Sakhalin Energy

• development of the Piltun-Astokhskoye oil and Lunskoye gas condensate fields located in the Sea of ​​Okhotsk on the shelf of Sakhalin Island;
• oil and natural gas exploration and production operations;
• production and sale of oil and liquefied natural gas (LNG).

The company carries out its activities on the basis of the Production Sharing Agreement ( PSA ).

Company governing body: Committee of Executive Directors. The composition of shareholders since 2007:

• Gazprom's share is 50% plus one share,
• Shell concern - 27.5% minus one share,
• Mitsui - 12.5% ​​and
• Mitsubishi - 10% of the shares.

• Three offshore oil and gas production platforms: Piltun-Astokhskaya-A (PA-A / Molikpak), Piltun-Astokhskaya-B (PA-B) and Lunskaya-A (LUN-A);
• Trans-Sakhalin pipeline system;
• united coastal technological complex;
• pumping station;
• Prigorodnoye production complex (including an oil shipping terminal and a liquefied natural gas (LNG) plant;
• two gas metering and sampling nodes (for gas transmission, including for gasification of the Sakhalin Oblast).

Sakhalin Blend is a special brand oil introduced by Sakhalin Energy to the Asia-Pacific market. It is a mixture of light low-sulfur oil and gas condensate. The company has been producing and shipping a mixture of oil and condensate from the export terminal of Prigorodnoye PC since 2009

of the year.

Since 2014, the company has been using condensate produced at the Kirinskoye field as part of the Sakhalin-3 project (PJSC Gazprom project). The condensate produced by the company and the condensate of the Sakhalin-3 project are mixed with oil to produce a variety of light low-sulfur oil with a density of about 44–45.5˚ and a sulfur content of about 0.14%. The Sakhalin Blend oil mixture is well known in the Asia-Pacific region and successfully competes with similar light low-sulfur grades of Middle East oil, with condensates, as well as with heavier Far Eastern grades, such as Sokol, ESPO.

The convenient geographical position of the Prigorodnoye port and the presence of its own oil tanker fleet (three specialized ice-class tankers) provide the possibility of deliveries to the Asia-Pacific region in the winter or reloading from ship to ship in the ports of South Korea and / or Japan for further transportation to other customers.

In July 2018, Sakhalin Energy shipped the 600th standard batch of oil since the start of year-round supplies.

In 2018, Sakhalin Energy produced 3.98 million tons (29.29 million barrels) of oil and 1.58 million tons (13.93 million barrels) of condensate and accepted condensate of the Sakhalin-3 project in the amount of 0 , 10 million tons (0.87 million barrels).

The main markets for the Sakhalin-2 oil mix have historically been Japan, South Korea and China. In 2018, the shares of these three countries remained high, as in previous years, and in general amounted to about 98.6% of the total supply of the year. Several shipments were delivered to the United States through ship-to-ship transhipment.

The share of the oil mixture shipped by Sakhalin Energy in the Asia-Pacific region is 0.34% of the total volume of oil consumed in the Asia-Pacific region.

LNG is a colorless and odorless liquid with a density half that of water, consisting of about 90% methane (CH4), the simplest natural gas in the gaseous hydrocarbon group. When cooling

natural gas to a temperature of –160 ° С at atmospheric pressure, it is liquefied with a simultaneous decrease in volume by 600 times, which allows for its accumulation, storage and transportation by sea.

Thanks to regular optimization of production systems and equipment debugging, the company achieves indicators that exceed the plant's design capacity of 9.6 million tons of LNG per year. In 2017, Sakhalin

Energy ”produced 11.49 million tons of LNG.

LNG was transported by specialized customer vessels and Grand Series gas carriers (Grand Elena, Grand Aniva and Grand Mereya), built specifically for the project and chartered by the company

on a long-term basis with two Russian-Japanese consortiums, as well as Amur River and Ob River, chartered on a short-term basis. Thus, the LNG fleet of the company in 2017 amounted to five gas tankers.

In August 2018, Sakhalin Energy shipped the 1,500th standard batch of LNG since the launch of Russia's first LNG plant.

In 2018, Sakhalin Energy continued to ship LNG to Japan, South Korea, Taiwan, and China. LNG buyers include gas distribution, electricity generating and trading affiliated companies with different volumes of demand. Work was underway to expand the portfolio of potential buyers in the Asia-Pacific region, during which negotiations for the first time were initiated on concluding direct framework LNG sales and purchase agreements (RHDCs) with Chinese companies. An interim result in 2018 was the conclusion of the RDKP with one of the largest consumers of LNG in China - PetroChina.

In 2018, the share of Sakhalin LNG amounted to 4.8% of the total LNG demand in the Asia-Pacific region and about 3.6% of the global LNG demand.

Since 2011, the company has been supplying natural gas to the gas pipeline system of PJSC Gazprom in payment of in-kind royalties to the Russian side. Gas transmission is carried out through two gas sampling and metering stations (OOG) in the northern and southern parts of Sakhalin. Since the start of deliveries, more than 8.66 billion cubic meters of natural gas has been transferred to the Russian side, including through the southern gas treatment plant to the Yuzhno-Sakhalinskaya CHPP-1 and other Sakhalin infrastructure facilities - more than 4.13 billion cubic meters of natural gas (including the supply of 653 million cubic meters in 2018).

In 2018, more than 430 million m³ of gas was transferred through the northern OUG, it was supplied to the Sakhalin-Khabarovsk-Vladivostok gas pipeline for further use in the development programs of the fuel and energy complex of the Far East and Primorye. In 2018, more than 1.12 billion m³ of gas from the Sakhalin-2 project was transferred to the Russian side.

In accordance with the PSA, the production section replaces the collection of a number of taxes, fees and duties. This means that instead of a series of taxes (including mineral extraction tax, property tax, etc.) and Sakhalin Energy fees, from the start of production, hydrocarbons are distributed in the form of royalties, and after the start of production sharing, in the form of shares of profitable products. Revenues in favor of the Russian side include income tax paid by the company and a number of mandatory payments, contributions and fees. In addition, the Russian side receives income from class R shares (a special preferred share giving the right to receive dividends).

In total, in 2018 Sakhalin Energy allocated $ 2.5 billion to the Russian Federation (in kind and in cash).

The amount of fulfilled royalty obligations (envisaged for execution in cash and in kind) amounted to $ 495 million. Dividends paid per class R share amounted to $ 177 million.

The share of the Russian side in profitable products amounted to 606 million US dollars. In addition, in 2018, a profit tax of $ 1.2 billion was transferred for the fiscal year 2017. In addition, the company paid a surcharge to the budget of the Russian Federation in the amount of $ 141.8 thousand for income tax.

In 2019, following the results of 2018, profit tax in the amount of about 1.7 billion US dollars will be transferred to the budget.

Work safety is the absolute priority of the company. Its high level is ensured by many measures, starting with the formation of a culture of safe behavior and safe work (including in contracting organizations).

The company has developed a special labor protection program. It is based on regular training of employees in order to motivate a naturally high culture of activity. Serious accidents are also prevented by the effective surveillance and intervention program, which has been in place since 2007. Its task is to create an environment in which every employee feels responsible for the safety of work and timely responds to potential danger.

Sakhalin Energy's goal is full incident prevention

The environmental activities of the company are carried out in accordance with the laws of the Russian Federation on environmental protection, taking into account the requirements of international standards and international best practices in the oil and gas industry. Sakhalin Energy carries out industrial environmental control at its facilities in order to comply with environmental legislation, comply with established standards in the field of environmental protection, ensure the rational use of natural resources and implement plans to reduce environmental impact.

Industrial environmental control is carried out by the company in the following areas:

• air exposure control;
• control of water use and impact on water bodies;
• control in the field of waste management.

The company has developed and is implementing the Standard for Air Protection and Energy Management, the Standard for Water Use, and the Standard for Waste Management.

Sakhalin Energy carries out industrial environmental control at its facilities in order to meet the requirements of environmental legislation. At the heart of the company's environmental activities is the principle of prevention.

To eliminate any risk of negative impacts on nature, industrial environmental control and local monitoring in the areas of the facilities are used.

In November 2009, Sakhalin Energy joined the UN Global Compact . The UN Global Compact is the world's largest international voluntary initiative to enhance corporate social responsibility of business.

Sakhalin Energy has been active in social activities since its inception in 1994. Large-scale and consistent investments in the social sector and long-term policies aimed at solving socially significant problems correspond to the company's commitment to the principles of sustainable development. The priority areas of the company's social programs were determined in consultation with the public. It:

• education;
• security;
• environmental protection and biodiversity conservation;
• Culture and art;
• health protection;
• Indigenous peoples of the North of the Sakhalin Oblast.

• Victory in the contest of PR-projects "ConText" . In the nomination: “Social projects” of the ConTEKst competition of PR projects, held with the support of the Ministry of Energy of Russia, the project of the company “Preservation and Promotion of the Cultural and Linguistic Heritage of Sakhalin Nivkhs” was recognized as the best.
• Winner of the All-Russian contest of the Russian Union of Industrialists and Entrepreneurs . Winner of the All-Russian contest of the Russian Union of Industrialists and Entrepreneurs (RSPP) “Leaders of Russian business: dynamics and responsibility-2015” in the nomination “For environmental responsibility”.
• The leader of the environmental rating. The first place in the environmental responsibility rating of Russian oil and gas companies in 2016, becoming a leader in all respects: environmental management, environmental impact and information disclosure.
• Leader of corporate charity. Winner of the All-Russian ranking “Leaders of Corporate Philanthropy-2016” , organized by the business newspaper “Vedomosti”, PricewaterhouseCoopers and the “Donor Forum”
• Leader of labor productivity. Sakhalin Energy became one of the leaders of the All-Russian award “Labor Productivity: Industry Leaders of Russia-2016” and took second place in the nomination “TOP-100: Industry Leaders of Russia-2016” and “TOP-30: Leaders in Labor Productivity in the Oil and Gas Industry Of Russia
• Hall of Fame of the city of Yuzhno-Sakhalinsk. Sakhalin Energy was listed on the Yuzhno-Sakhalinsk City Hall of Fame for its active charitable work, expressed in the provision of regular and substantial charitable assistance.
• Prizewinner of the People Investor contest. Sakhalin Energy won the 9th annual international competition and forum for corporate projects, People Investor: Companies Investing in People. In the nomination “Local Community Development and Volunteering”, the winner was the project “Preservation and Popularization of the Cultural and Linguistic Heritage of Sakhalin Nivkhs”.
• Winner of the RSPP contest. Grand Prix of the RSPP contest “Leaders of Russian business: dynamics and responsibility” in the nomination “For high quality reporting in the field of sustainable development”.

In 2019, Sakhalin Energy celebrates its 25th anniversary.

The Sakhalin-2 project, created by the company from scratch, is being implemented in difficult geographic and climatic conditions.

For 25 years, Sakhalin Energy has not only become a leader in the global oil and gas industry, but has also become one of the key energy suppliers for the Asia-Pacific region.

The Sakhalin-2 project is being implemented on the basis of Russia's first Production Sharing Agreement , which was signed between the government of the Russian Federation, the administration of the Sakhalin Oblast (now the government of the Sakhalin Oblast) and Sakhalin Energy in June 1994.

Russia's first offshore oil production platform, Molikpak , was installed as part of the Sakhalin-2 project in 1998, and less than a year later, commercial oil production began on the Russian continental shelf.

In February 2009, the first large-capacity LNG plant in Russia was launched. Over ten years, thanks to continuous work to optimize the work and processes of the company, we managed to increase the design capacity of the LNG plant by 20%.

Thanks to the activities of Sakhalin Energy, Russia has become one of the key players in this promising market. The launch of the Sakhalin LNG plant accounted for about 4% of global LNG supplies.

Project financing of the second phase of the project amounted to 6.7 billion US dollars. This became the largest project financing in Russia.

The project gave impetus to the development of many Sakhalin and Russian contracting companies . Participating in the Sakhalin-2 project, they acquire knowledge, introduce new technologies, improve indicators in the field of labor protection and the quality of services provided. With the support of the Government of the Sakhalin Region, the company is implementing a project to create the Sakhalin Oil and Gas Industrial Park , which includes the creation of services related to the repair and maintenance of drilling equipment, a complex of testing and laboratory tests, and repair of electric motors and equipment that had previously been serviced outside Sakhalin area.

The company implements environmental and social projects and has been a leader in environmental and corporate social responsibility for several years.

The main memorable dates of the company in 2019:

• February 18 - 10 years from the launch of Russia's first LNG plant
• March 29 - 10 years from the date of export of the first Russian LNG
• April 18 - 25th anniversary of the founding of the company
• June 22 - 25 years since the signing of the first Russian PSA (Sakhalin-2 PSA)
• July 5 - 20 years from the date of the first first oil production on the Russian shelf
• September 21 - 20 years from the date of export of the first Russian oil produced offshore

• Sakhalin-2 Project on YouTube
• Sakhalin Energy Exceeds LNG Plan
• PJSC Gazprom
• Shell Concern
• Molikpak Platform (PA-A)
• Piltun-Astokh-B Platform (PA-B)
• Lunskaya-A Platform (LUN-A)
• Interactive Sustainability Report 2016
• Sustainability Reports