Sakhalin II LNG Terminal

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Sakhalin II LNG Terminal (Russian: СПГ терминал Сахалин-2), also referred to as Prigorodnoye LNG export terminal (Russian: Производственный комплекс «Пригородное»), is an LNG export terminal in Sakhalin, Russia.

Location

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Project Details

Project Details, Trains 1 & 2

• Operator: Sakhalin Energy LLC
• Owner: Sakhalin Energy LLC
• Parent company: Gazprom (77.5%), Mitsui (12.5%), Mitsubishi (10%) (Shell's 27.5% handed off to Gazprom)*
• Location: Prigorodnoye, Aniva Bay, Korsakovsky District, Sakhalin, Russia
• Coordinates: 46.6288, 142.9112 (exact)
• Type: Export
• Capacity: 10 mtpa (5 mtpa per train), 10.8 mtpa (5.4 mtpa per train), 11.5 mtpa (5.75 mtpa per train)
• Status: Operating
• Start year: 2009
• Cost: $22 billion USD, $25 billion USD
• Associated infrastructure: Piltun Astokhskoye Oil Field (Russia), Lunskoye Oil and Gas Fields (Russia)

*Shell's 27.5% stake has been handed off to Gazprom by the Russian government but Shell still officially owns it.

Project Details, Train 3

• Operator: Sakhalin Energy LLC
• Owner: Sakhalin Energy LLC
• Parent company: Gazprom (77.5%), Mitsui (12.5%), Mitsubishi (10%) (Shell's 27.5% handed off to Gazprom)*
• Location: Prigorodnoye, Aniva Bay, Korsakovsky District, Sakhalin, Russia
• Coordinates: 46.6288, 142.9112 (exact)
• Type: Export
• Capacity: 5 mtpa
• Status: Proposed
• Start year: 2023; 2027
• Cost: 6.1 billion USD (2019)
• Associated infrastructure: Piltun Astokhskoye Oil Field (Russia), Lunskoye Oil and Gas Fields (Russia)

Note: mtpa = million tonnes per year; bcfd = billion cubic feet per day

*Shell's 27.5% stake has been handed off to Gazprom by the Russian government but Shell still officially owns it.

Background

At a cost of over US$25 billion, this project includes three large offshore platforms, 165 kilometers of subsea pipelines to shore, 800 kilometers of onshore pipeline, one of the world’s largest LNG plants, and oil and gas export terminals. The project is supplied by the Piltun Astokhskoye Oil Field (Russia) and Lunskoye Oil and Gas Fields (Russia).

Ownership changes

In February 2022, in response to Russia's invasion of Ukraine, Shell announced it would exit all of its Russian operations, including Sakhalin-2 in 2022.

In April 2022, it was reported that Shell was discussing the sale of its 27.5% stake in the project with the Chinese state-run oil companies CNOOC Ltd, China National Petroleum Corp (CNPC) and Sinopec, although all of the companies refused to comment on the speculation. Citing energy security reasons, Japanese Prime Minister Fumio Kishida said in March 2022 that Japan would not be withdrawing from the project in which Mitsui and Mitsubishi have 12.5% and 10% stakes respectively.

In July 2022, Shell was reportedly assessing the implications of a Russian decree that would allow the Russian state to take over foreign companies' stakes in the project.

Putin's decree dated June 30, 2022, transferred the Sakhalin II LNG project from the Sakhalin Energy Investment Company to Sakhalin Energy LLC in August 2022. Japanese companies Mitsui and Mitsubishi decided to keep their shares in the project, while Shell's share was transferred to Novatek.

In March 2024, Shell's 27.5% stake in the project was acquired by Sakhalin Project, fully owned by Gazprom, and the previous sale to Novatek was annulled.

Trains 1 & 2

In 2015, Sakhalin-2 LNG exported more than 500 billion cubic feet (bcf) of gas; 72% went to Japan, 24% to South Korea, 2% to Taiwan, and 2% to China.

Train 3

The company proposed a capacity expansion by adding a third train. As of 2017, it had not yet reached a final investment decision.

International Gas Union reported in 2017 that a third liquefaction and purification train at Sakhalin LNG has been delayed in part by sanctions imposed against the development of the Yuzhno-Kirinskoye natural gas field, which was to feed to Sakhalin. In July 2019 Russian President Vladimir Putin met with Shell CEO Ben Van Buerden to secure additional investments by Shell in Russia, after which Shell announced a plan to build 260 additional gas stations, but did not announce further commitments to a Sakhalin II expansion.

In September 2019, the cost of train 3 was estimated to be 6.1 billion USD.

In November 2019, Reuters reported that the plans for the third line have been put on hold, citing a lack of gas resources as well as the international sanctions imposed on Russia as the main reasons.

In May 2021, Gazprom's representative stated that "the project for the construction of the third line of the Sakhalin-2 project is at a high stage of development".

As of May 2024, there have not been any development updates related to this project since May 2021; however, since the start year of this project is 2027, this project is still considered proposed.

Environmental and Social Impacts

The impacts of the Sakhalin II LNG terminal include but are not limited to the following:

• In 2004 civil society groups raised concerns over the threat the project poses to the critically endangered Western Grey Whale. Sakhalin Energy has failed to follow many of the recommendations of the Western Gray Whale Advisory Panel (WGWAP), violating a condition of several public and private lenders.
• On 8 September 2004, a Sakhalin II-contracted dredging vessel ran aground on rocks at Kholmsk, Sakhalin Island, spilling approximately 1,300 barrels of fuel oil along 5 kilometers of coast. It was 48 hours before booms were in place to contain the spill.
• In January 2005, local indigenous peoples’ groups began public protests against Sakhalin II.
• Severe violations of pipeline construction requirements for Sakhalin II were recorded. Reckless construction included pipelines slashing through forests and polluting streams.
• In August 2004, the Shell-led Sakhalin Energy Company announced the prohibition of salmon fishing in waters bordering the construction site of LNG plant in Sakhalin Island's Aniva Bay. The decision led local fishermen to protest by blocking the LNG factory road with cars loaded with fishing nets.

• 800 km of the project’s onshore pipelines created severe erosion damaging hundreds of wild salmon rivers and tributaries and threatens future damage from poorly designed crossing of manifold geohazards, including 22 active earthquake fault crossings and landslide-prone areas.
• LNG terminal dredging and the dumping of dredging wastes damaged the fisheries in Aniva Bay.
• Associated construction activities disrupted local fishermen’s and fishing companies’ activities, adversely affecting the quality and quantity of fish caught, leading fishermen to bring a claim to the Independent Recourse Mechanism of the European Bank for Reconstruction and Development (EBRD) in 2005.
• After a massive die-off of herring in 1999 at Piltun Bay, independent lab tests conducted by environmental groups showed herring contained pollutants of the kind used in Sakhalin II drilling.
• The project poses long-term risks of oil spills amidst treacherous weather and ice despite the fact that the oil industry, including Sakhalin Energy, has no successful experience of responding to oil spills in ice conditions.