Sakhalin Energy Starts Year-Round Crude Oil Exports

By Torrey Clark

Dec. 12 (Bloomberg) -- OAO Gazprom’s Sakhalin Energy venture began year-round oil exports today and plans to start producing liquefied natural gas in “the next few weeks” after building pipelines to the southern tip of the Pacific island.

The project will use two tankers, the Governor Farkhutdinov and Sakhalin Island, to export oil this season, Sakhalin Energy said today in an e-mailed statement.

The $22 billion project had been slated to begin year-round oil exports in 2007 and LNG exports in the second half of this year. Royal Dutch Shell Plc, Europe’s biggest oil producer, agreed to cede control of Sakhalin-2 to Gazprom two years ago after months of pressure from environmental regulators, who threatened to shut down the project.

Gazprom owns 50 percent plus one share of Sakhalin Energy Co. Shell has 27.5 percent, Mitsui & Co. holds 12.5 percent and Mitsubishi Corp. has 10 percent. Much of the LNG will be exported to Japan, the world’s biggest buyer of the fuel. LNG is natural gas chilled to liquid form to aid transportation and storage by ocean-going tanker.

South Korea, which imports almost all its energy needs, said in December it will buy 1.5 million metric tons of LNG a year from the project. The country wants to diversify its sources of oil and gas as the country competes with China, Japan and India for natural resources. In October, South Korea agreed to import natural gas from East Timor starting 2013.

To contact the reporter on this story: Torrey Clark in Moscow at tclark8@bloomberg.net.