Oil play a major draw

TRAVELLING from St Petersburg to Vladivostok takes almost 10 hours and at night gas flares can be seen lighting the vast countryside.

It is easy to see why Russia holds the world’s largest natural gas reserves and the eighth largest oil reserves. It is the world’s largest exporter of natural gas and the second largest oil exporter.

However, few of Russia’s oil and gas resources compare to fields near an island off the east coast of Russia and to the north of Japan.

Sakhalin Island has been much contested by both countries over the past 150 years. It is almost half the size of Japan yet only about 680,000 people live there.

The island has a  diverse ecosystem, extreme climates, a rich array of flora and fauna and is also home to some of the largest oil and gas reserves in the world.

The Australian Trade Commission estimates the total investment over the life of the resource to be $US100 billion.

Two of nine planned oil and gas projects have commenced and investment in these two projects will be more than $US20 billion – about $US3.2 billion will be spent in 2003.

To put the reserves into perspective, there is enough gas in just one Sakhalin project to supply current global LNG demand for four years.

The operator of the first project, Sakhalin 1, is ExxonNeftegas, a subsidiary of Exxon Mobil, and other stakeholders include major Russian, Japanese and Indian oil companies.  Sakhalin Energy Investment Company – a consortium comprising Shell, Mitsui and Mitsubishi – manages the second project, Sakhalin 2.

The world’s largest LNG processing plant is also being built on Sakhalin to facilitate gas exports to Japan and Korea.

The Australian investment commission, Austrade, says the Sakhalin projects offer extensive and long-term business opportunities for Australian suppliers. To assist Australian business in Sakhalin it has already organised two Australian delegations there and is planning a third for early next year.

Austrade’s senior trade commissioner in Moscow, Gregory Klumov, said the Sakhalin Island projects had an expected life span of more than 50 years.

More than 30,000 jobs will also be created on the island leading to a demand for other services such as accommodation, recreational facilities, foodstuffs, social, infrastructure, health care and environmental services and products.

“Companies involved in this first mission provide products and services ranging from education and training to oil core and fluid analysis expertise, welding equipment, consumables and refrigeration engineering,” Mr Klumov said.

Australia could also gain from the tourism spend being geographically well placed to attract tourists from Sakhalin Island projects, he said.

One Australian company has already established its own operation in Sakhalin, while two other companies are planning to.



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