Gas and Oil Development Project - Case Study Example

Lecturer The Sakhalin Project Introduction The Sakhalin project is regarded as the most ambiguous and largest gas and oil development project in the entire world. This project is operated on Sakhalin Island that is situated in Russia. The Indian, Russian, Japanese, and United States oil and gas consortium companies are the cooperation behind the initiation and development of this project. The projects under Sakhalin 1 project include offshore oil fields; Exxon Neftegas limited (ENL), the Arkutum Dagi, and the Odoptu. Notably the project has been developed into four phases with each phase using both the offshore and onshore drilling fields. The total numbers of the reserves that it can recover are estimated to be at three hundred and seven million tons of oil and the natural gas was estimates are approximately four hundred and eight five billions cubic meters (Exxon Neftegas Limited). The execution and development of this project have been motivated with the application and use of advance construction methods and technologies. Moreover, the application of such technologies and construction methods have led to reduced cost of operation for the general project development and as well led to minimized negative environmental impacts. Additionally, the project has managed to overcome most of its technical and environmental challenges; thus, meeting its set goals and objectives through application of the newly introduced technologies. Furthermore, the committed management team has successful transformed the project’s goals and objective into the success of the project through their committed submission to the project. However, the project has been faced with numerous challenges including complex regulatory rules, limited infrastructure, difficult logistics, and unskilled labor. Nonetheless, the management proper application of its efficient plans especially along the new technologies has led to successful completion of the project’s first phase (Exxon Neftegas Limited). Background notes The Sakhalin project is one of the largest foreign direct investments that are found in Russia. It had the objective of fulfilling the ever-growing energy demands in Russia and other parts of the world. The project managed to fulfill this objective or its aim since it produces and supply energy for both domestic consumption in Russia and exporting some of its energy to northeast Asia. Moreover, it helped Russia to consolidate its strategic position regarding the supply of energy in other parts of the world. In other words, the project made Russia to be a world energy supplier and be reconsidered as energy provider within the world market. Other than making Russia world energy supplier, the Sakhalin project has other different benefits it has bought to Russia and to the Russians especially to the Sakhalin island inhabitants. Nonetheless, the projects have had some challenges. Nonetheless, it has managed to overcome most of them (Exxon Neftegas Limited). Development This projected started as a friend move that United States Exxon had on Russia. Therefore, it is a project initiated and developed by the United States’ Exxon. It declared its interest of investigating the viability of oil and national gas on the Sakhalin Island. It did this by establishing the Sakhalin State University on the Sakhalin Island. The Sakhalin island government accepted the move through its governor, Aleksandr khoroshavi and the same idea was supported the Russian president, Medvedev. Notably, the idea of having an institute on the island had been arrived on a year before the project was initiated and it was initiated due to the importance of the project (Exxon Neftegas Limited). The island governor supported the project on the basis that it would reduce the looming shortage of professionals on the island. Moreover, according to him, the institute would give the island a chance to rear its own staff who will contribute to its modernization. He added that the institution would give professionalism an opportunity for continuity in the island and that would provide skilled workmanship or labor. He again stressed that the project would give the island a state-of-the-art knowledge that would enable them develop their own oil and natural gas sectors of economy. With high appreciation, he supported the consortiums and rendered them to carry out the Sakhalin project on the island. These moral and leadership supports among others offered the Sakhalin project management team is what facilitated their work to succeed on the island (Exxon Neftegas Limited). In addition, the Sakhalin shelf turned out to be an important carbohydrates source; this as well facilitated the international research center to approve the viability of the project on the island. Moreover, the finding that were made ready by ENL Board chairman, Jim Flood, by saying that they will avail funds to help the Gas and Oil institution that was to be managed by the Sakhalin State university. He aimed at supporting other research activities including chemical and geology and to use other special software that include drilling simulation software (Exxon Neftegas Limited). Among other motivators, the project “Sakhali-1” was initiated and it included that development of some three previously underdeveloped fields. The potential resources of this project amounted to about three billion Oil barrels and natural gas of about four hundred and eighty five billion cubic meters. It is worth noting that Sakhalin project -1 had some partners other than Exxon and they include Rosneft with portion of 20%, ONGC of India with 20%, and “Sodeco” of Japan with 30% portion of the share (Exxon Neftegas Limited). Phase-I development of Chayvo field The Sakhalin -1 is divided into different phases including Chayvo, Arkutun Dagi, and Oduptu fields. These fields are located on the Sakhalin coast but on the northeastern coast of this island. Notably, there has been phase development approach in their daily operation (Exxon Neftegas Limited). All there operations and such operation facilities are situated on both Russia main land and on the Sakhalin Island. At the initial stages of the project, the Chayvo field was being developed using both offshore and onshore drilling facilities. The onshore drilling facilities were at Yastreb while the offshore drilling facilities were at Orlan both on the Sakhalin Island. The Orlan facilities or platform has maintained it continued operation while the Yastreb drilling facilities had since been dismantled and relocated to the Odoptu field. This shifting occurred in July 2008. After Odoptu first stage successful completion, the Yestreb is facing relocation back to Chayvo to resume the field development (Exxon Neftegas Limited). The produced gas and oil are transported to Chayvo that is onshore for processing and stabilization for shipment. The Sakhalin- 1 lead to the extensive building of Onshore Yestreb rig making it one of the most powerful facilities in the industry and hold world records for rich drilling. On the other hand, Orlan, an offshore facility, is used to develop the Chayvo zone southern flank from the offshore. The gas produced and processed in this region can be either transported or converted for domestic consumption. They use pipeline for transportation of these products from the onshore to the Sakhalin inland processing facilities where they are shipped to international markets (Exxon Neftegas Limited). Benefits of the project The project has yielded numerous benefits to Russia that includes revenues worth billions of dollars. Moreover, it has led to cheap domestic gas supply in Russia. The project has led to many employment opportunities in Russia including contracting of international companies. Additionally, the project has led to infrastructure development and modernization. The developments of infrastructures do not only positively impact the companies but also the community (Exxon Neftegas Limited). Challenges The Sakhalin Island is located betwixt Japan and Russia on the north Pacific, this shows that it is amid maintains that have extreme climate. Moreover, an ecological sensitive area has many plants and wild animals. The underlying climatic conditions and the availability of wild lives made it vulnerable to environmental problems. This posed a life threats to the workers especially during the early stages of the project (Exxon Neftegas Limited). Additionally, the project’s scope is vast. However, it is divided into two phases. the first phase of this project started producing oil in 1999 in Yastreb drilling rig. This rig could only operate on the ice-free summer months. The second phase, however, had an additional new offshore platform and new pipeline all of which increased production and allowed production to be continuous throughout the year. The initiation of the new facilities was met with many challenges. Moreover, the initial stages of the project were faced with a problem of unskilled labor, which rendered operation difficult (Exxon Neftegas Limited). Outlook of Sakhalin 1 The glooming outlook for the production in Russia indicates that the Sakhalin project may cut its oil output sharply. This is so because of the current political wrangle that has shadowed the project’s gas production; thus, it it apparent that the project may lose it bearing. It is reported that at some points in time there are talks of cutting the oil and gas production; that is, they intend to sign a gas deal. Even though the “Russkies” are interested with the gas, they are opposed to the idea that Exxon is selling it to the China or Japan on its own. They want to be involved in the sales. Unless proper consensus is attained, the project is at a tussle (Exxon Neftegas Limited). Work Cited Exxon Neftegas Limited, Exxon Neftegas Sakhalin-1 Operator. (n.d.). Print Retrieved from: http://www.sakhalin1.ru/Sakhalin/Russia-English/Upstream/about_phases.aspx Read More