The operator of the Sakhalin 1 oil and gas offshore development in Russia, Exxon Neftegaz, plans to downsize some activities on Sakhalin Island in the country’s far east in response to dire energy prices and and Covid-19-related challenges.

Exxon Neftegaz, in which US supermajor ExxonMobil has a 30% stake, said in an emailed statement to Reuters that “it is looking to reduce spending in response to market conditions, and evaluating all appropriate steps to reduce capital and operating expenses in the near term”.

“We are not commenting on the status of individual projects at this time,” the operator said.

Giant rigs

Sources close to the project said that Exxon Neftegaz had earlier informed its long-time partner, US contractor Parker Drilling, of a plan to halt operation of two of the world’s largest drilling rigs, Krechet and Yastreb.

Both rigs are capable of drilling long extended-reach wells that the operator spuds from shore into offshore reservoirs to avoid the need to install offshore drilling and production platforms.

According to Exxon Neftegaz, Krechet has been drilling such wells into the Odoptu field, while Yastreb has been “in conservation mode” on the Chayvo field, set to be finished in 2021.

Sources said that Krechet may halt operations for 18 months, although the operator has not confirmed this.

Due to the complexity and size of each rig, they are expected to remain on Sakhalin Island until the operator decides to resume drilling.

New wells required

Exxon Neftegaz will have to spud new wells as the company looks to maintain the oil production plateau of its three offshore deposits near Sakhalin Island – Chayvo, Odoptu and Arkutun-Dagi.

Additionally, new wells will be need to be drilled into the gas layers of these reservoir as Sakhalin 1 shareholders last year decided to go ahead with construction of their own liquefied natural gas export plant by 2025.

Two offshore platforms, Orlan and Berkut, are said to be continuing with oil production, however, the number of personnel on board will reportedly be reduced.

Besides ExxonMobil, other partners in Sakhalin 1 are Japan's Sodeco consortium, India's ONGC Videsh and Russian oil producer Rosneft.

Exxon Neftegaz reported averaged oil production of 392,000 barrels per day in the first quarter of this year to Russian authorities, against 388,000 bpd in 2019.

Production

Exxon Neftegaz set to scale back at Sakhalin 1 in Russia - report