Sakhalin-2 Project Begins Production

Sakhalin Energy has said that production has begun early from the Sakhalin-2 project, the oil and gas project in the Russian Far East, with production sharing having started.

This production sharing was agreed to begin when all project expenses have been recovered. The project has so far recovered $24.5 billion (USD) from phase one and two of the project.

"Production sharing began ahead of plan," CEO of Sakhalin Energy Andrei Galaev said today. "This is not only a result of favourable market conditions, but first of all result of efforts of the whole company and its employees in production optimisation which was constantly supported by our shareholders."

The project, which is built on Sakhalin Island, comprises both oil and gas assets including Russia's first LNG plant.

Through the production sharing agreement, the Russian Federation and the Sakhalin region has been paid $3 billion since 1995 with $0.5 billion expected to be paid out this year. Sakhalin Energy predicts the project will pay out over $100 billion over the course of its lifetime.

Sakhalin Energy is the operator of the Sakhalin-2 project. Russia's Gazprom is the majority stakeholder in Sakhalin Energy with a 51 per cent share. Shell holds a 27.5 per cent stake in the company while Mitsui holds a 12.5 per cent staje and Mitsubishi a 10 per cent stake.