Case Study: Sakhalin Island, Russia

Overview

At ExxonMobil, risks are mitigated with appropriate contingency planning and the application of a comprehensive risk management system. Business continuity planning and emergency preparedness are two essential elements to manage risk, so we can continue supplying fuels for transportation and electrical power as well as chemicals for consumer products, which are vital to the nation’s economy.

Global concern: Nothing receives more attention than the safety, security and health of our employees, contractors, customers, and the people who live and work in the areas where we operate. OIMS provides the discipline and structure to enable safe, secure, and incident-free operations.

Our approach:

• Improve operations reliability, manage risk, and lower our operating costs
• Establish common worldwide expectations for every operating unit
• Implement OIMS over the complete life cycle of a project from exploration to development and production, to project completion
• Ensure that management is continuously accountable for results Within two years of agreeing

The Arctic, one very tough place to work

Off Russia’s eastern coast, the Sakhalin-1 Project encompasses the offshore Chayvo, Odoptu, and Arkutun-Dagi fields, with Chayvo already producing and the others in the development phase. A pipeline across Sakhalin Island and the Tatar Strait links the fields to the DeKastri tanker loading terminal in Khabarovsk Krai, on the Russian mainland. It is one of ExxonMobil’s first ventures in Russia and is operated by our affiliate, Exxon Neftegas Limited (ENL).

Recognized as one of the most technically challenging projects undertaken by the industry, the Sakhalin-1 Project presents some of the most extreme conditions in which we have ever worked. ENL faced harsh arctic conditions, featuring five-foot-thick pack ice and earthquake activity, and worked in a remote location with very little existing infrastructure. Despite these challenges, the Sakhalin-1 Project progressed on schedule and within budget to accomplish what some initially doubted was even possible. In early 2007, the project reached its targeted peak production rate of 250 thousand barrels of oil per day. This success is due to our employees’ commitment to excellence and integrity that emphasizes safety, security, health, and environmental protection.

OIMS as a foundation for success

OIMS was implemented in 1992 to respond to opportunities for improvement in operations integrity and to institute a broad safety and environmental management framework globally. Today, OIMS—consisting of 11 elements—is embedded into everyday work processes at all levels of the global organization to proactively manage risk. Over time, it has become a part of our culture and the way our organization works, improving operations reliability and lowering our operating costs.

When ENL first started exploration and development on Sakhalin Island, the principles of OIMS were embedded at project inception. The project included establishing plans and setting expectations for employees for managing all project risks, including those involving safety, security, health, and the environment. When the project transitioned to operations in 2006, processes were in place to ensure continuity in OIMS implementation. During a 2008 OIMS assessment, ENL demonstrated practical application of the system and received one of the highest ratings for a new affiliate.

Leading-edge technology in the pursuit of project excellence. With input from Russian research and design institutes, engineering design studies were conducted to reduce the safety, security, health, and environmental risks of our facilities and operations. These included plans to build double-hulled tankers to ship crude oil from the DeKastri terminal, escorted safely in the winter by two large icebreakers equipped with the latest ice-navigation technology. Leading-edge technology was applied to drill extended-reach wells from the shoreline to the Chayvo field, which allowed for horizontal drilling under the sea floor and eliminated the need for a second offshore platform while minimizing and in some cases eliminating environmental risks.

Environmental leadership. In order to develop an effective and successful environmental plan, ENL engaged with federal, regional, and local regulators to establish a reputation of respect, trust, and credibility among Russian authorities. To address the concerns of Russian environmental protection agencies regarding potential impacts on salmon populations, the 225-kilometer pipeline was routed to reduce the number of stream crossings, which were carefully selected relative to salmon-spawning areas. Additionally, construction was scheduled during the winter months to minimize potential impacts due to sedimentation.

ENL has co-sponsored several studies since 1997 to better understand and protect the critically endangered Western Gray Whale, which feeds in the shallow waters off Sakhalin Island. Plans for constructing a permanent jetty along the shoreline were modified in the area used by the whales for feeding in the summer and early fall.

Additionally, conservation measures to protect the endangered Steller’s Sea Eagle (Orlan) populations included restricted buffer zones near nests to minimize disturbance to the eagles, and construction of artificial nests and perches to attract the birds to new coastal sites away from project facilities.

Building a local workforce. ExxonMobil and its affiliates seek to hire, train, and develop a local workforce to meet business needs. The personnel selection, training, and competency verification of our technical and professional employees and contractors on Sakhalin Island greatly contributed to the success of the project. Russian technician trainees went through a rigorous two-year training program that began with an intensive English language program and concluded with job-specific advanced training in North America. In 2008, 47 trainees graduated and were hired from the locally operated Sakhalin Technical Training Center. More than 500 nationals work directly for ENL, and 75 percent of our total workforce in Russia is national.

Safety excellence. On Sakhalin Island, personnel know that safety is a way of life and not just a message on a bulletin board. We ensure that the workforce is provided with proper training through our personnel safety and occupational health programs. As a result, by the end of 2008, the construction project had achieved a lost-time incident rate that was five times better than the worldwide average for the oil and gas construction industry. This safety excellence continued during the operations phase with no lost-time incidents in 2008. By early 2009, employees will have worked over 80 million hours with industry-leading safety performance.

Ensuring safety among our contract workers. Management and safety professionals have also worked hard to help the contractor workforce develop and enhance their capabilities to perform their job in a manner that is consistent with our safety, security, health, and environmental policies and expectations. The management team acts as safety champions, who work to bring the entire team—not just safety and environmental professionals—into the process. This involves observing safety practices in the workplace, helping contract personnel correct potentially hazardous practices, and providing remedial training for worker safety. An annual Contractor Safety Forum held in Yuzhno-Sakhalinsk helped maintain alignment of our contractors with ExxonMobil’s objectives and expectations, and provided them with various safety and environmental management tools.

Our community. ExxonMobil is committed to supporting the communities of Sakhalin Island and Khabarovsk Krai by investing in community infrastructure projects such as hospitals, roads, bridges, airports, and seaport facilities; power, water, and sanitation upgrades; and supporting education, health care, and cultural projects in the region.

Success in a new frontier

As an integral part of OIMS, procedures, site standards, facilities, and personnel are continuously evaluated to ensure that the Sakhalin-1 Project and operations are executed with integrity and in accordance with the highest industry standards. This helps maintain the support and strong relationships that have been established over the years with local residents and the federal, regional, and local government authorities.

In 2008, the Sakhalin-1 Project was recognized with the prestigious Award for Excellence in Project Integration at the International Petroleum Technology Conference, in particular for its construction and facilities engineering practices; safety, health, and environmental processes; human resources policies; community programs; and overall project teamwork.

Within two years of agreeing to assist with the update of the Okha Municipal District regional healthcare system, Exxon Neftegas Limited (ENL) provided the Okha Regional Medical Center with modern emergency medical care equipment, ranging from surgical tools to diagnostic equipment. Because no illness can be treated by equipment alone, ENL also arranged for healthcare professionals to be trained on how to utilize the equipment. For example, in 2008, a leading Russian surgeon conducted 14 demonstration operations and trained local physicians on a new endoscopic unit for video diagnostics and therapy.