Oil & Gas Journal: Sakhalin II Phase 2 clears EDRB hurdle: “EDRB's fit-for-purpose declaration allows the start of a 120-day period of public disclosure of and consultation on the project's environmental, social, health, and safety issues and mitigation documentation.”: Posted Saturday 17 December 2005

By OGJ editors

HOUSTON, Dec. 16 -- Sakhalin Energy Investment Co. Ltd. has received a determination from the European Bank for Reconstruction and Development (EBRD) that its Sakhalin II Phase 2 is "fit for purpose" on environmental and social issues management.

EDRB is a prospective lender to the huge offshore oil and gas development and LNG project in Russia's Far East, which has been hampered by rising cost estimates and delays.

Early this year, Royal Dutch Shell PLC, parent of Sakhalin Energy's lead partner, warned that costs for the phase might reach $20 billion, twice the original estimate for the entire Sakhalin II project (OGJ, July 25, 2005, p. 26). The project also has encountered delays related to environmental issues (OGJ, Aug. 8, 2005, p. 30).

Shell now plans to start year-round oil production, which depends on pipeline construction, in late 2007 and LNG sales in the summer of 2008. Sakhalin II produces about 80,000 b/d during summer, with oil moving to Japan via tanker.

Prospective lenders have been reviewing Sakhalin II Phase 2 for 3 years. EDRB's fit-for-purpose declaration allows the start of a 120-day period of public disclosure of and consultation on the project's environmental, social, health, and safety issues and mitigation documentation.

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