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ExxonMobil and partners to press ahead with Sakhalin 1 LNG scheme

US giant, Rosneft, ONGC Videsh and Sodeco sanction plan to build 6.2 MMtpa gas plant in far eastern Russia

ExxonMobil, Rosneft and their partners in the Sakhalin 1 development in Russia's far east have taken a decision to move ahead with a liquefied natural gas plant to commercialise gas reserves at offshore fields.

Igor Sechin, president of Russian state oil giant Rosneft, told an economic forum in the far east port city of Vladivostok on Thursday that the sanction calls for construction of a plant with output of 6.2 million tonnes per annum of LNG.

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The single-train facility will be located near the port of De-Kastri in the Khabarovsk region, which already hosts a Sakhalin 1 oil export terminal that is linked to the north of Sakhalin Island via a dedicated pipeline.

A previous version of this story indicated that the partners had sanctioned the project, but this is not the case - rather a decision has been taken to move ahead with it, although a final investment decision is still awaited.

Sakhalin 1 is operated by Exxon Neftegaz, where US supermajor ExxonMobil and Japan’s Sodeco each have a 30% interest, with the remaining shareholding of 40% split evenly between Rosneft and India’s ONGC Videsh.

Exxon Neftegaz has been working on the design of the plant in De-Kastri and optimisation of required investments since 2016, while Rosneft researched an alternative option to build an LNG plant in the south of Sakhalin Island, close to the existing Sakhalin 2 LNG facility operated by Gazprom-led Sakhalin Energy.

According to Exxon Neftegaz, pre-front-end engineering and design and some FEED work on the De-Kastri plant was completed early last year.

However, the project is understood to require the approval of Russian authorities as Sakhalin 1 is operated under a production sharing arrangement.

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The project has also met with opposition from Russian gas monopoly Gazprom, which wants to buy Sakhalin 1 gas to send it to the Sakhalin 2 LNG plant.

Last year, Exxon Neftegaz said that new gas wells will be drilled from the existing Orlan offshore platform and the Chayvo onshore site into offshore reservoirs in the Okhotsk Sea using extended reach technology.

Untreated gas will then flow to a new processing unit, to be built at the Chayvo onshore oil and gas facility to remove water and bring it to market specifications, before it is pumped to De-Kastri.

Speaking in Vladivostok, Sechin confirmed that Japan will remain the prime market for Sakhalin 1 LNG.

(This article has been amended to correct the fact that the partners have not taken FID on the project, but have taken a decision to move ahead with the project.)

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