FFC: Sakhalin: Interview with Dr. Galina N. Pavlova

Do you feel like managing all the contractors and bringing them together with Russian contents? And do you feel the job is becoming bigger and bigger?

My role is growing every day, yet my department is not only supervising Russian content. We are also responsible for coordinating all major activities for both Sakhalin 1 and Sakhalin 2 projects.

Considering that there is a great deal of construction at the moment and that the projects are growing quickly, we paying a great deal of attention and consideration in the work program and its budgets as well.

On the whole, are you happy with the work of the foreign companies in Sakhalin?

There are three main issues we have to pay attention to:

I would like to say that the Sakhalin 1 project has reached up to 65% of Russian content for its operations. We are really pleased with that number. As far as Sakhalin 2 is concerned, the rate of Russian participation is only at 45%, which is a greater concern.

Our goal is to reach 70% of Russian participation for each project. Yet we also fully appreciate the problems that exist on the part of the Russian contractors and we are working with them to improve their performance.

In the other hand, the operators of both projects should actively involve more Russian content, especially Sakhalin 2. In particular, the general contractors such as CTSD and Parsons could have involved more Russian participation.

Two years ago, there was a conflict between Sakhalin and the Russian federation for the distribution of oil and gas revenues. Two years ago you stated that you would pressure Moscow to re-invest more revenues back into the island. Is this happening?

Unfortunately the conflict has not been resolved – it is actually much greater now. The balance that used to exist in the past for distribution was a sharing agreement which stipulated that 40% of revenues would go back to the Sakhalin Region, while 60% would go to the federal government. This is different now.

Recently a new regulation has been put in place, which includes a production tax of which Sakhalin receives only 5% because the majority of revenues are generated through off-shore projects.

How are you working to improve the infrastructures on the island?

Income taxes contributing and we are working with the constructors to make them contribute to the development of local infrastructure. We are modernising the island through new bridges, roads and ports, together with the operators of the oil and gas project. A development fund is also contributing to the people of the island. All in all, these projects have been greatly beneficial for infrastructure development.

Meanwhile, we are currently looking into compensation schemes that would help build 3 or 4 new fisheries on the island. We continue to collaborate with the Ministry of Finance and the Ministry of Natural Resources, which has generated some additional subsidies for specific projects in the past.

Are you also working with Federal authorities in order to minimise bureaucracy for the construction phase?

We are closely involved in the resolution of this issue and we are strongly supported by the Ministry of Industry and Energy. Yet the reorganisation of the government has not been finalised yet. Some resolutions on these issues are very complicated and we are working to resolve them.

The negotiations for pipeline to Japan are still taking place... What is your opinion on this issue? Why is it dragging on?

Negotiations are going forward with Japan, Korea and China and the decision will not be made just by the operators. There are state borders and national representatives will also participate in these negotiations.

Japan’s priority is currently LNG. Nevertheless, in the longer term, what they might do is construct necessary gasification plants in Japan to be able to accept pipeline gas sales.

Are you also cooperating with the Sakhalin 5 project?

Yes. The project is going well and we are working closely with BP and Rosneft for the Sakhalin 5 project.