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Thursday, May 18, 2006

Study on Sakhalin-II costs to be finished in summer

ST. Petersburg, May 18 (RIA Novosti) - Expert analyses of the rising costs of the giant Sakhalin II energy project should be completed over the summer, Russia's energy minister said Thursday. "We are conducting an assessment of the Sakhalin-II project in relation to increased capital investment [in the project], the rising cost of the project and the initiative proposed by an investor," Viktor Khristenko said, without giving a specific timeframe for the assessment. Under the project, Sakhalin Energy is developing two vast offshore fields off the island of Sakhalin in Russia's Far East that hold estimated recoverable reserves of 150 million metric tons of oil and 500 billion cubic meters of gas. Sakhalin Energy, 55%-owned by Royal Dutch/Shell, previously said it was considering raising the costs of the second stage of project development from the initial $12 billion to $20 bln. The second stage includes gas production and liquefaction at a new liquefied natural gas (LNG) plant on Sakhalin with projected annual capacity of 9.6 million tons. Other partners in the project include Japan's Mitsui (25%) and Mitsubishi (20%). Khristenko also said energy giant Gazprom would this summer finalize its choice of partners for development of the Shtokman gas field off Russia's Arctic coast that holds an estimated 3.2 trillion cubic meters of natural gas and 31 million metric tons of gas condensate. A shortlist of companies competing to get in on the project unveiled last September includes Norway's Statoil and Norsk Hydro, France's Total, and U.S. giants Chevron and ConocoPhillips. "The Shtokman [project] is unique not only because of the choice of partners for its implementation," Khristenko said. "It is also unique from a technical standpoint in terms of its production technology, logistics and refinery techniques."

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