YUZHNO-SAKHALINSK, Russia — Braving a new frontier of oil exploration around Russia’s remote Sakhalin Island means conquering ice-locked seas, frequent earthquakes and muddy swamps fed by melting snow in the rapid springtime thaw.
Executives at the world’s largest oil and gas project, known as Sakhalin-2, say they are nearing the finish line as they aim to open up a vast new energy source for the nearby Asian economic powerhouses of Japan and South Korea, along with the U.S. and others.
The waters of the Sea of Okhotsk around Sakhalin Island are believed to hold total estimated reserves of at least 45 billion barrels of oil and gas equivalents — an amount similar to the resources remaining in the Gulf of Mexico or the North Sea.
One of most formidable challenges to unlocking those riches proved to be the Moscow government itself. It won a tug-of-war with foreign investors that left Russia’s state-controlled OAO Gazprom gas giant in control and reduced the Netherlands’ Royal Dutch Shell PLC and Japanese partners to minority shareholders in Sakhalin Energy, the international consortium running the project.
Moscow threatened last year to pull the project’s operating license, citing problems in compliance with environmental regulations. The risk of losing the entire project pressured Shell and other founders to cede majority control to Gazprom in April for $7.45 billion.
Shell now holds 27.5 percent of Sakhalin Energy, along with Japanese firms Mitsui & Co. at 12.5 percent and Mitsubishi Corp. at 10 percent.
After the switch in control, the Moscow government last month gave its tentative approval for the project and said environmental compliance had improved.
Sakhalin Energy already has been exporting limited oil from a single offshore platform since 2003 that can only operate half of the year, when seas aren’t frozen. But the next phase of the project set to be completed by the end of 2008 will see the opening of two more offshore platforms, along with pipelines bringing oil and gas to the island’s warmer southern shore.
