Russian state controlled gas giant Gazprom has hinted that gas production from the Sakhalin 2 development in the country’s far east may have to be reduced to help maintain the life of the field.
In a latest monthly corporate journal Vesti, the recently constituted new operator of Sakhalin 2, Sakhalinskaya Energiya, reported that meetings with representatives of majority stakeholder Gazprom had resulted in a decision decided to drop the current emphasis on maximising well flow rates for the Lunskoye field, Sakhalin 2’s sole gas asset.
Instead, the operator will adopt a “rational development” plan aimed at extending the assets operating lifetime by producing gas at a lower rate.
Vesti quoted Gazprom technical director Timur Gafarov as saying that the change was spurred by “external negative factors [for the project] and internal necessity”, as the operator looks to ensure the “stability of liquefied natural gas production and extend the period of uninterrupted gas extraction”.
Russian gas giant Gazprom holds a 50% stake plus one share in the project.
Sakhalinskaya Energiya had not responded to Upstream’s request for comment by the time of publishing.
Sakhalin 2 operates Russia’s first LNG plant, with gas supplied from the offshore Lunskoye field via a dedicated pipeline that runs from the north to the south of Sakhalin Island.
The plant has two trains, with a nameplate capacity of 9.6 million tonnes per annum of LNG, but the facility has been able to produce at a rate of between 10% and 20% above capacity in recent years.
Speaking earlier at an industry forum in Vladivostok, Sakhalin Governor Valery Limarenko said he expects Sakhalin 2 to export 11.4 million tonnes of LNG to global markets this year, against the 10.4 million tonnes it exported in 2021.
In December 2020, Vesti said a major seismic campaign was planned for this year to look into the gas potential of deeper Daginsky layers at Lunskoye, because then-operator Sakhalin Energy Investment was looking to increase the field’s gas reserves to help extend the lifetime of the project.
According to a report by Russia’s Natural Resources Ministry in 2020, Lunskoye holds estimated recoverable reserves of about 260 billion cubic metres, which is sufficient to support output for 14 years at the previous year’s production rate of 17.8 Bcm.
Sakhalinskaya Energy took over as operator of Sakhalin 2 in August after Russian authorities ordered previous operator Sakhalin Energy Investment to be disbanded.
The move to create a new operator followed the decision of UK supermajor and project partner Shell to exit the development in the wake of international sanctions imposed against Russia following the Russian invasion of Ukraine in February.
Sakhalin Energy Investment’s foreign partners, including Shell, were invited to apply to the government to obtain stakes in Sakhalinskaya Energy of the same size that they had in the previous operating company.
However, Shell has said it would not take the 27.5% shareholding offered and revealed during a recent call with investors that it will also not renew its long-term contract to buy 1 million tpa of LNG from the project.
Japan’s Mitsui and Mitsubishi have opted to regain their 12.5% and 10% stakes in Sakhalin 2, despite Japan joining international sanctions against Russia and its corporations.
Japanese Economy, Trade & Industry Minister Yasutoshi Nishimura told reporters in Tokyo on Friday that authorities welcomed this week’s decision by the country’s Sakhalin Oil & Gas Development Company (Sodeco) to apply for a 30% stake in another Sakhalin oil and gas project, Sakhalin 1.
The decision was made at a Sodeco’s extraordinary shareholder meeting on Friday, Reuters reported.
“We welcomed such a decision since [Sakhalin 1] continues to be a very important project,” Nishimura said. “We will communicate closely with private-sector businesses and do utmost to ensure [country’s] energy security.”
In a similar scenario to the Sakhalin 2 development, the Russian government ordered Sakhalin 1’s assets and personnel to be transferred to a new, Russian-registered operator, depriving the project's operator and leading shareholder ExxonMobil of the US of the opportunity to make a smooth exit.
