Energy’s Vityaz pro- FOR INTERNATIONAL kind management system to ensure activities are duction complex in January 2004 and renewed it COOPERATION kl carried out safely by identifying risks, control and in January 2007. ISO certified two new offshore Formed as a result of a merger in 1999 between mitigation measures before work begins. platforms, Lunskoye-A (Lun-A) and Piltun-As tokh- the Export-Import Bank of Japan (JEXIM) and the skoye-B (PA-B), with ISO 14001 in May 2008, Overseas Economic Cooperation Fund, Japan mn INTERNATIONAL and Prigorodnoye complex in September 2008. (OECF). JEXIM was a significant lender to Sa kha- INJECTION WELL FINANCE CORPORATION The onshore processing facility (OPF) and Pipe - lin Energy during Phase 1, and JBIC followed suit, op Wells into which fluids (water, gas) are pumped (IFC) line Operations were certified in March 2009 as into the reservoir formation to maintain reservoir IFC is a member of the World Bank Group, that compliant with ISO’s Environmental Manage ment qr pressure and displace oil, used on the onshore invests in the private sector. In addition to com- Systems standard 14001:2004, marking the final platforms for the Sakhalin-2 project. Separated pliance with the Russian Federation and PSA re- stage in the certification process for all of Sakhalin gas from production wells may be reinjected into gulations, Sakhalin Energy and its engineering, Energy’s facilities and operations. st the upper gas section of the reservoir. Water in - procurement, construction, and operation con- The laboratory at the liquefied natural gas jection wells are common offshore where filtered tractors and sub-contractors execute their acti - (LNG) plant received ISO 17025 in 2007, which uv and treated seawater are injected into a lower vities in accordance with IFC social, health, safe- specifies general competency requirements to water-bearing section of the reservoir. ty and environmental requirements. IFC standards carry out calibrations, including sampling. wx

54 55 yz contributing $116 million to Sakhalin-2 in 1997. in the implementation of the Production Sharing Sakhalin Energy secured $3.7 billion from JBIC Agreement (PSA). for Phase 2 in 2008. It comprises six members, two each from Sa khalin Energy, the Ministry of Energy of the JOINT COMMITTEE Russian Federation, and the Department of Oil The Joint Committee was set up to ensure a and Gas Complex of Sakhalin Oblast. See also high level of participation by Russian industries Production Sharing Agreement.

op klfrom to qr KHOLMSK LUNSKOYE st SUPPLY BASE LANDFALL AREA uv

56 yz the projects Sakhalin-1 and Sakhalin-2. Sakhalin Energy also upgraded ancillary works including offices at Kholmsk, as part of the infrastructure programme. See also Infrastructure upgrade projects.

KORSAKOV k The nearest town to the liquefied natural gas (LNG) KHOLMSK SUPPLY BASE plant and the oil export terminal (OET) at Prigo - Located at Sakhalin’s western seaport, the Kholmsk rod noye, Korsakov is on the northern edge of Ani - supply base is the main port supporting Sa kha - va Bay south of Sakhalin Island. Fishing is its ma- lin Energy’s three offshore production platforms. jor industry, and its major resource area is Aniva kl The base has facilities for storing and handling Bay, where crab, salmon, scallop and pollock are cargo. Through Sakhalin Energy’s infrastructure plentiful. Korsakov is a major recreation area for upgrade programme, Kholmsk was transformed Sakhalin residents on the southern part of the is- mn from a struggling fishing port into a thriving sup- land. See also Aniva Bay and Resettlement Ac - ply area. It now provides catering for vessels from tion Plan. op

59 yz include the Piltun-Astokhskoye license area, lo - heavy hydrocarbons are removed from the gas cated approximately 12 miles from the northeast in various processes. During the subsequent cool coast of Sakhalin Island, and the Lunskoye li - down, the gas becomes a clear, colourless, odour - cense area, located approximately 8 miles from less liquid. The density of LNG is less than half the northeast coast of Sakhalin Island. the density of water so it floats if spilled on wa - ter. In this aqueous state, natural gas reduces in l LIQUEFIED NATURAL GAS volume 600 times, so it can be transported by sea LANDSLIDES Liquefied natural gas (LNG) is natural gas in its in LNG tankers. It is returned to a gaseous state Landslide risk along the TransSakhalin pipeline is liquid form. Natural gas is primarily made up of at re-gasification terminals after delivery to cus- mostly confined to a very mountainous section of methane, and also contains low concentrations tomers. LNG is not corrosive or toxic. It can be the pipeline corridor that passes through the Ma- of other hydrocarbons, water, carbon dioxide, ni- used for heating and cooking as well as to gene - kl karov Mountains. Information gathered from ma- tro gen, oxygen and some sulphur compounds. rate electricity and for other industrial uses. LNG ny geological and geo-hazard studies of both During the liquefaction process, natural gas is can also be kept as a liquid to be used as an al - existing and potential landslides was taken into cooled to minus 160 degrees Celsius. Before the ternative source of transportation fuel. Natural gas mn account when designing the pipeline. In addition gas is cooled, water vapour, carbon dioxide and is the cleanest burning fossil fuel and LNG is a quickly and safely evacuated from the plant to re-routing the pipeline factoring in landslide price-competitive source of energy that could help through a tall vertical pipe (the flare stack) for op risks, Sakhalin Energy uses industry best prac- meet the future energy needs of many countries. immediate ignition by a pilot flame. While the tices to mitigate the risk to as low as reasonably It also offers unrivalled flexibility of delivery com- plant is operating the pilot flame at the top of qr practicable, ensuring the safety and integrity of pared with gas supplied via pipeline. the flare stack is constantly kept alight — con- the entire TransSakhalin pipeline system in ope- firming normal operations. The pilot flame en - ration. LIQUEFIED NATURAL GAS FLARE sures that should gas need to be quickly vented st The flare at Sakhalin Energy’s liquefied natural from the plant it will always ignite at the top of LICENCE AREAS gas (LNG) plant at Prigorodnoye is a crucial ele- the flare stack. This ensures there is less impact uv The sub-soil areas specified in the Production ment of the plant’s safety system. Flaring is the on the environment compared to releasing un- Sharing Agreement. For Sakhalin Energy, these process by which excess gas from the plant is ig nited gas. wx

60 61 yz and in June 2008 by the Dewa Maru (114,000 m3) four loading arms. The water depth at the tail of from an LNG facility in Japan. the jetty is 14 metres. The jetty services LNG The LNG delivered by the carriers was used tankers that have capacities of 18,000 m3 to to cool loading lines, equipment and LNG storage 145,000 m3. Loading operations take from six tanks. The imported LNG was also used during to 16 hours, depending on vessel capacity. The commissioning for the flaring system, gas turbine jetty will load around 160 LNG carriers per year. generators, boil off gas compressors and other major elements of the process trains.

LIQUEFIED NATURAL GAS JETTY Liquefied natural gas (LNG) is loaded onto tan - kl kers from an 805 metres long LNG loading jetty. LIQUEFIED NATURAL The jetty is fitted with four arms — two loading GAS LABORATORY arms, one dual-purpose arm and one vapour re- The laboratory of the liquefied natural gas/oil ex- mn turn arm. The jetty’s trestle consists of 10 support terminal (LNG/OET) received ISO 17025 ac- ports and 11 metal truss spans creating two le- creditation in 2007. Eight staff are employed in op vels — nine 80 metres trusses and two trusses the laboratory, equipped with state-of-the-art in - LIQUEFIED NATURAL with lengths of 40 metres and 45 metres. The up- strumentation to analyse oil, gas, chemicals and qr GAS IMPORTS per deck is designed for electric cables and a ro- water streams produced at the site. The laborato- Sakhalin Energy imported three cargoes of li - ad bed four metres wide. The lower deck is used ry also analyses sea samples from the platforms. quefied natural gas to help accelerate the start-up for the LNG pipeline, communication lines and a st process for its LNG plant. Deliveries were made one-metre-wide footpath. LNG is pumped from LIQUEFIED NATURAL GAS in July 2007 by the Granosa from Botang, Indone - the storage tanks into the parallel loading lines, MEASUREMENT METHODOLOGY uv sia (130,000 m3), in October 2007 by the Arc tic which are brought to the LNG jetty. At the jetty A special methodology developed by the Rus - 3 Sun from an LNG terminal in Alaska, (85,000 m ) head, the pipelines are connected with the jetty’s sian Meteorology Institute, VNIIR, at the request wx

62 63 yz of Sakhalin Energy, based on the international lin’s, based on the use of a double mixed refrige- The complex includes the following equipment standard of liquefied natural gas (LNG) measure- rant (DMR). This advanced technology was adapt- and infrastructure: ment. The main difference with a crude oil mea- ed to ensure maximum production efficiency du- I two 100,000 m3 storage tanks; surement is an LNG measurement performed on- ring the extremely cold winters in Sakhalin. I an LNG jetty; board ship using the Custody Transfer Measure - In November 2007, Shell’s then CEO, Jero en I two LNG processing trains, each with a capa - ment System and verified by an internationally van der Veer, presented Sakhalin Energy’s LNG city of 4.8 million tonnes of LNG per year; recognised entity. project team with a special safety award, for I two refrigerant storage spheres with a gross achieving a record 20 million man-hours free of capacity of 1,600 m3 each for propane and LIQUEFIED NATURAL GAS PLANT lost time in ci dents (LTI). The award was also a ethane storage; The Sakhalin-2 liquefied natural gas (LNG) plant record for the Shell Group for a greenfield con- I a diesel fuel system; integrity of critical elements, such as an emer- is the first of its kind in Russia. Located in Pri go rod- struction site. I a heat transfer fluid (HTF) system to supply gency shut down valve and the control room of kl noye in the south of Sakhalin Island, it receives, The LNG plant is one of Sakha lin’s most po- heat to process consumers; the plant. If necessary, the plant can be shut down treats, processes and liquefies natural gas. A spe - pular visitor attractions. Russian Federation Pre- I five gas turbine-driven generators with a to- safely. See also Double mixed refrigerant pro cess, cial gas liquefaction process was developed for sident, Dmitry Medvedev, inaugurated the LNG tal power capacity of around 129MW; Liquefied natural gas processing trains. mn the plant, for use in cold climates such as Sakha - plant in February 2009. I utility systems, including instrument air and nitrogen plants and diesel fuel systems; LIQUEFIED NATURAL GAS op I a wastewater treatment plant to treat both PROCESSING TRAINS sewage water and coil-containing water. Two liquefied natural gas (LNG) parallel process- qr ing trains with an annual capacity of 4.8 million The treated water complies with the highest in - tonnes are fitted with a removal unit for carbon ternational standards and follows the most strin- dioxide and hydrogen sulfide, a gas dehydration st gent Russian and international design codes. The unit with molecular sieves, mercury removal using plant was designed to prevent a major loss of con- activated carbon, fractionation for refrigerant and uv tainment in the event of an earthquake, meaning stable condensate production, and a gas lique- no major loss of LNG, and ensuring the structural faction unit. wx

64 65 yz LIQUEFIED NATURAL protects the outer tank from the low LNG tem- GAS TRANSPORTATION perature and maintains the temperature inside Sakhalin-2 liquefied natural gas is transported by the tank. specialised LNG carriers. Only about 300 specialised LNG tankers are operating worldwide. The LUNSKOYE-A tankers are built to the most stringent safety re - The Lunskoye-A (Lun-A) platform was installed in quirements. The LNG temperature is maintained the Lunskoye gas field, 15 kilometers offshore in LIQUEFIED NATURAL GAS TANKER at minus 162 degrees Celsius, thanks to an on- the Sea of Okhotsk at a depth of 48 metres. The A tanker that transports liquefied natural gas board cooling system and several polyurethane Lun-A platform is equipped with minimum proces- (LNG). Three specialised tankers were built to insulation layers. sing facilities. It is designed for production year and drilling equipment are located at the oppo- ship Sakhalin LNG to buyers. The Grand Aniva and Three specialized LNG tankers were built to round, and produces the majority of gas for the site end of the platform from the living quarters to kl the Grand Elena were built at Mitsubishi Heavy transport Sakhalin LNG to buyers. The tanks on liquefied natural gas (LNG) plant. Gas treatment maximise safety. The main working areas are en- Industries shipyard in Nagasaki, Japan. The ice- these vessels are spherically shaped and made is carried out at the onshore processing facility closed, temperature controlled and ventilated. strengthened carriers have an LNG capacity of of aluminium alloy. The tankers are also double (OPF) before the gas is transported to the LNG Equipment located in the open is protected from mn 145,000 m3 and were built for a Japanese-Rus- hulled to maintain the inside temperature while plant. Power to Lun-A is supplied by OPF through ice and cold weather. sian joint venture of Nippon Yusen Kabushiki Kai- protecting the outer tank from the low temperatu - a subsea cable. The platform’s substructure is a A special barge was constructed to transport op sha (NYK Line) and JSC Sovocomflot, the Rus- re inside. See also Liquefied natural gas tanker. four-legged concrete gravity base (CGBS) which the topsides to Sakhalin. While being loaded onto sian-owned shipping company. supports the topsides facilities. The southeastern the barge, jacks elevated the topsides to a height qr The Grand Mereya was built at the Chiba LIQUEFIED NATURAL leg is used as the well bay, the northeastern leg of 25 metres. In June 2006, the Lun-A platform works shipyard in Japan by a Japanese-Russian GAS STORAGE TANKS for the pipeline risers, and J tubes and the re - topsides were installed on the base using the float- consortium of Mitsui OSK Lines, Kawasaki Kisen Liquefied natural gas (LNG) tanks are double wall - maining legs for the pumps and tanks. The inte- over method. The barge with the topsides was st Kaisha and Primorsk Shipping Corporation ed and measure 37 metres tall and 67 metres wide. grated topsides facility was built in South Korea. placed between the legs of the concrete base. The (PRISCO). Designed to operate in low tempera- The inner tank is made of 9% nickel steel. The ex - The topsides include drilling and hydrocarbon li- massive structure of the topsides was slowly and uv tures, the specialized carriers ensure year-round ternal tank is made of pre-stressed reinforced quids separation facilities, storage for chemicals smoothly lowered onto the base legs through bal- operation from Sakhalin where winters are severe. concrete. Heat insulation between the two layers and a living quarters module. All the processing lasting, and attached to the friction pendulum wx

66 67 yz bearings, creating a new record for this type of in- See also Concrete gravity base structures, Ex - stallation. Friction pendulum bearings were plac- tended reach drilling, Float-over, Friction pendu- ed below the platform’s topsides to allow the top- lum bearings and Topsides. sides to move during an earthquake while the CGBS remained firmly anchored to the seabed. LUNSKOYE FIELD Lun-A will be used for extended reach drilling of The Lunskoye gas field is in the Sea of Okhotsk deviated wells to a maximum horizontal deviation off the northeast coast of Sakhalin Island. The up to 6 kilometers, and to a maximum true verti- Lunskoye-A platform was installed in the field in cal depth of 2,960 metres. Lun-A’s has the capa - June 2008. See also Lunskoye-A. city to produce more than 50 million m3 of gas, and associated condensate and oil of around LUNSKOYE LANDFALL AREA 8,000 m3 (50,000 barrels) per day. Gas from Lun- A multiphase pieline from the Lunskoye-A plat- A came onstream in January 2009. form comes onshore around seven kilometers from the onshore processing facility (OPF). Hyd- mn Statistics: rocarbons are transported from the OPF to the Accommodation.....126 staff liquefied natural gas (LNG) plant and oil export op Substructure...... height: 69,6 metres terminal at Prigorodnoye. weight: 103,000 tonnes qr base: 88m x 105m x from to 13.5 metres mn MANUAL SEEDING NON-FINANCIAL Leg height...... 56 metres st REPORTING Leg diameter ...... 20 metres Topsides ...... weight: 21,800 tonnes uv flare stack height: 105 metres wx

68 yz the RoW by hand or mechanical hand spreader. This is the most common method used on the RoW. For less fertile soils found in the northern part of Sakhalin Island, fertiliser is also spread over the RoW. Organic erosion matting made m from coconuts is also used extensively to promote MANUAL SEEDING seed germination and growth in the northern Manual seeding is a biological reinstatement areas. See also Reinstatement measures. tech nique used to sow seeds on the Right of Way (RoW) for the TransSakhalin pipeline. The pro cess MARINE MAMMAL begins with ground preparation (i.e. ripping, till- PROTECTION PLAN ing) to reduce soil compaction and create a rou- The Marine Mammal Protection Plan was put into ghened surface that acts as a sink for seeds, wa- effect in 2006 with the primary aim of introduc- ter, and nutrients. Next, seeds are sown along ing measures to mitigate any impacts from the mn

71 yz MITIGATION MEASURES Malaysia Australia, Indonesia and Oman. See al - Measures designed to mitigate the negative im- so Shareholding structure. pacts and enhance the positive benefits from the construction and operation of the Sakhalin-2 pro- MITSUI & CO. LTD. ject. The purpose is to remove, minimise and com- Mitsui is one of Japan’s leading trading houses. pensate for adverse effects to as low as rea son- The company currently participates in liquefied na- ably practicable. The measures were developed tural gas (LNG) projects in Abu Dhabi, Australia, to address potentially identified adverse im pacts. Oman, Qatar, Indonesia and Equatorial Guinea as The measures address the following areas: well as in the Sakhalin-2 project. In oil and gas ex- I avoidance; ploration and production (E&P), Mitsui has built so - I compensation; lid upstream assets in the Middle East, Southeast I decreasing probability of occurrence; Asia, Oceania and North America. Mitsui accounts Sakhalin Energy projects on the Western Gray MEMORANDUM OF I enhancement; for approximately one quarter of crude oil and oil Whale and other marine mammals. For more UNDERSTANDING (МОU) I impact reduction; products traded in Japan. See also Share hold - mn in forma tion, please visit www.sakhalinenergy. A Memorandum of Understanding (MoU) is often I prevention. ing structure. com the first step in a series of agreements leading to op developing a complex contract between compa ni - MITSUBISHI CORPORATION (MC) MASSIVE HYDRAULIC es. It is typically not a legally binding do cument. Mitsubishi Corporation (MC) is Japan’s largest qr FRACTURING general trading company (sogo shosha), with more A technique used in well completion to increase MISSION than 200 bases of operations in approximately or restore productivity. A viscous fluid carrying Sakhalin Energy is committed to being a pre- 80 countries around the world, including Japan. st proppant or sand is pumped into the formation mier energy supplier, recognised for its opera- With seven business groups and more than 500 above the fracture pressure, to split open the rock tional excellence, reliability and safety. We con- subsidiaries and affiliates, MC serves custo mers uv and create a high productivity channel. The tech- duct our business in an ethically, socially and in virtually every industry. In addition to Sakhalin, nique is commonly used in Russia. environmentally responsible manner. MC is involved in LNG projects in Brunei, Alas ka, wx

72 73 yz in the Beaufort Sea. Fitted to the bottom of the Mo- Deck...... 73 x 73 metres MULTIPHASE LINE likpaq is a 15 metres steel spacer so the platform Helideck height ...... 49 metres Carries gas, condensate and glycol water from could be installed in the deeper waters off Sa - Drill slots ...... 32 drill slots Lunskoye-A (Lun-A) to the onshore processing kha lin Island. The Molikpaq contains a caisson Operating wells: facility (OPF). structure, its centre filled with sand ballast to en- 13 oil producing, one well for gas injection, four sure effective anchoring of the platform on the wells for water injection and one well for drilling MULTIPLIER EFFECT seabed. waste injection. See also Caisson and Extended Investments into development of a large scale The main working areas are enclosed, tem- reach drilling. project that generate more business for industries perature controlled and ventilated. Outside equip- and services outside the sector of that project. ment has winter protection. Living quarters were MONO-ETHYLENE GLYCOL Sakhalin Energy’s work on the Sakhalin-2 designed for 134 permanent and 30 seasonal em - Used to inhibit the formation of natural gas cla- project boosted development of many local, re- ployees. Extended reach drilling of deviated wells thrate hydrates in offshore pipelines. Ethylene gional and national enterprises, giving them po- to a maximum horizontal deviation up to 6 kilo- gly col can be recovered from natural gas and tential access to non-Russian markets, and ge- meters and a maximum well depth of up to 6,650 reused as an inhibitor, after a purification treat- ne rating more em ployment, higher salaries, in - mn metres were used on the Molikpaq. The daily pro- ment that removes water and inorganic salts. creased retail trade, better social programmes MOLIKPAQ duction capacity of the Molikpaq is 90,000 bar- Ethylene glycol is combustible but not flamma- and larger tax payments. The Project has contri- op The platform installed in the Astokh part of the rels (14.3 thousand m3) of oil and 2.1 million m3 ble. See also Onshore processing facility. buted to a wide-ranging revitalisation of the eco- Piltun-Astokhskoye field in the Sea of Okhotsk in of associated gas. Previously operating only dur - nomy on Sakhalin Island, generally referred to as qr September 1998, 16 kilometers offshore and at ing the summer months, year-round production a “multiplier effect”. a depth of 30 metres. Molikpaq was the main fa- from Molikpaq started in November 2008. According to the Council for Research of Pro- cility of the Vityaz production complex during sea- ductive Forces part of the Ministry of Economic st sonal oil production. The Molikpaq is a converted Statistics: Development of the Russian Federation, every ice-class drilling rig. Its name means “Big Wave” Base ...... 111 x 111 x 111 metres dollar invested into the construction of the Sa- uv in the language of the Inuit people of northern Ca- Weight ...... 37,523 tonnes khalin-2 project has generated another 0.60 dol - nada, where the drilling rig was previously based, Derrick height ...... 101 metres lar in other sectors of the economy. wx

74 75 yz since 2002. In 2009, the company decided to implement the Guidelines of the Global Reporting Initiative (GRI), a set of international standards on sustainable development reporting emphasizing best company practices on social, economic, and n environmental issues. NON-DESTRUCTIVE TESTING OF PIPELINE WELDS As a part of safety procedures, X-rays fully in - spected all welds on the TransSakhalin oil and gas pipelines. To ensure complete integrity in the event of an earthquake, the welds on sections of the pipeline that cross seismic faults were in - spected by Automatic Ultrasound.

NON-FINANCIAL REPORTING op Part of a management system to internally monitor the processes used to carry out a compa- qr ny’s commitments in social performance mana- from to gement and how these processes are fulfilled and op OFFSHORE PIPELINES PUBLIC improved. Non-financial reporting is also a tool st CONSULTATION used to deliver information to all stakeholders, in- AND DISCLOSURE cluding the release of comprehensive data on so ci- PLAN uv al, economic, and environmental subjects. Sa khalin Energy has conducted non-financial report ing wx

76 yz pipelines apart from the MEG delivery pipeline have asphalt enamel coatings and concrete weight coatings. The MEG delivery pipeline has a three- layer polyethylene coating. o The 300 kilometers offshore system comprises OFFSHORE PIPELINES these pipelines: The offshore pipeline system that includes the oil I two 14” pipelines from PA-A to shore; and gas transportation pipelines from the Molik - I two 14” pipelines from PA-B to shore; paq platform (PA-A), Piltun-Astokhskoye-B plat- I two 30” pipelines from Lun-A to shore at the form (PA-B) and Lunskoye-A platform (Lun-A) to OPF; shore, a mono-ethylene-glycol (MEG) delivery line I one 4.5” pipeline from shore to the Lun-A from the onshore processing facility (OPF) to the platform; Lun-A and an oil-loading pipeline at the oil export I one 30” pipeline for tankers from the OET to terminal (OET) at Prigorodnoye. All the offshore the tanker loading unit (TLU) in Aniva Bay. op

79 yz OIL EXPORT TERMINAL has organised effective oil spill response plans of the Sakhalin shelf, especially from January to The oil export terminal (OET) is located at Prigo - (OSR), and is developing an OSR for use in each March. In compliance with Sakhalin Energy’s po- rodnoye, next to the liquefied natural gas (LNG) of the Company’s facilities onshore, offshore, and licy on ecological responsibility, all Company tan- plant. An export pipeline and a tanker loading for the Prigorodnoye complex. Regular field train- kers are double hulled. A bow-loading system is unit (TLU) are incorporated into the OET where ing exercises are held and substantial funds have used to load the oil, allowing for year-round export. oil is stored prior to loading on a tanker. Oil from already been invested in more than 1400 items of The “Governor Farhutdinor” and “Sakhalin the Piltun-Astokhskoye oilfield is supplied to the equipment to respond to an oil spill, which are in Is land” tankers each have a loading capacity of OET via the TransSakhalin oil pipeline, and mixed place and ready to be deployed in an emergency. 108 000 tonnes, while “Zaliv Aniva” has a capa - with condensate produced from the Lunskoye-A The Irbis is an oil spill response (OSR) ves- city of 130 000 tonnes. (Lun-A) platform at the onshore processing fa ci - sel that is on standby twenty four hours a day at OIL STORAGE TANKS All oil carriers are chartered by Sakhalin li ty (OPF). Then the oil is placed in storage tanks the Molikpaq (PA-A) platform. It has three ma rine The oil export terminal (OET) at Prigorodnoye Energy. Oil transportation under the Sakhalin-2 at the OET. Situated on the eastern side of the OSR systems on board including marine booms, complex houses two oil storage tanks. The tanks project is also performed on customers’ vessels. LNG plant, the OET shares utility systems and its skimmers and sorbents. See also Boom, Disper - have geodesic curvature-type domes with float- See also Aframax. common plant control systems, based in the LNG sant, Sorbents. ing internal roofs and a total net operating capa - control centre. city of 1.2 million barrels (190,000 m3), equal to ONLINE BIDDING six days throughput for the onshore pipeline. Oil An internet-based quotation tool applied only un- op OIL SPILL RESPONSE leak detection systems are installed in the tank der certain market circumstances as an integrat- Sakhalin Energy has an excellent record in oil spill pads to prevent soil contamination. ed part of a tender or quotation process. It allows qr prevention over 10 production seasons, since oil potential suppliers to place quotations in a dyna - production started at the Vityaz Production com - OIL TRANSPORTATION mic bidding environment where every supplier or plex in 1999. As of early 2009, only 2.5 barrels Crude oil from the Sakhalin-2 project is trans- other bidder can react to quotes from competi- st or 396 litres of oil have been spilled from a total ported to customers by oil tankers “Governor Far- tors. Sakhalin Energy pioneered OLB on Sakha lin of 97.3 million barrels which is about one litre for hutdinov”, “Sakhalin Island” and “Zaliv Aniva”. Island in October 2006 when it awarded a contract uv every 39 million litres produced. The company has These ice-reinforced vessels were custom built to for transportation between Moscow and Yuzhno- a comprehensive oil spill preparedness plan and operate in low temperatures and for the climate Sakhalinsk following an OLB process. wx

80 81 yz ONSHORE PIPELINES I one 48” gas pipeline from OPF to LNG — 620 The onshore pipeline system stretches for more kilometers; than 780 kilometers from the Chaivo landfall on I one 24” oil pipeline from OPF to OET — 620 the northeastern coast of Sakhalin to the on shore kilometers. processing facility (OPF), and continues to the liquefied natural gas (LNG) plant and the oil ex port The oil and gas pipelines are laid in a single Right p terminal (OET) in the southern part of the island. of Way (RoW), 36 metres wide in most sections north of OPF and 43 metres wide south of OPF. PERMIT TO WORK The entire onshore pipeline consists of these The pipes are laid in separate trenches not less See Integrated Safe System Of Work. pipelines: than one metre beneath the surface and are coat- I two 20” oil and gas pipelines from the Chai - ed with three layers of polyethylene to protect PHASE 1 vo landfall to OPF — 160.5 kilometers; against corrosion. from the Lunskoye gas field before pumping these Phase 1 of the Sakhalin-2 project started in 1996 I two 30” multiphase pipelines from shore to hydrocarbons into the TransSakhalin pipeline sys- and was focused on oil development in the Pil tun- OPF — 6.8 kilometers; ONSHORE tem for transport to the liquefied natural gas (LNG) Astokhskoye field. The Molikpaq (PA-A) platform PROCESSING FACILITY plant and the oil export terminal (OET). Oil and gas The onshore processing facility (OPF) covers produced from the Piltun-Astokhskoye platforms op 62.2 hectares and is located northeast of Sa - arrives at the OPF and is then transported by pipe- khalin, seven kilometres from the landfall point line to the LNG plant and the OET at Prigorod - qr of the multiphase pipelines from the Lunskoye-A noye complex. The OPF also supplies power to (Lun-A) platform, and 70 kilometers from the vil - the Lun-A platform. Mono-ethylene is piped to lage of Nysh. Transport to the OPF is via an over- the Lun-A from the OPF and used in the platform st night train journey of 14 hours or a plane trip of process to inhibit hydrates. The glycol returns to one to two hours to Mogliki, followed by a two- the OPF via the multiphase pipeline to be regene - uv hour car journey. The primary function of the OPF rated. This is a continuous loop process. See al- is to process the gas and condensate produced so Mono-ethylene glycol. wx

82 83 yz was installed as part of the Vityaz production com- processing facility, Liquefied natural gas plant, and at the oil export terminal (OET) in Prigo rod - plex and for seasonal oil production. Between 1999 Oil export terminal, Offshore pipelines, Onshore noye comlex. See also Pipeline inspection gauge and 2008, seasonal oil production yielded more pipelines and TransSakhalin pipelines. (PIG). than one million barrels. See also Molikpaq, Pro- ject history, Vityaz crude oil and Vityaz produc- PIG TRAP STATIONS PILTUN-ASTOKHSKOYE-A (PA-A) tion complex. The Sakhalin-2 project has five pig trap locations, See Molikpaq. at Chaivo, the onshore processing facility (OPF), PHASE 2 at Gastello, the liquefied natural gas (LNG) plant, PILTUN-ASTOKHSKOYE-B (PA-B) Sakhalin Energy launched Phase 2 of the Sa kha- The Piltun-Astokhskoye — B (PA-B) platform was lin-2 project in 2003, an integrated oil and gas de- installed in July 2007 in the Piltun area of the Pil- velopment, with six sub-projects simultaneously tun-Astokhskoye oil field, 12 kilometers offshore implemented to enable year-round oil and gas and at a depth of 32 metres. Designed for year- production from the Molikpaq (PA-A), Lun skoye- round production, the PA-B is a drilling, process- A (Lun-A), and Piltun-Astokhskoye-B (PA-B) plat- ing and production platform that extracts oil and forms. Phase 2 also involved the construction of a associated gas from the Piltun reservoir. The plat- liquefied natural gas (LNG) plant and oil export form’s substructure is a four-legged concrete gra- op terminal (OET) at Prigorodnoye complex in the vity base which supports the topside facilities. The south of Sakhalin, an onshore processing facili- southeastern leg will be used as the well bay, the qr ty (OPF), offshore pipelines and onshore pipe - north-eastern leg for the pipeline risers, J tubes lines. Sakhalin Energy received the Distin guish - and the remaining legs for pumps and tanks. The ed Achievement Award for Phase 2 at the 2009 integrated topside facility was manufactured for st Offshore Technology Conference, in recognition the PA-B in South Korea. The topsides include of its unique and significant achievements in de- drill ing and hydrocarbon liquids separation fa ci li - temperature controlled and ventilated. Equipment uv veloping offshore technology. See also Lun- ties, storage for chemicals and a living quarters located in the open has ice protection. PA-B’s pro- skoye-A, Piltun-Astokhskoye-B (PA-B), Onshore mo dule. The main working areas are enclosed, duction capacity is around 70,000 barrels (11.1 wx

84 85 yz thousand m3) of oil and 92 MMscf (2.9 million m3) PILTUN FEATURE OF financial, environmental and other aspects of of associated gas per day. PILTUN-ASTOKHSKOYE FIELD developing Sakhalin-2. The PoD is subject to the The Piltun-Astokhskoye-B (PA-B) platform is built approval of the Supervisory Board of Sakhalin-2. Statistics: in this area, in the Sea of Okhotsk off the north- The PoD of Phase 1 was approved in 1997, for Accommodation.....100 permanent east coast of Sakhalin Island. See also Hydro car- Phase 2 in 2001 and an update for Phase 2 was and 40 temporary staff bon resource volumes and Piltun-Astokhskoye- approved in 2003. See also Production Sharing Substructure...... height: 53 metres B (PAB). Agreement. weight: 90,000 tonnes dimensions: PIPELINE INSPECTION PRESSURE 94 x 91.5 x 11.5 metres GAUGE (PIG) PIPELINE MAINTENANCE Topsides ...... flare stack height: A pipeline tool that runs through lengths of in - MAINTENANCE DEPOTS PROJEСT (PMP) 98.6 metres stall ed pipeline for commissioning and mainte- Stations that support and maintain the pipeline After completing Phase 1 development drilling for weight: 28.000 tonnes nance. PIGs serve a wide range of functions, from system. The depots are also used to store ma- Astokh, and initial production under a depletion well slots: 45 well slots a simple foam cleaning PIG to intelligent PIG for chi nery and equipment for onshore oil spill res - drive with gas reinjection, water injection was performing detailed inspections. ponse. Four PMDs are located alongside the on- chosen to maximise reservoir recovery through PILTUN-ASTOKHSKOYE FIELD shore pipelines in Nogliki, Yasnoye, Gastello and voidage replacement under a Pressure Main te - op The Piltun-Astokhskoye oil field is in the Sea of Sovetskoye. nance Project (PMP). Okhotsk off the northeast coast of Sakhalin Is land. A second phase of drilling (Phase 1a) of wa- qr It is divided into two areas for development. The PIPELINES ter injector wells was started, and a water treat- Piltun-Astokshskoye-A platform (PA-A or Molik- See TransSakhalin pipelines, Offshore pipelines ment, injection module and power gene ration paq) is installed on the Astokhskoye feature, and and Onshore pipelines. mo dule were installed on the Molikpaq (PA-A) st the Piltun-Astokhskoye-B (PA-B) platform is in- platform. stalled on the Piltun feature. See also Hydro car- PLAN OF DEVELOPMENT (POD) The PMP project was completed in 2005 when uv bon resource volumes, Molikpaq and Piltun-As - A general document required by the Production a fourth water injector well was drilled with a wa- tokh skoye-B (PAB). Sharing Agreement (PSA) outlining the technical, ter injection capacity of 115,000 barrels a day. wx

86 87 yz PRESSURE TESTING liquefied natural gas (LNG) plant and an oil ex port A process in which a piece of equipment e.g. a terminal (OET). See also Liquefied natural gas pipe, is tested to its design or working pressure, plant and Oil export terminal. to ensure its integrity. PRIGORODNOYE SEAPORT PRIGORODNOYE Prigorodnoye Seaport was named in September PRODUCTION COMPLEX 2007 and was formally established and opened to The Prigorodnoye production complex is located foreign vessels in May 2008. The Port Prigorod- on the southern shores of Sakhalin Island, on the noye Closed Joint-Stock Company is a joint ven- and OAO Sovcomflot via its respective subsi dia - ration, represented by the government of the Rus- coast of Aniva Bay. The complex comprises the ture on a parity basis between Sakhalin Energy ry. It was incorporated on 31 July 2008 to assist sian Federation and the Sakhalin Oblast Govern- the operations of Sakhalin Energy in the Prigo- ment. A PSA is a commercial contract between an rod noye seaport. investor and the state, allowing the investor to make large scale, long-term and high-risk invest- PRODUCTION SEASON — ments. According to a PSA, the state grants an in- PHASE 1 vestor the exclusive right to develop a subsoil field The production season of Phase 1 of the Sakha - and an investor undertakes to develop the fields op lin-2 project ran from 1999 to 2008. The oil was by its own means and at its own risk. The purpose produced through the Vityaz production complex of the Sakhalin-2 PSA was to define the terms qr during the summer months. See Molikpaq and and conditions for the exploration, development, Vityaz production complex. production, processing and transportation of hydro carbons by replacing existing tax and license st PRODUCTION regimes with a contract- based arrangement that SHARING AGREEMENT exists for the life of the project. According to the uv Sakhalin Energy signed a Production Sharing conditions of the PSA, the Russian Federation re- Agreement (PSA) in 1994 with the Russian Fede - tains the sovereign right of ownership to the oil wx

88 89 yz and gas fields and Sakhalin Energy invests the I LNG plant 9.6 million tonnes of liquefied na - insurance. See also Japan Bank for Internatio - funds required for the exploration and develop- tural gas per year. nal Cooperation. ment of the fields. This contract allows for complete transparency of the project economics of PROJECT FINANCE PROJECT HISTORY Sakhalin-2. Often used in the global oil and gas industry for 1992 The state, the Russian Federation, approves developing major infrastructure assets. The debt A consortium of companies comprising McDer- the estimates of expenditure and has the right to repayment is made from the cash flow generat- mott, Marathon and Mitsui (the MMM wins ten- audit the investor’s expenses. In addition, the pared by the financial asset. Sakhalin-2 Phase 1 pro- der to carry out a feasibility study to develop Of- ties bear mutual responsibility for compliance with ject financing in 1998 was the first joint venture fshore oil and gas fields. the established rules of the PSA. in hydrocarbons project finance in the Russian The MMM consortium, in co-operation with The Sakhalin-2 PSA states a specific tax re- Federation. Sakhalinmorneftegas (SMNG), carries out a feasi - gime for project development. Most taxes and PRODUCTION The Japan Bank for International Coopera- bility study for the Sakhalin offshore development customs duties are substituted by production SYSTEM CAPACITY tion (JBIC), which was the Export-Import Bank of project that included a programme to ap praise shar ing. This effectively means that instead of a I PA-A (Molikpaq) 90,000 barrels (14.3 thou- Japan at the time, was one of the project lenders. and develop all discovered and prospective oil value-added tax, a mineral resources tax, or other sand m3) of oil per day; The largest project finance deal in Russia was and gas bearing fields and structures. taxes, Sakhalin Energy will pay 10% to 70% de - I 70.5 MMscf (2.1 million m3) of gas per day; sig n ed in June 2008 when Sakhalin Energy se - op pending on the internal rate of return of remain- I no gas produced from the Molikpaq during cured a $5.3 billion loan from JBIC and an inter- ing production and a 32% profit tax on the com- Phase 1; national consortium of banks. qr pany’s share, even though the Russian Fede ra - I PA-B 70,000 barrels (11.1 thousand m3) of In October 2009, Sakhalin Energy got an ad- tion has lowered the profit tax to 24%. These oil per day; ditional $1.4 billion, bringing the total project fi- amounts constitute the “take” of the Russian Fe- I 92 MMscf (2.7 million m3) of gas per day; nancing for Phase 2 up to $6.7 billion. A consor- st deration from the Sakhalin-2 project. After cost I Lun-A 1,800 MMscf (52.5 million m3) of gas tium of international commercial banks provided recovery, the minimum amount to be paid to the per day; additional debt, and Nippon Export and Invest - uv Russian Federation will be about 45% of the total I 60,000 barrels (9.5 thousand m3) of oil/con- ment Insurance (NEXI), an Export Credit Agency revenues of the Sakhalin-2 project. densate per day; owned by the Japanese government provided the wx

90 91 yz Shell and Mitsubishi join the Consortium, now 1997 1998 referred to as MMMSM. Supervisory Board approves the Plan of Deve lop - Sakhalin Energy secures Project Finance for ment (PoD) for Phase 1. Phase 1. 1993 McDermott sells its shares in the project to Piltun-Astokhskoye-A (Molikpaq) platform in- The Russian State Expert Council approves the the other shareholders. Sakhalin Energy declares stalled in the Sea of Okhotsk. Project’s feasibility study (TEO). The Council re- the Date of Development under Phase 1. com mended design effort should continue and 1999 a PSA be drafted for the fields. Start of oil production from the Molikpaq (PA-A) platform under Sakhalin-2, Phase 1. 1994 Sakhalin Energy Investment Company Ltd. (Sa- 2000 khalin Energy) formed and assumes ownership Contracts awarded for designing offshore and of banks. onshore facilities for the complete development 22 June, the Russian Federation and Sakha - of the Piltun-Astokhskoye and Lunskoye fields. lin Energy sign a Production Sharing Agreement Sakhalin Energy moves into corporate head- (PSA), “Agreement on the Development of Pil tun- quarters in Yuzhno-Sakhalinsk in May. op Astokhskoye and Lunskoye Oil and Gas Fields on Shell becomes Sakhalin Energy’s majority Piltun-Astokhskoye and Lunskoye licence areas the Basis of Production Sharing”. shareholder, in December, following an asset ex- (Phase 2, PdD) on 14 June. qr change agreement with Marathon. The sharehold- 1996 ing of Sakhalin Energy became Royal Dutch Shell 2002 Project Commencement Date 22 May. Sakhalin (55%), Mitsui (25%) and Mitsubishi (20%). Sakhalin Energy submits Phase 2 TEOC. st Energy proposes phased development of the Pil- tun-Astokhskoye field, starting with the Astokh - 2001 2003 uv skoye feature (Phase 1) and conducts concurrent Supervisory Board approves Sakhalin Energy’s Sakhalin Energy declares Date of Development programme of appraisal and facilities design. Integrated Plan of Development (PoD) for the under Phase 2. wx

92 93 yz 2006 The single anchor leg mooring (SALM) and Installation of Lunskoye-A (Lun-A), the first ice the floating storage and offloading unit (FSO) class, gas platform in Russia takes place in Okha are demobilised from the Vityaz produc- June. tion complex in December. Future capacity of the LNG plant’s trains 1 and 2 is committed for 20-plus years for delive- 2009 ries to Japan, South Korea and North America. First gas is produced from the Lunskoye-A (Lun- A) platform in January. 2007 Start-up of Russia’s liquefied natural gas Gazprom, Russia’s largest company, becomes (LNG) plant takes place in February. Sakhalin Energy’s majority shareholder. The Piltun-Astokhskoye-B (PA-B) platform is installed in July. First LNG imported to Sakhalin to accelerate start-up of LNG plant commissioning. First long-term agreements for LNG supply Sakhalin Energy concludes long-term agree- op concluded with Japanese energy Companies in ment for LNG supply to North America’s west coast. 2008 May. Sakhalin Energy secures Russia’s largest project qr Ground-breaking ceremony at the construc - 2005 finance deal of $5.3 billion from the Japanese tion site of the first liquefied natural gas (LNG) Sakhalin Energy concludes long-term agreement Bank for International Cooperation and an inter- plant in Russia takes place in June. for LNG supply to South Korea. national consortium of banks in June. st Concrete gravity base structures, the first First oil from the Molikpaq platform enters 2004 used in Russia, are successfully installed in the the TransSakhalin pipeline in November. uv Construction starts on the TransSakhalin pipeline Lunskoye field in June and the Piltun-Astokhskoye First oil from Piltun-Astokhskoye-B (PA-B) in January. field in August. enters the pipeline system in December. wx

94 95 yz The Company’s strategy for public consultation and information disclosure has evolved over more than 10 years of engagement with the communities of Sakhalin Island and other interested parties. Feedback from this process has helped Sakhalin Energy develop a meaningful approach to ensure interested stakeholders are adequa te- ly informed of project activities, and has provided the Company with an effective way to hear their concerns. Additionally this feedback has been a useful tool for Sakhalin Energy’s compliance with the legal requirements of the Russian Federation First Sakhalin-2 LNG cargo is exported in for public consultation and International Finance March. Corporation (IFC) Guidance Note F on the prepa- Sakhalin Energy has secured an additional ra tion of a Public Consultation and Disclosure Plan $1.4 billion in project financing, bringing the to- (PCDP). tal Phase 2 project financing up to $6.7 billion. The PCDP describes Sakhalin Energy’s plans and programmes for public consultation and dis- qr PUBLIC CONSULTATION closure of information on the project. Given the from to AND DISCLOSURE PLAN massive scale of the project, Sakhalin Energy is qr QUALITY RUSSIAN PARTY Sakhalin Energy considers regular and meaning- committed to regularly engaging the public and st ASSURANCE ful engagement with the public and key stake- other stakeholders locally where the project is holders, and public disclosure of relevant project under development as well as nationally and in- uv information, important for the successful develop- ternationally. See also Stakeholders, Inter na tio- ment of the Sakhalin-2 project. nal Finance Corporation. wx

96 yz have been taken so the entire production of a pro- duct or service is within specifications and conditions of operation apply to all users. Typically, in - dicators monitor the production process to ensure q it is mastered. QUALITY CONTROL QUALITY Quality control is a management system, used by ASSURANCE Sakhalin Energy, to ensure that items, systems, A formal methodology used by Sakhalin Energy construction etc are fit for purpose, built as per to assess the quality of products or services. Qua- design or constructed as per code etc. It in cludes lity assurance includes a formal review of care, the regulation of the quality of raw materials, as- problem identification, corrective actions to reme - semblies, products and components as well as dy deficiencies, and evaluation of actions taken. services related to production and management, The method considers that necessary precautions production and inspection processes.

99 yz engineers, production technologists and opera- to natural erosion. Methods to control erosion in- tions engineers study data transmitted from wells. clude installing slope breakers, silt fences, and The team has round-the-clock access to data, 3D drainage channels, and seeding to promote re- seismic visualisation, reservoir models and con- vegetation. Erosion controls help prevent sedi- nections to global expert support. ment entering waterways and potentially silting r up spawning areas. REAL-TIME RECOVERABLE RESERVES A gabion is a double-twisted, wire mesh bas- OPERATIONS CENTRE The estimated amount of hydrocarbons in a field ket of variable size, uniformly partitioned into in- A centre set up in Sakhalin Energy’s administra- that can be produced using currently available ternal cells, interconnected with other similar tive offices in Yuzhno-Sakhalinsk that uses drill - technology. units, and filled with stone, used to stabilise a ing and geological expertise to monitor wells. trench. The Sakhalin-2 project used gabion walls Drill ing control centres are linked by high-speed REINSTATEMENT MEASURES to stabilise slopes while upgrading roads and satellite or fibre optic cable to the main opera- Used to permanently stabilise and re-vegetate an bridges. Gabion walls are visible on the road to tions centre, where a dedicated multi-disciplina- area affected by pipeline construction, reinstate- Prigorodnoye from Korsakov and on the Tikhaya ry team of well engineers, geologists, reservoir ment is an important component of Sakhalin River to the north of Vzmoye, Dolisnk District. Energy’s commitment to the environment and to Riprap, usually made from hard rock such main taining the integrity of the pipelines during as granite, protects areas from erosion and sta- operation. Reinstatement is undertaken in sever- bilises river banks to avoid silting. It was widely qr al steps, first to restore drainage patterns and used next to rivers crossed by the TransSakhalin profile the landscape, or technical reinstatement. pipelines. Next erosion control measures are put in place. Erosion control involves mostly controlling A slope breaker is a special trench cons - st The final phase is biological reinstatement, most- damage and stabilising the ground. It may include truct ed across a slope for drainage. The breaker ly by seeding, of the Right of Way (RoW), to pro- temporary reinstatement until construction is fi - catches water, diverts it away from disturbed areas uv mote the rapid return of vegetative cover, provid - nished and permanent reinstatement to return the and slows the flow rate to prevent erosion. Dur- ing long-term protection against erosion. land to a stable condition, no longer vulnerable ing construction of the TransSakhalin pipelines, wx

100 101 yz slope breakers were used as an erosion control sakhalin energy.com. See also Reinstate - RESERVOIR measure on steep slopes on Sakhalin during con- ment measures and TransSakhalin pipelines. A crucial component of a complete petroleum struction of the TransSakhalin pipelines. See al- sys tem, a reservoir is a subsurface volume of po- so River crossings. RESERVES IN PLACE rous and permeable rock in which oil, gas or both The total amount of estimated hydrocarbons in a have accumulated. Sedimentary rocks are the REMEDIAL ACTION PLAN field, usually considerably higher than recover- most common reservoir rocks because they have A plan written in August 2007 for rivers, erosion able reserves. Reserves are estimated with figu- more porosity than most igneous and metamor- control and reinstatement, and wetlands, in res- res taken from exploratory drilling or by seismic phic rocks, and form at the same temperatures ponse to several incidents of environmental non- modelling. The oil and gas industry is continu- needed to preserve hydrocarbons. compliance during construction of the onshore ously developing and trialling new methods to pipelines for Phase 2 of the Sakhalin-2 project. maximise recovery or the extraction of hydrocar- RESETTLEMENT ACTION PLAN The full report is available in the library sec- bons. See also Recoverable reserves and Seis- The policy framework and procedures followed tion of Sakhalin Energy’s website at www. mic modelling. to address land acquisition and resettlement, required for construction and operation of the Sa- khalin-2 Phase 2 project. The RAP is implemented according to World Bank guidelines. The plan ensures land users affected by the land requir - ed for the liquefied natural gas (LNG) site or the qr pipeline Right of Way (RoW) are resettled to new RIGHT OF WAY (ROW) properties, compensated or both. A targeted com- The cleared area where oil and gas pipelines and pensation programme is being implemented for associated valves are installed, which is subse- st the dacha owners and users near the LNG site, quently technically and biologically reinstated. whose properties are not close enough to re quire The RoW is continuously maintained to prevent uv resettlement under Russian law. See also World erosion and ensure safety of the pipelines. See Bank guidelines. also TransSakhalin pipelines. wx

102 103 yz RIVER CROSSINGS had been damaged by fire and soil erosion. The The TransSakhalin pipeline system crosses over project is based on sustainable development prin- 1,000 watercourses of different sizes, characte- ciples aimed at improving the environment, and ristics and importance along the pipeline route. building up the local economy by involving local About 170 crossings were made on rivers consi- communities. Environmental engineers from Sa- dered ecologically sensitive and of commercial fi - khalin Energy supervise the project with advice shing value. The pipeline system crosses the ri - from the USA Forest Service, the Wild Salmon vers only in winter, when salmon are absent and Center and the Sakhalin Salmon Initiative. For the water flow is lowest, reducing any potential ecolo- first river to benefit from this initiative, the Djim - gical impacts. See also TransSakhalin pipelines. dan river in Nogliki district, the local Nogliki com - munity participated in project implementation. RIVER RESTORATION PROJECT The vegetation cover on the Djimdan’s basin was A pilot project started by Sakhalin Energy in 2007 severely disturbed by major forest fires in 1989 to help restore and sustain ecological function- and 1998. Soil erosion had steadily filled the ri- ing of rivers on Sakhalin Island after the rivers ver with a lot of sediment, which affected salmon spawning areas. The pilot project is reducing the similar projects to Sakhalin-2 in Australia, Brunei, ROYALTIES accumulation of fine sediment from sources next Oman, Malaysia and Nigeria, where it has com- Sakhalin Energy pays a 6% royalty to the govern- to watercourses and creating new in-channel missioned and constructed eight liquefied natu- ment of the Russian Federation on all oil and gas qr habitats. ral gas (LNG) processing trains. Shell holds the produced during the lifetime of the project. largest equity share of LNG capacity among in - ROYAL DUTCH SHELL PLC ternational oil companies. It also holds a leading RUSSIAN CONTENT st One of the leading players in the global energy position in LNG shipping and in the marketing and Human and industrial resources in Russia that are market, Shell is active in 130 countries and pro- trading of natural gas and power in Europe, the deployed for a project. Under the Production Shar- uv duces 3.5 million barrels a day of oil equivalent. USA and the Asia Pacific. See also Shareholding ing Agreement (PSA) Sakhalin Energy signed with The company has successfully implemented five structure. the Russian Federation, Russian content is defined wx

104 105 yz which includes labour, equipment, materials and contract services. See also Production Sharing Agreement.

RUSSIAN PARTY Sakhalin Energy and the Russian Federation col- lectively referred to as the Russian Party (RP) signed the Production Sharing Agreement. The in man hours and the volume and quantity of ma- Russian Party to the PSA is made up of represen- terials. Sakhalin Energy is committed to using tatives from the Federal and Sakhalin Govern ment. 70% Russian content over the life of the project, See also Production Sharing Agreement.

stfrom to SAFETY TREATMENT PLAN st EXCLUSION FOR OBJECTS OF ZONES CULTURAL HERITAGE uv

106 yz common from November to March, which can cause major transportation problems on the is - land and travelling to and from. Winter days can also be clear and dry with blue skies and sun- shine, making Sakhalin an excellent area for win- s ter sports. Winter can last from October to May in SAFETY EXCLUSION ZONES Zones established in the event of an oil spill. The zones are about one kilometre away from the source of a significant or ongoing spill of crude oil or condensate, and air and sea travel from them may be restricted. Exclusion zones may vary in size after a safety assessment is carried out. See also Oil spill response.

SAKHALIN CLIMATE The climate of Sakhalin Island is a study in ex - tremes. Aniva Bay, where Sakhalin Energy’s li - quefied natural gas (LNG) plant is located, is larg - ely ice free during winter. In other parts of Sakha - lin, temperatures can drop to as low as –30оC st in Yuzhno-Sakhalinsk in the south and to –54оC at Nogliki in the north. Sakhalin’s lakes and large uv swaths of the surrounding sea ice over in winter. Snow is heavy: snowfall of up to three metres is wx

109 yz SAKHALIN ENERGY PRIORITIES The Company’s strategy is to act in line with its vision and mission. To that end, our major prio - ri ties for the coming years are in the following areas: I safety — world-class safety performance, ensuring no harm to people, the environment, or assets; the north of Sakhalin Island. In the spring, melt- I reliability — consistent, high quality perfor - ing snow can also cause problems and mud is ve- mance; ry common. In summer, temperatures can reach I production — operational excellence, meet- 34оC. Autumn is the best time of year on Sakha - ing targets, a lean, flexible and efficient ope- lin when temperatures are moderate and rainfall rating culture; SAKHALIN ISLAND SAKHALIN SALMON INITIATIVE is scant from August to September. I delivery — meeting or exceeding customer An Island is in the Russian Far East, a nine hour See Social Investment. expectations for oil and LNG delivery; flight from Moscow and a two hour flight from To- SAKHALIN ENERGY I costs — promoting control, accountability and kyo. The population of Sakhalin Island is nearly SAKHALIN-2 INVESTMENT COMPANY LTD. awareness of costs; 520,000 and its capital is Yuzhno-Sakhalinsk. Its One of the world’s largest integrated oil and gas The operating company for the Sakhalin-2 Pro- I growth — increasing existing plant capacity, main industries are oil and gas production and fi- projects being developed in phases to enable year- duction Sharing Agreement (PSA) formed in 1994 including by re-rating, de-bottlenecking. shing. See also Indigenous People and Yuzhno- round production of oil and gas in the Russian Far to develop the Piltun-Astokhskoye and the Lun- Sakhalinsk. East. From three offshore platforms, the oil and gas st skoye oil and gas fields in the Sea of Okhotsk, SAKHALIN INDIGENOUS are transported by the TransSakhalin pipelines via offshore Sakhalin Island in the Russian Far East. MINORITIES DEVELOPMENT SAKHALIN ROAD an onshore processing facility (OPF) in the north- uv See also Project history, Sakhalin-2 and Share - PLAN SAFETY PARTNERSHIP east of Sakhalin Island to the liquefied natural gas holding structure. See Social Investment. See Social Investment. (LNG) plant and the oil export terminal (OET) in wx

110 111 yz the south of the island. Sakhalin-2 also includes I first simultaneous implementation of several projects to improve the island’s infrastructure and large interconnected green field sub-projects the well-being of the community through chari- in Russia; table events and sustainable development pro- I phase 1 project financing first funding of its grams. kind in Russia’s oil and gas industry; I largest project finance deal in Russia (2008); SAKHALIN-2 RECORDS I first offshore platform installed in Russia (Mo - I first PSA agreement signed in Russia; likpaq); I first operating PSA in Russia; I zero to minimal gas flaring, the first system of I first offshore oil and gas operation in Russia; its kind in Russia (Molikpaq); I first construction of water injection and po wer generation modules in Russia: Amur shipyards in Komsomolsk for the Molikpaq (PA-A) platform; I first use of directional hydraulic fracturing, of formation for well completion in Russia (Mo- lik paq platform); I first use of indirect fracture of formation for well completion in Russia (the Molikpaq platform); I first ice class stationary gas production plat- I installation of friction pendulum bearings on I first commercially produced oil from an off- form installed in Russia — Lunskoye-A platform Lunskoye-A is first use of these bearings in the st shore platform in Russia (Molikpaq) on the (Lun-A); oil and gas industry anywhere in the world; continental shelf; I float-over of the Lunskoye-A, 21,800 tonnes I float-over of 28,000 tonnes Piltun-As tokh - uv I first concrete gravity base structure in Rus - topsides in 2006 a world and Russian record skoye-B (PA-B) topsides in 2007 broke the sia, built for the Lunskoye-A platform (Lun-A); in 2006; float-over record; wx

112 113 yz I first liquefied natural gas (LNG) plant — the I first time LNG measurement methodology was permanent living quarters, and no resorts. A one- first of the kind built in Russia; used in Russia; kilometre SPZ has been set up around the lique - I first import of LNG to Russia; I first use ISSOW electronic permit to work sys- fied natural gas (LNG) plant and oil export ter- I first export of LNG from Russia; tem used in Russia; minal (OET) at Prigorodnoye. I first LNG carrier to enter Russian territorial I first time an oil and gas company set up a bu- waters — Granosa in 2007; siness and scientific cooperative group, the SEISMIC MODELING I first real-time operations centre in Russia; Western Gray Whales Advisory Panel; Software that accurately represents the complex I first road safety partnership between public geology and geophysical phenomena underwa- administration and business in Russia (Sakha - ter or underground. When interpreted, seismic lin Road Safety Partnership); mo delling gives an approximation of the extent I the first offshore 4D seismic survey in Russia. to which oil, gas and water are present and a three dimensional (3D) picture of an oil or gas re - SALES AND PURCHASE servoir. Afterwards, exploration and drilling rigs AGREEMENT take samples from the reservoir before launching The final sales and purchase contract which con- any project to recover or extract hydrocarbons. tains all the detailed provisions that govern the long-term delivery of liquefied natural gas (LNG). SEISMIC MONITORING SYSTEM See also Heads of Agreement. A system installed on the TransSakhalin pipelines earthquake can be shut down and isolated im - and other project facilities that records detailed mediately. See also Block valve stations, SCADA SANITARY PROTECTION data of any seismic event along the pipeline in and TransSakhalin pipelines. ZONE (SPZ) real time and in digital format. The information is st A sanitary protection zone (SPZ) is a special area then forwarded to the control centre at the on - SEISMIC SURVEYS established around a hazardous facility required shore processing facility (OPF) and used in mak- A 3D survey carried out in the Lunskoye gas field uv by Russian Federation regulations. Land use is ing decisions on operations. Any section of the in 2003 to provide additional geological infor - restricted within the SPZ meaning no crops, no pipeline or part of the processing plants near an mation for developing the field and identifying wx

114 115 yz ma rine mammals in the area. The survey found platform are monitored remotely by experts in munity through a programme of sponsorships and Western Gray whales, Minke whales, Orcas, Har- Yuzhno-Sakhalinsk to effectively control of water do nations since the beginning of the Sakhalin-2 bour seals and Dalls porpoises. In July 2010 in injection rates in different reservoirs, so they are project. The programmes, rooting from the sus- consultation with the Western Gray Whales Ad- in alignment with a continuously updated dy na - tai nable development principles, encompass visory Panel (WGWAP) Sakhalin Energy succes- mic reservoir model. See also Real-time opera- health, charity, education, biodiversity protection, sfully completed the first offshore 4D seismic tions centre. business and infrastructure development issues. survey in Russia. See also Western Gray Whales They range from opening internet centres in Sa - Advisory Panel. SOCIAL IMPACT ASSESSMENT khalin libraries to training district medical teams loading hose. The SALM served as a connection A report prepared by independent socialists and and finding families for orphaned children. In SENYA buoy for the FSO via two 950 tonne MBL moor- economists from Sakhalin and international SIA 2007–2009 the company supported social pro- See Social Investment — What to do in emergen - ing hawsers and was demobilised in 2008. The Vi- experts, including input from more than 5000 jects of more than 350 million roubles and was cy situations programme tyaz production complex produced oil in Phase 1 Sakhalin residents in 52 communities, carried out recognised by the Sakhalin Oblast Government in while oil is now produced at Molikpaq which is from September 2001 to November 2002. The March 2008 as its Benefactor of the Year 2007 — SHAREHOLDING STRUCTURE connected to the new pipeline system and then report was published in 2003 and an addendum High Social Efficiency for the second year in a row. Sakhalin Energy’s shareholding is broken out as exported from the oil export terminal in Prigo rod - came out in 2005. Sakhalin Energy social investment programmes follows: OAO Gazprom 50% plus one share, Royal noye complex. See also FSO Okha and Vityaz Sakhalin Energy follows the policies, proce- Dutch Shell 27% minus one share, Mitsui & Co. production complex. dures and commitments in the SIA on the Sa kha- 12.5%, Mitsubishi Corporation 10%. lin community. The full report is available in the SMALL GRANTS — BIG-DEEDS library section of Sakhalin Energy’s website at SINGLE ANCHOR LEG MOORING See Social Investment. www.sakhalinenergy.com Part of the Vityaz production complex, the SALM st was raised in summer from the sea bottom into SMART WELLS SOCIAL INVESTMENT an upright position to receive crude oil from the Technology that uses multi-zone water injection Well-aware of its responsibility for prosperity and uv Molikpaq platform that continued to flow to the to effectively manage flooding on a platform. Pres- sustainable development of the local community floating storage offloading tanker (FSO) via a sure, temperature and other parameters on the Sakhalin Energy has been investing in the com - wx

116 117 yz are declared the best practices of the kind both Employee charitable support programme at regional and federal levels. An internal charitable donation programme. The programme was set up to support employees of Educational grants Sakhalin Energy who contribute to society. The A programme running since 2003 that gives grants company matches funds raised by employees to graduates from Sakhalin schools to attend Rus- who are nominated from fundraising events or sia’s best universities. other activites, to underwrite specific social projects. “Hurry up for good deeds” is the motto of the programme. Indigenous People’s (IP) organisation, Riapon. Campaign” as well as the pre-hospital care and Sakhalin Indigenous The plan was also included as one of 16 Russian the “Safe Routes to School” projects. The seat Minorities Development Plan projects in the 2006–2007 edition of Best Cor - belt campaign won a safety award in 2007 from Launched in 2006 as a cooperative effort of Sa- porate Social Projects 2006–2007. The Russian the London-based Energy Institute, which holds khalin Energy, the Sakhalin Oblast Government Federation Council’s Committee for the North and an annual awards ceremony to recognise excel- and the Sakhalin Indigenous People’s Council, the Indigenous People gave Sakhalin Energy its high- lence and innovation in the energy industry. main objective of the SIMDP is to support the so- est evaluation in 2008 for its cooperation with the cial and economic development of the indigenous indigenous population, through the SIMDP. See Sakhalin Salmon Initiative (SSI) minorities of Sakhalin Island, through protecting also Indigenous People. Sakhalin Salmon Initiative was established in 2004 health, promoting education, preserving tradi - within the Wild Salmon Centre (USA). Since 2005 tio nal lifestyles, and supporting traditional econo- Sakhalin Road Safety Partnership (SRSP) Sakhalin Energy has been financing SSI concept mic development. The International Finance Cor- With Sakhalin Energy’s initiative and active par- note and strategy development. Sakhalin Salmon st poration, a member of the World Bank Group, ticipation, the SRSP started in 2005, the first Rus- Initiative is a large scale enterprise that supports singled out the SIMDP in 2007 as a model of in- sian partnership between public administration wild salmon conservation and sustainable salmon uv ternational best practice. In 2008 the Plan re - and business to help improve road safety. The reproduction as well as the preservation of salmon ceiv ed a Letter of Honours from Russia’s largest SRSP is responsible for the successful “Seat Belt river ecosystems. Other goals of the SSI include wx

118 119 yz philanthropy policy and social investment prin- Sakhalin Oblast project — Sports against juvenile also reconstructed through this programme. Sa- ciples” announced within the Corporate Donor of delinquency. In 2005–2008 Sakhalin Energy al- khalin Energy has organised visits of the “Soviet Russia — the national awards for best practices lott ed some 1.15 million dollars on Sakhalin Re- Hockey Legends” to Sakhalin Island since 2006. in corporate social investments. gion sports development projects. In 2006, with financial help from Sakhalin Sustainable Development Chair Small grants-big deeds Energy, a new mini football pitch with artificial Sakhalin University established a Sustainable De- A charitable programme aimed at supporting lo- grass in Makarov and a hockey ground in Ty - velopment Chair in 2006, focusing on three areas cal initiatives in the Sakhalin Oblast area, which movsk were built. A sports ground in Aniva was for spreading the principles of sustainable deve - started in 2003. Small grants are awarded on a lopment on Sakhalin Island. Based on a specific building institutional capacity for conservation and competitive basis to initiative groups, NGOs and curriculum, the Chair selects local projects that promoting sustainable economic development on other organisations working at the community le - amplify research, provide teaching support, and Sakhalin Island. The Sakhalin-based SSI centre vel in the Sakhalin Oblast to fund social, cultural, educate and inform the general public. manages the initiative and it is overseen by a SSI and educational initiatives that produce results Coordinate Committee that includes representa- for community groups. A total of 47 projects have What to do in emergency tives from the Sakhalin Oblast Government, regio - been implemented through the programme so far. situations programme nal and federal agencies, academic institutions, Sakhalin Energy, in partnership with the Mi nis try business enterprises, commercial fishermen, in - Sports development programme of Emergency Situations (EMERCOM), set up this digenous communities and local and in ter na tio - One of the priorities in the company social invest - programme in 2006. A cartoon character, Senya, nal NGOs. In 2008 Sakhalin Energy and the US- ments are sports development projects. Sakha lin advises children on television on what to do in an based Wild Salmon Center (WSC) jointly funded Energy supported the construction of sports fa- emergency or dangerous situation. a four-year (2008 –2011), $8.8 million programme cilities and children’s playgrounds, and contribut - Under the project 12 Sakhalin schools, per - st to conserve wild salmon, that is managed by the ed into material and technical foundation enhan - forming safety classes were packed with neces- SSI (Sakhalin Energy donate 4.4 million dollars). cement across Sakhalin Region. Moreover Sakha - sary equipment, and educational campaigns on uv 2009 Sakhalin Salmon Initiative won in nomi- lin Energy assisted in organisation of sports events safety rules are regularly arranged. The series of nation “Best programme demonstrating corporate for kids and juniors, and performed a partner in safety cartoons, with Senya in the lead, is the wx

120 121 yz SOCIAL PERFORMANCE I reporting publicly on performance; STAKEHOLDERS POLICY AND COMMITMENTS I playing a leading role in promoting best prac - Individuals or organisations which can influence Sakhalin Energy has systematic tools and pro ces- tice in industry; the performance of Sakhalin Energy’s business, ses to assess, manage and monitor the social im- I promoting a culture in which all staff share including customers, suppliers, contractors, in - pacts of its business operations. A management these commitments. dus try bodies, local and national governments, framework sets targets, measures and improves non-governmental organisations and employees. the impacts of Sakhalin Energy’s business ope - SORBENTS ra tions and to meet lender requirements. A wide A special material that absorbs hydrocarbons. STATE ENVIRONMENTAL range of stakeholders are consulted for feedback See also Oil spill response. EXPERT REVIEW (SEER) major instrument of the programme: being the on identifying, managing and monitoring social A review carried out by about 70 Russian scien- means of social impact the cartoons teach chil- issues. SPORTS AGAINST tists on the Sakhalin-2 project, Phase 2 in 2003. dren to respond to various emergency situations. Sakhalin Energy aims to have an exemplary JUVENILE DELINQUENCY The review established that the company’s plan- The project is in demand in other regions of social performance, to earn the confidence of cus- See Social Investment. n ed activities for the integrated development of Russia. Senya cartoons on safety are posted on tomers, shareholders and society at large, to be its hydrocarbon fields in the Sea of Okhotsk com- the Emercom web site. They are also released on a good neighbour, and to contribute to sustain- plied Russian environmental law. SEER made 90 DVDs, broadcast to children in cinemas, on TV, on able development. recommendations in its report. street screens, and in schools and kindergardens in Khabarovsk, Blagoveschensk, Kamchatka, Ma- Sakhalin Energy is committed to these objectives: STELLER’S SEA EAGLES gadan, Yakutia and other regions. Emercom’s Me- I pursuing the goal of no harm to people, in clud- Found only in Russia, Japan, and the Aleutian Is- dical Evacuation Centre recommended showing ing those people who live near operations; lands, they are among the world’s largest eagles. the cartoons in kindergardens and schools. The I contributing to the wider, long-term, econo - Steller’s Sea Eagles are listed in the Sakhalin and st project won the Corporate Donor of Russia con- mic, environmental and social benefit of the Russia Red Data Books and included in the In - test for “Best Programme for improving the so - regions where it operates working to mitigate ter national Union for the Conservation of Nature uv cial climate in the community — caring about fa- any negative social impacts of its business (IUCN) Red List. A Steller’s Sea Eagle has a wing- mily values”. operations; s pan of two metres. Male birds weigh around six wx

122 123 yz kilogrammes and females nine kilogrammes. SUPERVISORY BOARD Corporation (PRISCO) and Swire Pacific Off shore. Since 2003, Russian ornithologists, contracted Sakhalin-2’s highest executive entity, the Su per- All ships are fitted with an anti-freeze system, ad- by Sakhalin Energy, have conducted extensive visory Board reviews issues connected with the vanced computer constrol systems and are ope- stu dies of the eagles in northeast Sakhalin. Based approval of development plans, development bud- rated by a crew of Russian nationals. on their research, special programmes were de- gets, annual work programmes and budgets, prin- The Svitzer Aniva, the Svitzer Busse, the Svit- ve loped to mitigate impacts on this rare spe cies, cipal financial documents and liquefied natural gas zer Korsakov, and the Svitzer Sakhalin, four ice- including limiting motor vehicle speed, suspend- (LNG) sales agreements. The Supervisory Board class tugs based in Prigorodnoye complex are ing work during nesting periods and re-routing is made up of six representatives from Sakhalin chartered by Sakhalin Energy on a long term ba- onshore pipelines. Energy and its shareholders and six representa- sis to service the liquefied natural gas plant and tives of the Russian party to the Production Shar- the oil export terminal (OET). The tugs perform ing Agreement (PSA), including two representa- ship berthing, buoy maintenance, ice channel tives of the Sakhalin Oblast Government and four break ing and ice management, and were de sign- representatives of the Federal government. ed to break up to 85 cm of level ice travelling at a minimum of three knots and to manage harbour SUPERVISORY CONTROL AND ice. When operating in tandem, two tugs can DATA ACQUISITION (SCADA) break a channel wide enough for tankers calling A software package for controlling remote facili- at the terminal to pass through. ties and for logging data, showing alarms and displaying information installed along the TransSa - SUPPORTING FLEET SUSTAINABLE DEVELOPMENT khalin pipeline. From locations along the route, Three, ice-class supply vessels used for Sakha - A broad concept defined as a development which signals are routed back to the control centre by lin Energy’s three offshore platforms, the Paci fic meets the needs of the present without com- st fibre optic cable for real time, continuous moni - Endeavour, the Pacific Endurance, and the Paci- promising the ability of future generations to do toring. Control room operators use the data to fic Enterprise. The ships were built at the Norwe - the same. Sustainable development is a priority uv monitor operating parameters and to make deci - gian shipyard of Aker Langsten in 2006, as part of for Sakhalin Energy and for Sakhalin Island, to sions, assuring the safe operation of the pipeline. a joint venture between JSC Primorsk Shipping pursue economic growth and social advancement wx

124 125 yz inhabited by taimen along the company’s pipe - lines. The study provided support for many stakeholders, including Japanese scientists and ex perts from the Wild Salmon Center. It assessed eight ri ver catchments in the autumn and spring. The study’s results established a baseline for future t scientific research, identified the main juvenile TAIMEN habitats, and estimated the population size and A rare, protected species of salmon included in reproductive success of the taimen. the World Conservation Union’s (IUCN) Red List Engineering won the Lieutenant Governor’s award as critically endangered and rapidly declining. TANKER LOADING UNIT of excellence in 2007 for its TLU design at the En- More than half of the world’s Sakhalin Taimen The tanker loading unit (TLU) acts as a single gineering Excellence Gala, hosted by the Con - population is thought to live on Sakhalin Island. point mooring, and is located 4.5 kilometers off - sulting Engineers of British Columbia, Canada. Taimen are vulnerable to poaching and informa- shore in Aniva Bay at a depth of 30 metres. tion on them is scant. In 2007, Sakhalin Energy An offshore pipeline supplies oil to the TLU TECHNICAL AND ECONOMIC launched a survey to identify the river systems from oil storage tanks. During operations, three SUBSTANTIATION FOR pumps are used, with an additional pump on CONSTRUCTION (TEOC) stand by. Each pump used for loading crude oil A report summarising key technical and environ- in ways that can be sustained in the long term by has a maximum hourly capacity of 2650 m3. On mental information on the Sakhalin-2 Phase 2 conserving resources and protecting the envi- the TLU, a tower fitted with a mooring yoke con- project which has additional summaries on cost ronment. nects to the oil loading arm with hawsers. The TLU and project economics. Technical, environmental st services oil tankers with a capacity of 40,000 m3 and economical solutions are also included for SUSTAINABLE to 150,000 m3 and should load around 100 oil the implementation of the project necessary to uv DEVELOPMENT CHAIR tankers per year. Loading operations last 14 to 24 ful fill requirements of the Russian Federation. See Social Investment. hours, depending on tanker capacity. Sandwell Russian authorities approved the TEOC in 2003. wx

126 127 yz Further detail is available in subsequent volumes. TECHNICAL I levelling soil after backfilling the trench over The TEOC report can be accessed in Sakhalin in REINSTATEMENT the width of the RoWprofiling soil to return the district libraries and the Regional Research Library. Creating a stable land form along the TransSa - site to its pre-existing land form and drain age khalin pipelines Right of Way (RoW) once all con- pattern when feasible; TECHNICAL INTEGRITY struction activities have been completed. The main I removing all construction wastes and refuse, Ensuring the safety of physical assets, such as a focus of technical reinstatement is to restore the including large rocks and wood debris; platform throughout its life cycle to help elimi- RoW to its original condition wherever practica- I removing running track where required; nate failures that could harm people or damage ble. However in order to ensure pipeline integrity, I installalling erosion control measures, such as the environment. During the life of an asset, the this is not always possible. riprap, slope breakers, and erosion matting); project team ensures technical integrity during I stabilising watercourses. the design stage and the operating team safe- Technical reinstatement includes the following TRAINING CENTRES guards it during the operational phase. techniques: Once technical reinstatement is complete, biolo - The training centre for Sakhalin Energy at the gical reinstatement is performed. See Biological Yuzhno-Sakhalinsk Fuel and Energy College con- reinstatement, Right of Way (RoW) and Trans Sa- ducts basic trainee and apprenticeship programs khalin pipelines. to meet the Russian Federation’s mandatory re- quirement for certification. The Sakhalin Island TOPSIDES Technical Training Centre trains staff, contractors, Integrated decks that provide living and working and other oil and gas operators. It also holds accommodation and an area for driling and pro- courses on fire fighting and helicopter, underwa- duction equipment on a platform. The topsides for ter, and escape training (HUET). the Lunskoye-A (Lun-A) and Piltun-Astokhskoye - st B (PA-B) were built at the Samsung Heavy In dus- TRANSSAKHALIN PIPELINES tries construction yard on Geoje Island in South The name given to Sakhalin Energy’s onshore uv Korea. See also Concrete gravity base structure, pipelines system. It includes the following infra- Float-over, Lunskoye-A and Piltun-Astokhskoye-B. structure: wx

128 129 yz skoye and Lunskoye fields in the north of Sakhalin to the OPF in the Nogliki district, and then to the liquefied natural gas (LNG) plant and the oil ex port terminal (OET) in the south of Sakhalin at Aniva Bay. See also Block valves, Block valve station, Pig, Pipeline maintenance depots and Right of Way.

TREATMENT PLAN I onshore gas and oil pipelines; FOR OBJECTS I fiber optic cable network; OF CULTURAL HERITAGE I two booster stations to maintain pressure in Procedures to follow in the treatment of cultural the pipeline; objects potentially affected by construction of the I five pig (pipeline inspection gauges) launch- Sakhalin-2 project in fulfillment of the commit- ers and receiver stations for cleaning and diag- ments made by Sakhalin Energy to safeguarding nostics; these items. Resources or objects of cultural heri- I 104 block valves on the oil pipeline, 47 block tage include archaeological sites, historic objects, valves on the gas pipeline, four block valves religious objects, and locations, including sites of on the multiphase line between the onshore cultural importance to Indigenous Peoples (IP), processing facility (OPF) and the Lunskaya-A and paleontological objects and places with uni- from to (Lun-A) platform Associated facilities installed que characteristics to their natural environment. uv UNITED NATIONS VITYAZ along the pipeline route, including five pipe- The list of objects includes sites identified be fore GLOBAL COMPACT PRODUCTION line maintenance depots (PMDs). and during construction. Items of cultural heritage COMPLEX value for Indigenous Peoples include objects or uv Hydrocarbons are transported through the Trans- locations they consider of spiritual, sacred, or na- Sakhalin pipeline system, from the Piltun-Astokh- tural value. wx

130 yz operations and strategies with 10 universally ac- cepted principles in the areas of human rights, labour relations, environmental protection, and anti- corruption. Sakhalin Energy joined the Global Compact in 2009. Membership is voluntary and u contributes to sustainable development and the UNITED NATIONS general liability of a corporation. By joining the GLOBAL COMPACT Global Compact, a company acknowledges that The United Nations Global Compact is a strate- business based on these general principles helps gic policy initiative and practical platform for foster a more sustainable, fair and inclusive glo- businesses that are committed to aligning their bal economy and thriving companies.

133 yz VISION To be the premier energy source for the Asia- Pacific region.

VITYAZ CRUDE OIL v A new brand of crude oil that Sakhalin Energy in- VENDOR troduced to the market. Vityaz is a light, sweet oil DEVELOPMENT with similar qualities to light Oman crude oil. See PROGRAMME also Vityaz production complex. A training programme to develop Russian ven- dors and contractors aimed at boosting the com- VITYAZ PRODUCTION COMPLEX petitiveness of Russian enterprises and sharing The Vityaz production complex was the Phase 1 so- insights with them on the unique expertise used lution for seasonal oil production and export. It was on the Sakhalin-2 project. In the programme, situated in the Astokh part of the Piltun-Astokh - several training courses introduce Russian con- skoye field. It comprised the Molikpaq (PA-A) pro- tractors to many aspects of direct cooperation duction platform, a single anchor leg moor ing with Sakhalin Energy and other major operating (SALM), an underwater pipeline and the Okha flo - companies. ating storage and offloading (FSO) unit. Phase 1 oil was produced from the complex from 1999 un- from to VESTI til 2008 when year-round production began un der wx WESTERN GRAY WHALES X-RAY OF PIPES A Sakhalin Energy publication of news and ana- Phase 2. The Molikpaq platform now produces oil lysis about the Sakhalin-2 project. Vesti was in- and exports it via the pipeline system to the oil ex- cluded in “Best Corporate Publications in Russia port terminal (OET) in Aniva Bay. The SALM and 2006–2007”. The publication is available in Rus- FSO Okha were decommissioned at the end of 2008. sian at www.sakhalinenergy.ru See also Molikpaq, Vityaz crude oil and FSO Okha. wx

134 yz females. Western Gray whales spend the summer feeding in the waters surrounding Sakhalin Island, before moving south to warmer climates in winter. Sakhalin Energy is committed to minimising any risks to the Western Gray Whale. The compa- w ny rerouted the subsea pipeline to bypass feed- WESTERN GRAY WHALES ing areas and in 2007 put into effect stringent One of the largest mammals on earth, the West - noise level criteria during installation of topsides ern Gray Whale is critically endangered. Inter - on the Piltun-Astokhskoye-B (PA-B) platform to na tional estimates show around 130 individual avoid any disturbance to the whales. See also whales remain, including 25 to 35 reproductive Western Gray Whales Advisory Panel.

137 yz WET-CUT CROSSING project. The group is made up of representatives A technique used to install a pipeline under a wa- of the Russian Federal Government, the Sakha - tercourse. A trench is dug through a watercourse lin Oblast Government and Sakhalin Energy. while the water continues to flow. As soon as the Its objective is to prepare and coordinate do- trench is finished, a pre-welded, hydro-tested pipe cuments and decisions at a working level for section is lowered into the freshly cut trench, further consi deration and decision by the Su per- which is then backfilled with clean material. In visory Board. most cases, pipeline trenches are cut with an ex - cavator or, because of the limited reach of an ex- WORLD BANK WESTERN GRAY WHALE cavator, with a dragline for larger watercourses. GUIDELINES ADVISORY PANEL The Sakhalin-2 project used the wet-cut tech - In addition to fulfilling the regulatory require- Sakhalin Energy requested a panel be establish- nique when crossing the majority of watercours- ments of the Production Sharing Agreement and ed to advise the company on the evolution of the es and only in winter for rivers in fragile environ- the Russian Federation, Sakhalin Oblast Govern- Western Gray Whale population around Sakhalin ments when water flow is reduced or sometimes ment Energy also conducts its Project activities Island. WGWAP was set up in 2006 under the aus- non-existent, minimising any sediment-related im- according to several other guidelines. pices of the International Union for Conservation pacts. See also Auger bore method, Dry-cut cross - These include the World Bank/IFC and Ex- of Nature (IUCN, also known as the World Con - ing, Right of Way and TransSakhalin pipelines. Im Bank qualitative and quantitative policies and servation Union). The panel comprises 11 lead- guidelines to ensure that business activities are ing marine scientists who continue to provide in- WHAT TO DO IN EMERGENCY conducted in a sound social, environmental, fi - dependent review processes and risk manage- SITUATIONS PROGRAMME nan cial and economically balanced way; and all ment advice to the company. Sakhalin Energy is See Social Investment. or part of European Union directives on health the first oil and gas company to set up a coope- and safety as specified in the Relevant Standard rative initiative involving business and the scien- WORKING GROUP (WG) Requirements column in Annex A of the Health, tific and environmental communities. See also A group of experts established in 2000 by a de ci- Safety, Environmental and Social Action Plan Western Gray Whales. sion of the Supervisory Board for the Sakha lin-2 (HSESAP). wx

138 139 yz x X-RAY OF PIPES See Non-destructive testing of pipeline welds.

yzfrom to YUZHNO- ZIMA SAKHALINSK HIGHLANDS

140 yz YUZHNO-SAKHALINSK The administrative centre of the Sakhalin Oblast Government where the offices of Sakhalin Ener gy are based. Previously known as Vladimirovka until 1905, when it was renamed Toyohara while y southern Sakhalin was under the control of Ja - pan until 1945. Today Yuzhno-Sakhalinsk has a population of about 181,000.

143 yz cuttings re-injection wells. See also Cuttings re-injection.

ZERO FLARING The Molikpaq is Russia’s first operating platform z to apply a policy of zero flaring of associated gas, ZERO DRILLING DISCHARGE starting in 2005. In the past, standard oil field The Molikpaq (PA-A), Lunskoye-A (Lun-A), and procedure was to burn or flare the gas. Before in - Piltun-Astokhskoye-B (PA-B) platforms operate stallation of the subsea pipelines, all associated with zero drilling discharge to the environment, gas was re-injected into the reservoir by gas com- meaning no drill cuttings, or driling muds are dis- pressors. Today all the gas is exported to Prigo- charged overboard. All process fluids, effluents rodnoye complex to produce liquefied natural gas and water that are produced are injected into (LNG).

ZIMA HIGHLANDS reside. It is divided into five areas, Zima 1, 2, 3 and The Zima Highlands housing complex is situated 4 with homes in the adjacent Strawberry Hills com- on 40 hectares of land just south of Yuzhno-Sa- plex. The main facility has a recreation centre com- khalinsk where almost 500 Sakhalin Energy staff plete with gym, weight room and badminton courts.

144 145 yz