Business Commentary for Rational Individuals

Sakhalin Island

Dr. Bill Belew

Issue II - June 17, 2006

Introduction by Mr. Stolyarov: The waters off Sakhalin Island contain about as much oil as remains in Europe and the United States, writes Dr. Bill Belew. This article offers demonstration of the fact that mankind is not faced with imminent fossil fuel shortages; rather, it is faced with opportunities for investing in plentiful fossil fuel reserves throughout the world. 

Sakhalin Island is a remote and sparsely populated area in the farthest east section of Russia. It sits to the north of Japan's northernmost island of Hokkaido.

Its ports freeze over part of each year because, well, it is so dang cold.

But Sakhalin is where the future may lie -- at least for Russia's big oil.

The island is about 600 miles long -- about the length of California but about one/fourth the size -- and there are an estimated 45 billion barrels of oil equivalent that lie beneath its seas.  California probably has that much, too, but the fishhuggers are winning so far, and it can't be gotten to.

45 billion barrels is roughly how much oil remains in Europe or the US -- so, it's a lot.

Still, it is not easy to get to due to the location, the conditions, and the fact that no one wants to live in such an obscene place.

Well, nobody wants to be there except one of the big boys -- Shell.

Shell has partnered with Sakhalin Energy Investment Co. to the tune of a 55% stake. Marathon Oil couldn't finish this marathon and DNFed (did not finish).

Shell's other partners are Mitsui & Co. and Mitsubishi Corp. from Japan.

Shell has already spent 10s of billions of dollars, and the oil is yet to flow.

Has Shell bit off more than it can chew with this one? Maybe they should let the global warmers lose to the point where the area becomes defrosted for a spell.

There is a lot of oil off the coast of Sakhalin Island located in the Sea of Oshkosh, off the coast of Far East Russia and seven time zones from Moscow.

I almost went there once but got stuck in the ice in a not-so-remote part of Siberia. Everyone has heard how cold it is in Siberia. It's true. In fact, it is so cold, people tell jokes in November, but no one laughs until March -- that is when the jokes start to thaw out.

On the most northern tip of Sakhalin there are platforms -- or there will be platforms. Once in place, they will deliver oil by pipeline to the southern most tip of the island some 500 miles away.

After that the oil will be loaded into tankers and the gas supercooled. That would be about one degree Celsius below its usual temperature.

And then it will be shipped off to the hungry economies of Japan, South Korea, and China -- and if there is any left over -- to a terminal in Baja California, Mexico and on to the West Coast of the US. And to think, CA has some just a few miles off shore.

The price tag for this project -- somewhere around $30 billion.

Question: Could that money be spent developing alternatives to oil?

In other words, is it worth it?

What do you think?


Dr. Bill Belew is a former Intelligence Officer for a Destroyer Squadron. He lived 20 years in Japan, where he started a language school for Japanese ECS. Dr. Belew teaches classes for a vocational school and online for a national university.

See Dr. Belew's blog, PanAsianBiz, for news and discussions about business and current events in Russia and Asia. See ZhongHuaRising for Dr. Belew's reports on business in China, RisingSunofNihon on business in Japan, and TheBizofKnowledge on business education.

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