Sakhalin Operators and Russian Govt Disagree on Gas Transporting Way

Shareholders in the Sakhalin I oil and gas project and regional authorities disagree on the best method of transporting the gas, the governor of the Sakhalin Region said Tuesday.

Ivan Malakhov said transporting the liquefied natural gas by sea is more advantageous than constructing a gas pipeline to China, which is favored by the Sakhalin I shareholders.

The project, which is operated under a production-sharing agreement (PSA) by Exxon Neftegas Limited, a subsidiary of U.S. oil major Exxon, is located on Sakhalin Island's northeastern shelf and is expected to bring in around $52.2 billion to the Russian budget by 2054, when it is scheduled to end.

"The main thing is that the gas and oil pipeline have actually been built and so there are no further costs. We could discuss additional pumping stations but those costs are nothing in comparison to constructing a pipeline from Sakhalin under the Tatar Strait," Malakhov said.

The governor is in favor of integrating the Sakhalin-I and Sakhalin II facilities to deliver gas to the LNG facility in the south of the Island for its eventual transportation by sea.