Approval Process for the Sakhalin II Offshore Field Development
Authors: DeHekker Glenn , Aurora Ravi P. 
Published: October 2008

This paper describes Sakhalin Energy Investment Company's experience with the Russian Approval process pertaining to the Piltun-Astokhskoye (PA) development offshore Sakhalin Island, Russia. Sakhalin Energy Investment Company (Sakhalin Energy) is a joint venture of Marathon Sakhalin Limited (37.5%), Shell Sakhalin Holdings B.V. (25.0%), Mitsui Sakhalin Development Co. Ltd. (25.0%), and Diamond Gas Sakhalin B.V. (12.5%). Sakhalin Energy received the licenses to develop Piltun-Astokhskoye and Lunskoye Fields (Fig. 1) in May 1996, following the signing of a Production Sharing Agreement (PSA) between Sakhalin Energy and the Russian Federation (Russian Party) in June 1994. The PSA established a Supervisory Board, with equal representation from Sakhalin Energy and the Russian Party, to implement all phases (exploration and production) of both fields. Sakhalin Energy obtained Approvals from the Supervisory Board and many Russian agencies at both Federal and Regional levels to reach the target of first oil in July 1999 set jointly by all parties to the PSA. The Approval process was very challenging for all parties due to the following reasons:PA development is the first arctic offshore project in Russia,the PSA is the first production sharing agreement for an oil and gas development in Russia,this project is a high profile project in Russia, both technically and politically, due to (a) and (b) above, (d) the lack of clearly defined regulatory environment, and (e) common use of international design codes and standards as well as the use of international equipment and materials.

The many facets of the Russian Approval process as encountered during the PA field development are described next.

Approval Process for Piltun-Astokhskoye Field Development (Phase 1)

The following paragraphs describe:the steps that lead to implementation of a project in Russia,Sakhalin Energy's experience with the Russian Approval process,future trends aimed at streamlining Approvals, andour conclusions based on experience gained to date.

A schematic of the Piltun-Astokhskoye Field Development (Phase 1), officially known as Vityaz Complex, is shown in Fig. 2. The overall project schedule is shown in Fig. 3. This is a very complex development in arctic waters, and the production is limited to about 180 days per year during the ice-free period. The development concept consists of a converted arctic drilling rig, the Molikpaq, a Single Anchor Leg Mooring (SALM) system, a short submarine pipeline from the Molikpaq to the SALM, a Floating Storage and Offloading (FSO) tanker anchored to the SALM. The FSO will offload crude oil to tankers of opportunity during the ice-free period.

Steps to Project implementation.

Sakhalin Energy had to first get the Development Plan for Piltun-Astokhskoye License Area approved by the Supervisory Board. As noted earlier the Supervisory Board is a body established under the terms of the PSA to implement all phases of the project. The Development Plan was officially submitted to the Supervisory Board in June 1997 and it was approved in July 1997. The quick turn around by the Supervisory Board was due to close cooperation between Sakhalin Energy's personnel and the "working group" that was established by the Supervisory Board to closely examine information requiring Supervisory Board decisions before the matter came up to the Supervisory Board. It should be noted that the Development Plan could not be presented to the Supervisory Board without first getting Approvals from the State Reserve Committee (SRC) for estimated in-place and recoverable reserves, and the Central Development Committee (CDC) for the reservoir development plan. This is illustrated in