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Exxon Finalizes Agreement In $ 15 Billion Project

Project estimated to produce 2.5 billion barrels of crude oil, 15 trillion cubic feet of gas Exxon Corporation announced that an agreement has been reached by the Sakhalin I Consortium to formally declare the Sakhalin I Production Sharing Agreement effective June 10, and begin evaluation work on the billion Sakhalin I project, offshore Sakhalin Island, worth an estimated $15 billion.

The project would involve the development of an estimated 2.5 billion barrels of crude oil and condensate and 15 trillion-cubic-ft. of gas, equal to a total of 5 billion oil equivalent barrels, in three offshore fields. The fields are located in water depths of up to 165 ft. (50.3 m), 15 to 20 miles off the northeastern coast of Sakhalin Island.

K.T. Koonce, chairman of Exxon Neftegas Ltd., an affiliate of Exxon Corporation, stressed the importance of this significant multinational project to the people of Sakhalin Island and the Russian Federation. "The Sakhalin I project should make a major contribution to economic growth in the Russian Far East region. According to our estimates, over the life of the project, Sakhalin I could generate many billions of dollars in revenues from sales of hydrocarbons and be responsible for the creation of thousands of jobs. The majority of the investment and operating expenditures required for labor, materials and services is expected to go directly to the Russian private sector." In keeping with the consortium's desire to proceed as rapidly as possible, a well will be drilled and tested, and state-of-the-art 3D seismic work will be conducted this summer. The well will be drilled in the Arkutun-Dagi field using Sakhalinmorneftegas' OKHA drilling rig.

This is the first part of a $200 to $300-million resource appraisal program that is required to better define estimates of reserves in the three fields, Chayvo, Odoptu and Arkutun-Dagi. The appraisal program includes drilling, coring and testing additional wells, as well as conducting additional 3D seismic surveys.

The multinational Sakhalin I Project Consortium includes two Russian companies, Rosneft- Sakhalin and Sakhalinmorneftegas-Shelf, the Japanese company Sakhalin Oil and Gas Development Co., Ltd., (SODECO) and Exxon Neftegas Limited, an affiliate of Exxon Corporation and operator of the project. Exxon and SODECO each have a 30 percent interest, while Sakhalinmorneftegas-Shelf and Rosneft- Sakhalin have a 23 and 17 percent interest, respectively.

Potential Development Description The development of the three fields will involve a combination of large, ice-resistant platforms and subsea templates. Significant onshore facilities, pipelines and project infrastructure will have to be established on the island in order to support the project and the export of oil and gas. Portions of the onshore facilities and pipelines may be a joint industry project serving all offshore Sakhalin fields. Production from the project will be available to both local and export markets. Russian members of the consortium and the foreign partners will be responsible for marketing their own respective shares of production.




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