ExxonMobil and partners are mulling cost cuts on their Sakhalin-1 project in Russia’s Far East due to current market conditions.
Operator Exxon Neftegas Limited (ENL) reportedly said on Friday it’s adjusting its schedule and scope of certain activities. The company told Reuters it’s looking to reduce spending and evaluating all appropriate steps to reduce capital and operating expenses in the near term.
The move follows measures taken by oil and gas producers around the world, amid the uncertainty and challenge posed by the Covid-19 pandemic, as well as the turmoil in the oil industry. Low oil prices and the output cuts enforced by governments, including Russia, are set to reduce company’s production.
ENL didn’t comment on which projects could be affected.
The Sakhalin-1 oil and gas project is one of the largest single international direct investments in Russia. Its Chayvo, Odoptu, and Arkutun Dagi license blocks, located off the northeastern coast of Sakhalin Island in the Russian Far East, are being developed using a phased approach.
The planned spending cuts could affect the planned Chayvo Phase 2, which is set to expand the development of the block’s natural gas resources not associated with current oil production, Kallanish Energy reports.
This project will require drilling of additional gas wells and the expansion of existing onshore and offshore facilities. The development will enable an increase in gas sales to both domestic and export markets.
In turn, the Far East LNG project could also be affected. This project is planned to be built near the Sakhalin-1 De-Kastri oil export terminal in Khabarovsk Krai, leveraging logistical synergies and the marine infrastructure already in place.
The Sakhalin-1 project is a joint venture between ExxonMobil (30%), Rosneft (20%), Sodeco (30%) and ONGC Videsh (20%). It has estimated reserves of 2.31 billion barrels (307 million tonnes) and 12.1 trillion cubic feet (485 billion cubic meters) of gas.
This post appeared first on Kallanish Energy News.