All the money OVL earns from Sakhalin is profit

Vol 13, PW 11 (05 Nov 09) Exploration & Production

OVL’s investment in the Sakhalin-I project in Russia’s desolate Far East doesn’t look so bad after all.

PETROWATCH learns overall oil production from the Exxon Neftegas-operated Sakhalin-I offshore oil and gasfields of Chavyo, Odoptu and Arkutun Dagi is likely to go up from 155,000 b/d to 190,000 b/d by the third quarter of 2010. This is welcome news for OVL which has now recovered the total $2.5bn it invested in the project and stands to make a profit from every incremental barrel produced.

It is especially heartening as observers last year noticed a disappointing trend of declining production at Sakhalin-I – billed as India’s largest overseas investment when OVL bought a 20% stake in 2001. Oil production at Sakhalin-I peaked at 250,000 b/d from 30 wells in the Chavyo field in February 2007 and has been dropping ever since.

But now, new oil production is expected from the previously undeveloped Odoptu field. Two of seven initial development wells planned at Odoptu (OP7 and OP8) are being drilled by Yastreb, the world’s most powerful land rig, operated by Parker Drilling.

Yastreb can drill extended reach wells some eight to 10-km offshore and can operate in temperatures of minus 40 degrees. “Sometimes Exxon moves the rig to OP7,â€‌ says a source, “and sometimes to OP8.

â€‌ OVL tells us OP8 will be completed by December 31 this year and OP7 by February 2010 or sometime within the first quarter of that calendar year. Drilling plans for the seven initial wells are part of the First Stage Production (FSP) phase at Odoptu, we hear.

Oil processing and surface facilities to handle oil production from Odoptu will be ready only in the third quarter of 2010, when production from all seven wells is slated to begin. Mainly oil producers, the seven wells will also release associated gas.