Sakhalin-2 Project Russian Content
Russian Content is of great importance for the partners of the Sakhalin-2 Project. The implementation of the Sakhalin-2 Project is carried out on terms of the Production Sharing Agreement, concluded in Russia.
Russian Content means the usage of Russian labour power, materials, equipment and services - the key element of profits, which are being gained and will be gained by Russia over the life of the entire Sakhalin-2 Project.
From a Russian Content perspective, the PSA provides a unique mechanism that enables the integration of international technology, business and management into Russian industry. As the practice shows, by encouraging the development of joint ventures between Russian and foreign companies and involvement of Russian subcontractors, Russian companies can gain experience of international business, develop new skills and implement modern technologies.
Benefits gained by Russian enterprises as a result of participating in the Sakhalin-2 Project:
- Creation of jobs
- Increase in production capacity
- Personnel training and development
- Improvement of safety standards and quality of services/materials
- New technology and unique experience
- Creation of joint ventures and the development of international business links
- Increased competitiveness in local and international tenders
In Sakhalin-2 Project PSA Sakhalin Energy undertook the commitment to
- Increase the level of the Russian Content every year
- Achieve a level of Russian Content (including labour, materials, equipment and contract services) of seventy percent (70%) over the life of the entire Sakhalin-2 Project.
Sakhalin Energy exerts every effort to meet this obligation under the PSA.
In accordance with the PSA requirements:
- Sakhalin Energy should give preference to a Russian enterprise in case of existence of tender offers from both a Russian enterprise and a foreign company, equivalent with regard to proposed prices, quality and performance time and in general satisfying the Sakhalin-2 Project requirements;
- Sakhalin Energy should ensure maximum participation of Russian citizens in the execution of works under the Sakhalin-2 Project on the territory of the Russian Federation;
- A Russian enterprise, participating in a tender on contractor or subcontractor terms should comply with the required conditions on fulfillment of works under a contract;
- An enterprise participating in a tender is considered to be a Russian one if the level of direct or indirect participation of Russian individual persons or legal or state entities is not less than 50%;
- The percentage of Russian Content is measured on an overall quantity basis, i.e. volume of materials and equipment and man-hours of services and the target of 70% is for Russian Content over the life of the project.
Within Sakhalin Energy there is a genuine desire to maximise Russian Content and to ensure that the Russian Federation and Sakhalin Oblast benefit from the activities of oil and gas exploration.
As a result many changes have been made within the company to create a pro-active approach from Sakhalin Energy and all stakeholders and to guarantee that the position of Russian Content is confirmed as a chief business motivation. These changes include a new Russian Content Development (RCD) policy and strategy. Sakhalin Energy's focus is on sustainable development of Russian Content by proactively developing Russian business opportunities: longer-term planning of future Contracting & Procurement activities, early identification of opportunities for involvement of Russian enterprises and personnel and provision of targeted assistance to Russian enterprises in order to increase their competitiveness.