RUSSIA - The Active PSAs.

There are JVs to develop over 210 oil and gas fields in the far north, West Siberia, and the far east. Some fields are huge. The big JVs involve the largest oil companies in the world, mostly from the US. Some of them have become active before their PSAs were finally approved.

Sakhalin I, the first among the projects on and off Sakhalin island in the Far East, had been prepared since 1976. Its 40-year PSA was signed June 19 1995 and went into effect on June 11, 1996. Work was launched immediately by Exxon (now ExxonMobil), the operator and leading partner of Japan's Sodeco group (JNOC, Japex & 12 private firms). Its fields on the Sakhalin shelf are Chaivo, Odoptu and Arkutun-Daginskoye, which contain 2.5 bn barrels of oil and condensates and 425 BCM (15 TCF) of gas. Total investment will be about $15 bn, with more than $600m spent so far. Oil production, in 1998 set to begin in late 1999, is now expected to start in 2001. Full-scale gas production will begin as soon as a major export pipeline to Hokkaido, northern Japan, has been completed. A two-year feasibility study for the pipeline was started in mid-1998. The contract for the first of seven oil and gas platforms to be installed in the fields was awarded to Kvaerner in January 1997 and this could cost about $1 bn. The platform will be a fixed steel gravity base structure and ice and earthquake resistant to cope with the sub-Artic conditions and seismic activity in the Okhotsk Sea. It will have a capacity of 110,000 b/d of oil and some gas and will be installed in water depths of 150 feet in Arkutun-Daginskoye, the first field to be on stream. The JV has two Russian partners Rosneft-Sakhalin and Sakhalinmorneftegaz-Shelf.

Sakhalin II involves a JV called Sakhalin Energy Investment Co. (SEIC). It has partly developed and put on stream Piltun-Astokhskoye field on the island's eastern shelf. SEIC also has the Lunskoye gas field. Its PSA was signed on June 22, 1994 and came into effect on June 22, 1996. Shell is the operator and JV leader (see Part 2). The fields have 750m barrels of oil, 300m barrels of condensates and 408 BCM of gas. Investment would be over $12 bn, if the project is to include an LNG export system which could be on stream by 2005.

Sakhalin III is a two-block project started in 1993 by Exxon to develop the West-Odoptu and Ayashsky fields on the shelf. Its PSA is still under negotiation by the Russian side and Exxon. Its Russian partners are Rosneft and its Sakhalinmorneftegaz unit.

Another Sakhalin III project started in 1993, involving ExxonMobil (33.3%) as operator and consortium leader to develop the Kirinsky fields, is under negotiation as well. The other partners are Texaco (33.3%), Rosneft (16.7%) and Sakhalinmorneftegaz (16.7%) - the latter two imposed on Mobil in late 1997. Mobil then hoped it would start a $300m exploration drilling programme in the ice-free summer of 1998. But this was delayed. The fields contain 450m tons of recoverable oil and 720 BCM of gas. The project will cost $30 bn and will yield $58.5 bn in gross profit, with total output of 452m tons of oil equivalent..

The Sakhalin IV, V and VI projects have been under discussion with various foreign companies. Sakhalin V has been discussed by BP, Rosneft and Sakhalinmorneftegaz. Sakhalin IV, abandoned by Arco in early 2000, has one major field offshore and six smaller fields onshore containing 895m barrels of liquids and 15.5 TCF of gas.

Shtokmanovskoye gas field in the Arctic Barents Sea, about 600 km north of the Kola peninsula, is to be developed by Gazprom subsidiary Rosshelf in partnership with Conoco, TotalFinaElf, North Hydro and Finnish company Fortum. Containing 4 TCM of gas and 250m barrels of condensates 4 km below the seabed, the field has six wells which have penetrated four reservoirs. Development will include deviated and horizontal wells, up to three offshore, ice-resistant platforms and gas pipelines and an onshore gas-receiving terminal. The PSA law for this was decreed on June 5, 2000 by President Putin. The law gives Rosshelf exclusive rights, and the company is to give 12.5% to each of the four foreign partners. The law, which simplifies taxation and other terms, was approved in May by the Duma. The PSA will be signed by the partners by end-2000. The field will produce 30 BCM/year from 2006 and 80 BCM/y from 2010. The gas will be exported to North West Europe between 2010 and 2040. Full costs could reach $19 bn.

Prirazlomnoye, a complex field in the Pechora Sea, will be developed by Rosshelf in partnership with Wintershall under a PSA signed in mid-1997. The field contains 400m barrels of oil and could eventually produce 120,000 b/d. BHP of Australia withdrew from this venture in 1999.

Priobskoye, in west Siberian Khanty Mansiisky, is one of the huge oil fields awaiting development since the mid-1990s. Slated to be developed by BP Amoco in partnership with the Yukos and Yugraneft, it contains 5 bn barrels of recoverable oil. Production is to rise from 10,000 b/d now to more than 450,000 b/d. Investments will be between $20-50 bn, including a new terminal and other infrastructure. Another field in the same region, Tyanskoye, is being re-explored and developed by Surgutneftegaz.

Timan Pechora fields in the far north, to be developed by Texaco in partnership with Rosneft, the local producer Arkhangelskgeoldobicha (AGD), BP Amoco, and Norsk Hydro, contain 306m tons (2.2 bn barrels) of oil and total investment is estimated at $15-40 bn. The JV, Timan Pechora Co. (TPC), has been waiting since 1990 and its PSA is yet to be finalised. This is why Exxon in late 1999 pulled out of the venture. The block is 17,500 sq km and its 12 fields include Trebs, Titov, Varandeiskoye and Toraveiskoye. The local government of the Nenetz autonomous region has pressed TPC to start developing the fields since 1996. But Texaco and the other Western partners have insisted on securing a clear and comprehensive PSA before actual work begins, because the local authorities wanted to impose onerous tax conditions. In June 1998, the local government granted 25-year rights to AGD for the development of Varandeiskoye and Toraveiskoye and indicated that the rest of the fields would be split into three different blocks and offered to companies other than the Texaco-led group. The Western partners were alarmed and subsequently got visiting US Vice President Al Gore to discuss the matter at the highest level in Moscow. Moscow got LUKoil, keen on this venture, to work on TPC's PSA. LUKoil holds the majority in AGD.

LUKoil (60%) and Conoco (40%) are investing in Timan Pechora's Northern Territories oilfields. They will begin producing from 2001.