Marathon, Shell complete Sakhalin, Foinaven holding swap

Marathon Sakhalin Ltd. and Shell Sakhalin Holdings BV on Wednesday completed their previously announced swap of Marathon's 37.5% interest in Sakhalin Energy Investment Co. Ltd., which operates the Sakhalin project off Russia, to Shell in exchange for Shell UK Ltd.'s 28% interest in the BP-operated Foinaven field.


Marathon Sakhalin Ltd. and Shell Sakhalin Holdings BV on Wednesday completed their previously announced swap of Marathon's 37.5% interest in Sakhalin Energy Investment Co. Ltd., which operates the Sakhalin project off Russia, to Shell in exchange for Shell UK Ltd.'s 28% interest in the BP-operated Foinaven field.

Foinaven is in the west of Shetlands area of the UK North Sea. Also included are Shell UK's interests in discoveries and prospects on license areas adjacent to Foinaven (OGJ Online, Oct. 23, 2000).

Marathon also will receive a 3.5% overriding royalty, payable from Shell's working interest, on 100% of the production from an eight-block area in the Gulf of Mexico, which includes the producing Ursa field and the recently announced Princess discovery. Marathon also has been reimbursed for its expenditures on the Sakhalin project for 2000.

Dave Golder, Marathon's senior vice-president for commercialization and development said Sakhalin "is without doubt a world-class project. For Marathon it was the right project, but at the wrong time. High levels of capital investment for several more years without significant near to mid-term returns simply didn't fit our strategic needs."

Other Sakhalin Energy shareholders�Mitsui & Co. Ltd., Mitsui Sakhalin Holdings BV, which holds a 25% interest, and Mitsubishi Corp. Diamond Gas Sakhalin BV, 12.5%�also have agreed to a revised shareholder agreement in which Sakhalin Energy would become an integrated project operator. Shell, which holds a 25% interest in Sakhalin, will provide upstream and LNG services to the venture.

Sakhalin Energy Investment Co. Ltd. was established in April 1994 to carry out the implementation and development of the Sakhalin II Project. The project covers two fields, Piltun-Astokhskoye�primarily an oil field�and Lunskoye, which is primarily a gas field.

Under the agreement, entered into by the Sakhalin Oblast, the Russian Federation, and Sakhalin Energy in 1994, direct investment in the project will amount to about $10 billion. First oil was produced in July 1999, from the Piltun-Astokhskoye field, with the first export of crude in September 1999.

The project will now move to gas field development and LNG plant construction phase, once gas sales agreements are in place.

Marathon Sakhalin Ltd. is a subsidiary of Marathon Oil Co., which is part of the USX-Marathon Group.

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