The government has approved a $6.5 billion increase in the overall budget of the Sakhalin-1 oil and gas project in Russia's Far East, to $19.3 billion, the Industry and Energy Ministry said Thursday according to RIA Novosti.
The government also approved a spending level of $1.193 billion in 2007, as proposed by the project operator, the ministry said in a statement.
The project, operated by Exxon Neftegas Limited, a subsidiary of U.S. oil major Exxon, on the Sakhalin Island's northeastern shelf under a production sharing agreement (PSA), is expected to bring in around $52.2 billion to the Russian budget by 2054, when it is scheduled to end.
Apart from the U.S. company, which owns 30%, Sakhalin-1 international consortium comprises Russia's state-owned Rosneft (20%), India's ONGC (20%), and Japan's SODECO (30%).
The consortium is developing the Arkutun-Dagi, Odoptu, and Chaivo deposits with recoverable reserves estimated at 2.3 billion barrels of oil and 485 billion cubic meters (17.1 trillion cubic feet) of natural gas.
The ministry said in a statement that the Sakhalin-1 budget has been adjusted by $6.5 billion to include spending on the Chaivo deposits' first stage.
The deposits are so far yielding 60,000 barrels per day, but output will be increased to 250,000 barrels in January 2007 after the commissioning of new onshore facilities; output in 2007 will be 11.5-12 million metric tons (about 8.8 million barrels).
Sakhalin-1 is expected to produce about 258 million metric tons (1.89 billion barrels) of oil and 356 billion cubic meters of natural gas over its lifespan.
Crude production was launched in October 2005. Supplies to the energy-hungry Asia-Pacific region began after a new onshore terminal in De-Kastri in the Khabarovsk Territory, the largest in Russia's Far East, was launched in October 2006.
Russia's environmental watchdog said Tuesday it will begin an inspection of Sakhalin-1 in January 2007, raising concerns of possible problems that it too will be hit by the problems its Shell-led sister-project, Sakhalin II, has been facing since September.
The multibillion-dollar Sakhalin II, whose operator is controlled by Royal Dutch Shell, has been accused of inflicting heavy environmental damage on Sakhalin Island, including deforestation, toxic waste dumping and soil erosion.