In Phase 1, the European Bank for Reconstruction and Development (EBRD) funded the commercial development of the Astokh feature of the Piltun-Astokhskoye oil and gas field located off Sakhalin Island, using the Molikpaq, an Arctic offshore drilling unit. The EBRD invested $116 million, the total funds invested being $780 million. Phase 1 was approved in 1997 and began operations in 1999.
Sakhalin Energy Investment Company (SEIC) is implementing Phase 2 of the project, which aims to integrate oil and gas to produce crude oil and condensate, and liquefied natural gas (LNG) for international export from Sakhalin Island from the Piltun-Astokhskoye and Lunskoye fields located offshore. In 2005, the total cost of the project was estimated at $20 billion.
This phase of Sakhalin II involves the installation of a second offshore platform on the Piltun field, which has been completed, and an offshore platform on the Lun gas field. Both platforms will be linked to the shore by pipelines. Gas from the Lun-A platform will be treated at an onshore processing facility. The treated oil and gas will then be transported via two 800-kilometer-long onshore pipelines to a new LNG plant and oil and LNG export terminal at Prigorodnoye in the south of Sakhalin Island. The project also includes the necessary infrastructure work (airport, road, and bridge upgrades) as well as shore-based supply camps and company headquarters.
The project has faced heavy criticism over the potential environmental impacts, which could include driving the world's last 100 remaining western pacific grey whales to extinction. Additional concerns include that the project could permanently harm the marine environment, threaten the livelihood of thousands of fishermen by destroying key salmon fishing with dumping spoil waste into the sea, as well as put the Okhotsk and Japanese seas at risk of a potentially devastating oil spill. In November 2007, for example, Sakhalin Energy admitted to a “small” oil spill in the vicinity of the Vityaz offshore complex, after a storm damaged a buoy.
The environmental concerns around Sakhalin II, Phase 2 have been heavily debated with Russian authorities threatening suspension at times. The project also affects indigenous peoples and communities on the island.
Gazprom's Sakhalin-2 Spills Oil Into Pacific Ocean, by Lucian Kim, Bloomberg, November 25, 2007 (Bloomberg website)
Russian authorities' complaints jeopardize Sakhalin II project (BIC website)