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Benefits to Russia

Federal and local government

During the life of the project over US$ 89 billion in taxes, royalty payments, and the state’s share of oil and gas is anticipated to be paid to the Russian state.

Since project startup, approximately US$ 4.8 billion in royalties, the state’s share of oil and gas and taxes has been provided to the Russian Federation which includes more than US$ 1.7 billion provided to the Sakhalin Oblast.

Domestic gas supplies

Sakhalin-1 has been delivering gas to domestic customers in Khabarovsk Krai since 2005, which is a significant step in the Russian Far East Gasification Program. As a result many small and mid-sized businesses, as well as public utility companies that supply heat and electric power to krai residents, are now able to use a more environmentally-friendly energy source for their needs.

The sales agreements concluded with OAO Khabarovsk Krai Gas (the owner of gas distributing network) and OAO Khabarovsk Energo (currently Far East Generating Company), are the first ever concluded between investment project participants under a Production Sharing Agreement and domestic Russian gas buyers for long-term gas sales based on international market pricing and commercial terms.

When requested by the buyers, Sakhalin-1 delivered volumes at rates higher than agreed to in the gas sales contracts, to ensure that the buyers receive adequate supply, particularly in winter, to maintain their operations.

Russian content

The Sakhalin-1 Consortium is committed to contracting with as many local companies as possible and providing jobs for as many Russian nationals as possible.

Contractors, subcontractors and vendors

Russian content is one of the key criteria in the Sakhalin-1 contracting process. While striving to maximize Russian content opportunities, however, preference is given to vendors that are able to effectively support the project objectives, including safety and health, environmental compliance, quality, maximizing profitability, and achieving scheduled completion.

To assist in maximizing the involvement of Russian contractors and vendors, Exxon Neftegas Limited, the Sakhalin Oblast Administration and the Ministry of Economic Development and Trade of the Russian Federation have established a Joint Committee on Russian Content.

These efforts have been successful as contracts have been awarded to hundreds of Russian companies and design institutes. To date, the Russian Content of contracts awarded for the Sakhalin-1 Project is over US$ 7.7 billion, or over two-thirds of the total. 

Jobs for Russian people

Project operator Exxon Neftegas Limited alone directly employs more than 550 Russian nationals. One of the long-term goals of ENL management is to train Russian employees to fill positions at all levels. As Russian employees gain experience, their percentage will approach 90 percent of the total workforce in 2012.

Infrastructure development

In partnership with the Sakhalin Oblast, Khabarovsk Krai and district administrations, the Sakhalin-1 Consortium provides significant community investments. We are actively involved in improving public infrastructure such as hospitals, roads, bridges and airport to support Sakhalin-1 hydrocarbon operations which also benefits the community.

When implementing community investment programs, we seek to find the best balance between the needs of the local population and the project's operational requirements.

Total expenditures on roads and shared infrastructure upgrades in Sakhalin Oblast and Khabarovsk Krai since project startup in 2001 amount to over US$ 156 million. 

For example, we invested in the Nogliki airport extensive upgrade project to build new terminals, install modern all-weather navigational equipment and pave runway. The airport supports Sakhalin-1 aviation operations.

Another significant community investment project was to restart construction of the Yuzhno-Sakhalinsk Women’s Clinic. The clinic’s construction began in the late 1980s but was suspended in 1989 due to lack of financing. Work resumed 17 years later after the Sakhalin-1 Consortium invested $3 million.

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