Strategy

Project operator * Sakhalin Energy Investment Company Ltd. (Sakhalin Energy) is the Sakhalin II project operator. * The Sakhalin Energy shareholders are listed below: * Gazprom Sakhalin Holdings B.V. (a subsidiary Gazprom – 50 per cent plus one share); * Shell Sakhalin Holdings B.V. (a subsidiary of Royal Dutch Shell plc. – 27.5 per cent minus one share); * Mitsui Sakhalin Holdings B.V. (a subsidiary of Mitsui and Co., Ltd. – 12.5 per cent); * Diamond Gas Sakhalin B.V. (a subsidiary of Mitsubishi Corporation – 10 per cent).

History In April 1994 Royal Dutch Shell plc., Mitsui and Co., Ltd. and Mitsubishi Corporation established Sakhalin Energy to develop the Piltun- Astokhskoye and the Lunskoye fields on the northeastern shelf of the Sakhalin Island as part of the Sakhalin II project. In June 1994 Sakhalin Energy and the Russian party represented by the Russian Federation Government and the Sakhalin Oblast Administration signed Russias first Production Sharing Agreement (PSA). In 1996 Phase 1 was launched. In 1999 first oil was produced from the Piltun-Astokhskoye oil field. In 2003 Phase 2 was launched.

In December 2006 Gazprom, Shell, Mitsui and Mitsubishi signed the Protocol on Gazproms joining Sakhalin Energy as the main shareholder. In April 2007 Gazprom and the Sakhalin Energy shareholders signed the Purchase and Sale Agreement. Under the Agreement, Gazprom acquired a 50 per cent plus 1 share in Sakhalin Energy. In October 2007, AEA Technology International Consultancy published the Sakhalin II project environmental report. The report states that the Health, Safety, Environmental and Social Action Plan (HSESAP) developed by Sakhalin Energy for Sakhalin II project generally meets Russian and international regulatory requirements related to environmental and process safety. In February 2009 the first Russian liquefied natural gas (LNG) plant was commissioned in Sakhalin.

The Sakhalin II project stipulates phased development of the Piltun- Astokhskoye and Lunskoye fields located 13–16 kilometers offshore the northeastern coast of the Sakhalin Island.

Sakhalin II recoverable hydrocarbon reserves amount to over 600 billion cubic meters of gas and 170 million tons of oil and condensate.

Sakhalin II project uniqueness * Russias first project based on the PSA. The first PSA concluded in Russia * The first offshore oil & gas producing platforms installed in Russia. * Russias first LNG plant. * First sales of Russian gas in the energy markets in Asia-Pacific and North America. To accelerate the commencement of the Sakhalin II fields development, Sakhalin Energy proposed a phased approach to the project implementation.

Production In February 2009 Russias first liquefied natural gas (LNG) plant became operational in Sakhalin. The plant commissioning enabled Russia to cover about 4 per cent of global LNG supplies. In 2014 Sakhalin Energy produced and offloaded 5.35 million tons (41.93 million barrels) of oil and produced 10.8 million tons of LNG.

Sustainability Sakhalin Energy is aware of its role in the Sakhalin Island development. Therefore, the concept of promoting sustainable development is the cornerstone of the companys operating philosophy. Sakhalin Energy deems it necessary to minimize the adverse environmental and social impacts of the project, particularly any impact on vulnerable communities and rare or endangered flora and fauna. Sakhalin Energy seeks to deliver a world-class oil & gas project that will be safe, eco- friendly and of maximum benefit to all the parties involved.

The company understands its responsibility for the social development and nature conservation within the project activity area. Sakhalin Energy is actively working with the population, authorities and independent experts to achieve the optimal balance among the social, economic and environmental factors, which will be beneficial to all the parties involved in the Sakhalin II project – the Russian Federation, its population as well as the companys customers and shareholders. Sakhalin Energy is implementing a multi-million infrastructure upgrade project in the Sakhalin Island, repairing and constructing roads, bridges, hospitals, seaports and airports. The estimated cost of these activities exceeds USD 600 million.