Sakhalin is the only region in Russia, located on the islands. It is composed of Sakhalin Island with the adjacent small islands Moneron and seals, as well as the Kuril Islands, comprising 56 islands.



Sakhalin island is the largest island in Russia - 948 km (589 miles) long, and 25 to 170 km (16 to 106 mi) wide, with a total area of 72,492 km2 (27,989 sq mi). Sakhalin is separated from the mainland by the narrow and shallow Mamiya Strait or Strait of Tartary, which often freezes in winter in its narrower part, and from Hokkaidō, (Japan) by the Soya Strait or Strait of La Pérouse.

Sakhalin is a federal subject of Russia (an oblast) comprising the island of Sakhalin and Kuril Islands.The oblast has an area of 87,100 km² and a population of 546,695 (2002 Census).

Its administrative center and largest city is Yuzhno-Sakhalinsk with a population of around 170,000.



Economy

Sakhalin is a classic "resource economy" relying on oil and gas exports, coal mining, forestry, and fishing. Limited quantities of rye, wheat, oats, barley and vegetables are grown, although the growing season averages less than 100 days.

Following the collapse of the Soviet Union and economic liberalization, Sakhalin has experienced an oil boom with extensive petroleum exploration and mining by most large oil multinational corporations. The oil and natural gas reserves contain an estimated 14 billion barrels (2.2 km³) of oil and 96 trillion cubic feet (2,700 km³) of gas and are being developed under production-sharing agreement contracts involving international oil companies like ExxonMobil and Shell.

In 1996, two large consortiums signed contracts to explore for oil and gas off the northeast coast of the island, Sakhalin-I and Sakhalin-II. The two consortia were estimated to spend a combined $21 billion U.S. dollars on the two projects, which almost doubled to $37 billion as of September 2006, triggering Russian governmental opposition. This will include an estimated $1 billion (US) to upgrade the island's infrastructure: roads, bridges, waste management sites, airports, railways, communications systems, and ports.

In 2000, the oil and gas industry accounted for 57.5% of Sakhalin's industrial output. By 2006, it accounted for 80% of the island's industrial output. Sakhalin's economy is growing rapidly thanks to its oil and gas industry. By 2005, the island had become the largest recipient of foreign investment in Russia, followed by Moscow. Unemployment in 2002 was only 2%.As of 18 April 2007 Gazprom have taken a 50% plus one share interest in Sakhalin II by purchasing 50% of Shell, Mitsui and Mitsubishi's shares.



Energy sector

Russia holds the world's largest natural gas reserves, the second largest coal reserves, and the eighth largest oil reserves. Russia is also the world's largest exporter of natural gas, the second largest oil exporter and the third largest energy consumer.

On the territory of the Sakhalin region there are 73 gas and oil deposits, including the island of Sakhalin itself with 64 deposits on the shelf of the Okhotsk.

Over 90% of deposits and proven reserves of oil and gas are concentrated in Okha and Nogliki administrative districts of Sakhalin Region. Those two regions account for 29 fields of 33 currently being developed on land. One oil field is being developed in Smirnykhovsky area, while 3 gas fields are situated in Aniva.

The total geological hydrocarbon resources of the Sakhalin oil and gas field is estimated at 7.8 billion tons of equivalent fuel, including oil - 3 800 million tonnes of free gas - 3300 billion m 3 condensate - 250,5 million tons. Off shore of Sakhalin island accounts for 76% of oil resources (2900 million tons), 90% (2970 billion m 3) of free gas and 96% of condensate (238 million tons).

In addition to that, the total hydrocarbon resources of the Mid-Kuril area are estimated at 386 million tons of fuel.

Sakhalin Oil deposits are characterized by diverse physicochemical properties and group hydrocarbon composition.. In general, as far as the quality is concerned the Sakhalin oil surpasses Russia's traditional export mix «Urals».



Main projects

Sakhalin I

Exxon Neftegaz is leading the project in conjunction with consortium members SODECO, ONGC Videsh, and two Rosneft subsidiaries (Sakhalinmorneftegaz and RN Astra). Via its subsidiaries, Rosneft holds a 20 percent share in the project. The $6.5 billion dollar first phase of the project will entail development of the Chayvo field, and subsequent phases will develop the Odoptu and and Arkutun Dagi fields. Total capital expenditure for the project, approved back in 2003, is set at $12.8 billion. Around $3.4 billion were spent during 2005 and 2006 combined.

Consortium members began drilling in May 2003, and commercial production from the Chayvo field began in October 2005. The consortium announced the field had reached maximum production in February 2007 at around 240,000 barrels per day (bbl/d) of oil and 140 million cubic feet per day (mmcf/d) of natural gas. Output is being piped to the Russian port of De-Kastri where natural gas is then pumped into the Russian system and oil is exported to international markets. Most of the oil is shipped to markets in East Asia, two to five sailing days away.

The Sakhalin I project, managed by Exxon Neftgas Limited (ENL), completed a production-sharing agreement (PSA) between the Sakhalin I consortium, the Russian Federation, and the Sakhalin government. Russia is in the process of building a 136 mile (219 km) pipeline across the Tatar Strait from Sakhalin Island to De-Kastri on the Russian mainland. From De-Kastri it will be loaded onto tankers for transport to East Asian markets, namely Japan, South Korea, and China.



Sakhalin II

The Sakhalin II project is being developed under a PSA that now includes Gazprom, Shell, Mitsubishi, and Mitsui. The consortium members have estimated that the project’s cost will total more than $20 billion, making the project the largest single foreign investment in Russia. To date, around $13 billion has already been spent.

Sakhalin II will supply natural gas to the United States, Japan and South Korea. In late 2004, Sakhalin Energy signed a contract with Coral Energy to supply 1,800 billion cubic feet (bcf) of LNG over 20 years to a power plant on the border of California and Mexico. The LNG will be delivered via tanker to the Energia Costa Azul terminal being constructed in Baja California, Mexico. In March 2004, Sakhalin II announced the sale of 300,000 tons of LNG per year to Japan's Tokyo Gas and Tokyo Electric Power (TEPCO) starting in summer 2008. In July 2005, the project operators announced a 20-year sales agreement of 1.6 million tons per year of LNG to Korea Natural Gas (KOGAS).



Sakhalin III

The four blocks in the Sakhalin-III project are estimated to contain 5.1 billion barrels of oil and 46 Tcf of natural gas. Russia’s environmental agency, Rosprirodnadzor, reported in early 2008 that it had discovered some license violations at Rosneft’s Veninsky Block and has threatened to withdraw the license. The Veninsky block, with oil reserves of 1.2 billion barrels and 9.1 Tcf of gas, will be developed by a Rosneft-Sinopec consortium. In February 2006, this block was transferred to Venineft, a joint venture of Rosneft (49.%), Chinese Sinopec (25.1%) and SakhalinskayaNeftyanayaKompaniya (25.1%).