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Sakhalin I oil and gas project undecided on transport strategy -1

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Shareholders in the Sakhalin I oil and gas project in Russia's Far East and regional authorities disagree on the best method of transporting the gas, the governor of the Sakhalin Region said Tuesday.
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TOKYO, February 27 (RIA Novosti) - Shareholders in the Sakhalin I oil and gas project in Russia's Far East 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.

Malakhov said the facilities required for transporting liquefied natural gas by sea will create new jobs in the region and boost the development of the sector for production and transportation of LNG.

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.

Sakhalin II comprises an oil field with associated gas, a natural gas field with associated condensate, a pipeline, a liquefied natural gas plant, and an LNG export terminal. The project's two fields have estimated reserves of 150 million metric tons (1.1 billion barrels) of oil and 500 billion cubic meters of natural gas.

Vladimir Salamatov, director of the economics ministry's department for investment and innovation policy, said Monday the Sakhalin I shareholders preferred the gas pipeline project to China than transporting LNG by sea to Japan.

"So far, the impression is that the China gas project is commercially more viable, but a final decision has yet to be made," Salamatov said.

Sakhalin-I is expected to produce about 258 million metric tons (1.89 billion barrels) of oil and 356 billion cubic meters of natural gas over its lifespan.

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