Russia Petroleum Technology Forum Moscow, March 9-11, 2005

Experience of Providing a Healthcare Contract for Gas Turbines on Sakhalin Energy’s Molipak Platform by Graham McKirdy Siemens Industrial Turbomachinery Ltd PO Box 1, Waterside South, Lincoln LN5 7FD, United Kingdom

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© Siemens AG 2005. All rights reserved.

better than industry availability. Hopefully we may provoke further consideration of our approach and perhaps generate some questions. In conjunction with these criteria. We also must not forget that any contract is essentially a live document and will inevitably through its life be amended to match an ever-changing operational and commercial environment. scope covering planned and unplanned events and operation in severe weather conditions. we were also very much aware that we would be operating within the Russian Federation on the only offshore oil production platform. • We therefore would like to attempt to share with you our experiences in the hope that it is clear that to support turbomachinery in this environment more than just manpower and materials are required. . namely fixed OPEX over a 10-year period. Therefore our technical and legal structure would have to comply with the terms of Production Sharing Agreement (PSA) with the Russian Federation on the development of the Sakhalin II project. we wanted to illustrate the creation of a Long Term Support Agreement (LTSA) for gas turbines. local content. All rights reserved. • We consider that this harmonious approach working with Sakhalin Energy has matched the requirements of our customer. taxation. environmental standards and GOST. 2 © Siemens AG 2005. This particular contract was formulated in partnership with our customer to meet his requirements. low risk.Introduction • When we were invited to present a paper at this year’s conference.

The route via Korea and Japan is of a similar timescale but the flights are less regular. All rights reserved. and in particular the Molikpaq Platform. the temperature may fall down to – 70 degrees C. 31 hours travelling and 30 hours waiting. . Therefore the encroaching ice between December and June interrupts oil production and shuts down the turbomachinery. these are planned to be in operation in 2006. This has safety implications and affects the offloading of crude oil from the Floating Storage and Offload Facility (FSO) to visiting tankers. • Weather o The prevailing weather around the Molikpaq Platform in the Sea of Othosk is truly arctic. Once in Sakhalin a train journey of 17. From the middle of December through to the beginning of the following June the seas are frozen over. • Operating Window o Currently there are no crude oil or gas pipelines to shore. The operating window lasts between six and seven 3 © Siemens AG 2005.Facts • Location o Sakhalin Island. There you will wait for possibly 24 hours for helicopter transport to the platform. o The same timescales are true for the shipment of materials. From Western Europe two routes. With the wind chill. During the production season production is affected by waves being whipped up by hurricane force winds. is one of the most remote offshore oil and gas production locations in the world and reaching the platform takes a 60 hour transit time from either London or Amsterdam. with additional time required for customs clearance.5 hours takes you to the onshore supply base in Nogliki in the north east of the island. therefore the FSO and offloading buoy for crude tankers can only operate when the seas surrounding the Molikpaq Platform are free from ice. Overall. via Moscow or via Korea /Japan can be taken to Sakhalin Island.

Iran has the largest proven reserves of gas with 24. As there is no gas available.5 bbl and United Kingdom and Norway stand at 14.5 bbl. • Oil . a water injection module has been added to the platform allowing water injection into the reservoir throughout the winter shutdown season to pressurise the well in preparation for the beginning of June. This is achieved with two SGT 100 (formerly Typhoon) twin-shaft turbines driving water injection pumps.9 billio n barrels oil (bbl): in comparison. Current known reserves are estimated at 13.at the moment this is less plentiful in the seas off Sakhalin Island. Since 2004.7 trillion cubic meters (tcm) 91. • I trust this short introduc tory summary of the prevailing conditions and potential hydrocarbon reserves provide accurate and graphic picture to you of Sakhalin Island. • Known Hydrocarbon Reserves o It is said that Sakhalin Island is mentioned in the prophecies of Nostradamus: he predicted the island shaped like the fish would become the richest place on earth.5 tcm (18 trillion tcf) of gas.4 tcm. however. diesel fuel is used. In comparison the combined current known reserves of Norway and the United Kingdom stand at 2.0 tcm.months. Qatar’s known reserves are 14. • Sakhalin II project combined reserves are about 1 billion bbl of oil and 0.0 trillion cubic feet 9 (tcf)now currently after mainland Russia. 4 © Siemens AG 2005. . Currently conservative estimates on known oil and gas reserves are as follows: • Gas 2. All rights reserved.

o For Siemens.1 million bbl 10. the Molikpaq.7 million bbl 5 © Siemens AG 2005. Today Sakhalin Energy Shareholders are Shell (55%). .Project History • Milestones o Oil was discovered in the Piltun Ashtokeskoye (PA) field in 1984. All rights reserved. In 2001 discussions commenced with Sakhalin Energy with respect to expanding our product support through the vehicle of an LTSA for the existing equipment and future additions to the platform.8 million bbl 10. Sakhalin Energy developed the field utilising a converted ‘Arctic Class’ drilling rig. the equipment supplied initially comprised of one SGT-100 and two SGT-200 (formerly Tornado) industrial gas turbines and two Siemens injection centrifugal compressors which were installed on the platform in 1998. In the middle of the following year we reached agreement. o This year we are in the process of 'novating' the LTSA to OOO Siemens SP in Moscow. as the production platform. After winning a tender for development of PA and Lunskoye field in the early 1990’s a consortium of companies formed Sakhalin Energy Investment Company Ltd to operate the project. Mitsui (25%) and Mitsubishi (20%). First oil was delivered in 1999. Two years later Marathon sold its share in the project to Shell.4 million bbl 15. o In 2003 additional Siemens turbomachinery was installed on the Molikpaq Platform within the water injection module comprising three SGT-100 industrial gas turbines.3 million bbl 11. • Production Volumes o 2000 o 2001 o 2002 o 2003 o 2004 12.

0 million per week. issue of purchase order. . .000 barrels per day easily equates to a loss of $3. a full time contract manager was appointed.Customer Requirements • At the commencement of our discussions with this customer. o Guaranteed response times. o Risk coverage for unplanned shutdowns in the form of turbines and strategic spares held in Sakhalin. o Minimum downtimes – the price of oil at $45. the criteria for moving away from ‘traditional methods’ of product support in the form of ‘planned or unplanned event. • Availability o This was to be equal to. the RF have imposed strict limits on SEIC with respect to flaring of gas therefore it’s essential to avoid any unplanned shutdowns as this results in flaring of gas. Also. The various OPCOs have differing operating environment and turbo-machinery. All rights reserved. contained with the contract.00 per barrel at a production rate of 70.turbines. These assets also operate turbomachinery . the time required to manage the logistics of supporting such a demanding operation. o Dedicated Contract Manager – due to the time difference between Sakhalin and Lincoln (10 hours).150. • Benchmarking in comparison to other Shell OPCOs o SEIC are a part of Shell. 6 © Siemens AG 2005. o Emergency call-out service. All assets are required to ‘benchmark’ their annual OPEX. however the OPEX of the Molikpaq would be subject to this scrutiny. over $22.000 per day. o Fulltime technician ‘babysitter’ on Molikpaq. It is well known that Shell operate many oil and gas assets throughout the world. completion of task and then issue of invoice’ were quite clear. or above industry accepted norms of 97%. compressors and pumps.

Basically this provides the following: • Daily download of operating data from all six turbines to a Siemens server. The data is retrieved automatically by a daily phone call from the Siemens server. submission of tax returns for the contract and personnel engaged in maintaining the turbines. Russian Content. we engaged the services of Price Waterhouse Coopers Moscow (PWC). After review of several companies who had already established a presence on the island. registering locally with the Sakhalin Oblast for taxation purposes.• Pricing Structure o The requirement here was simple. o The details of the SEIC PSA are confidential but several aspects have an impact on supplier and sub-vendors to SEIC. the historical data in question can be accessed by the customer through their own ‘account’. This principle allowed SEIC to accurately plan OPEX with ‘no surprises’ over an extended period of time. This provides unlimited 7 © Siemens AG 2005. This value would remain unchanged for the contract term. ‘single monthly payments’ for the LTSA to cover the full contract scope. All rights reserved. Along with ExxonMobil / ExxonNeftGas and Total Kharyaga there are only three in existence within the RF. • Remote Diagnostic Capability o Again the remote location of the platform and turbomachinery necessitated the inclusion of this facility. The format of the data replicates exactly the ‘Control Screens’ and ‘Tags’ of each turbine package. • PSA Requirements o It is widely known within the industry that SEIC have a ‘Production Sharing Agreement’ (PSA) with the Russian Federation for their Sakhalin assets. • In the case of ‘trending’ and ‘diagnostic activity’ of particular faults. For example. .

adjust parameters. The skills required were diagnostic capability. 8 © Siemens AG 2005. and observe the turbine in each of the above sequences. • This was viewed as essential by the customer. • Manpower o Permanent presence on Molikpaq ‘babysitter’. electrical and mechanical. If a fault indicated by a ‘trip’ or ‘alarm’ occurs which requires immediate analysis by specialist disciplines located at the Siemens facility in Lincoln. Materials and Manpower. The duration of each stay on the platform is four weeks. o Additional technicians for planned and unplanned inspections. All rights reserved. Each individual tag can (if required) be analysed over large or miniscule time frame. . SEIC can authorise (through a telephone line) Siemens to dial into the control panel of the particular turbine package in question. The specialist in Lincoln can then carry out starts and shutdowns. • Another facility required and provided with the ‘Remote Diagnostic Capability’ is ‘real time’ analysis. Two technicians rotate on a backto-back basis. The manpower contract values make up 20% of the total value. o Full time Contract Manager based in Lincoln. software reprogramming of the controls logic. • This was also viewed as essential by the customer. Scope • Contract o The LTSA actually consists of two contracts. • In addition to the permanent presence of the ‘babysitter’ a pool of technicians was created with skills specific to the SEIC turbine fleet and with Russian visas.access to the data stored on the Siemens server.

o Power Turbine • The mechanical drive units have different power turbines. we were required to support the existing fleet of six gas turbine packages. . The SGT-200 units are gas fuel only. The ‘helpdesk’ consists of specialists in each discipline who will analyse faults and shutdowns on. 24 hours per day from Siemens in Lincoln. each of the packages has differing configurations. For example three gas turbines incorporate Dry Low Emissions (DLE) combustion systems whilst the remaining three incorporate ‘conventional’ combustion systems. o Gas Turbine • The gas turbines in operation are two SGT-100 power generation sets. and two SGT 200 mechanical drive compressor sets coupled to two Siemens STC-SV (formerly MV) gas injection centrifugal compressors. All rights reserved.o Provide training on platform for SEIC personnel. o Oil System • Conventional. the four SGT100’s are dual fuel. Now due to the varying timescales of installation and location of manufacture. 9 © Siemens AG 2005. two SGT-100 mechanical drive pump sets which are coupled to two Sulzer high pressure water injection pumps. o Technical support. This allows operating on diesel during the winter production shutdown. o Main Gearbox for Generator Set.line utilising the resources of the Siemens infrastructure and the Remote Electronic Link • Materials o To meet the customer’s requirements of minimum downtime and minimum risk. • Siemens in Lincoln operates a 24-hour helpdesk for the Siemens turbine fleet. o Combustion and Fuel Systems • They are of varying configuration.

Generally carried out at 8. o An “A” inspection represents an annual visual inspection of gas turbine. the remaining three were packaged in Lincoln.000 hours and is generally an overhaul of the turbine hot gas path components. o A “C” inspection is carried out at 48.o Controls • In most turbomachinery installations it is an accepted fact that the majority of alarms and shutdowns are associated with spurious trips and alarms from within the control systems. for a company to operate within a PSA they are required to become tax compliant. This is a key element of the contract and operating in Sakhalin. o Operational strategic spares held on Molikpaq. o Spare gas turbines and power turbines located in Sakhalin. C. o A “B” inspection represents an inspection carried out at 24. • Inspection Schedule o Within Siemens we use the industry nomenclature of describing inspections as A. Otherwise failure 10 © Siemens AG 2005 All rights reserved. therefore the provision of replacement. . A. B. A. Then on a yearly basis we must submit tax returns for the company and manpower. o Package frame and systems • The first three units installed were packaged at Siemens gas turbine packaging facility in Houston.000 hours.000 hours and is generally an overhaul of the power turbine. we registered with the Sakahalin Oblast. USA. A. Prior to the creation of our company OOO Siemens SP. turbine hot gas path components. This is in addition to the “A” class inspection. England. power turbine and package frame and systems. o Therefore the general sequence / overhaul cycle is A. B and C. cards and probes became an integral part of the front line stockholding. • Taxation o As stated above. screens.

where the defect is the responsibility of Siemens.to do so would result in heavy fines and possible restrictions from working within the Russian Federation. All materials must be supported with proforma invoices. In addition to this all associated paperwork must comply with RF Import/Export regulations. it is a requirement that all materials shipped to SEIC in support of the contract are immediately entered into the SEIC SAP system with unique location numbers. Due to the volume of materials passing through the airport and port of Sakhalin Island there are many agents to choose from. In addition to a shipping partner we had to select a ‘customs clearance agent’. GOST certification and reference numbers. All rights reserved. the costs are covered at no extra charge to SEIC. The Siemens technicians as ‘babysitters’ on the Molikpaq are fully trained and proficient on the SEIC SAP material control system. Within the contract scope Siemens are responsible for shipment of all material and customs clearance. all unplanned incidents.Both SEIC and Siemens operate SAP. Due to the nature of the contract. Results • Reduced OPEX o It is accepted by both parties. that in the first three years of the LTSA the cumulative monthly cost of goods and services provided when compared to the cost of ad hoc contracting and traditional methods equate to a genuine reduction in OPEX. • Logistics o This is a crucial element in the support of the Molikpaq turbines. . o SAP. Here again we worked closely with SEIC and selected their logistics partner. Again failure to do so results in severe delays. 11 © Siemens AG 2005.

This has contributed greatly to our response time in the event of unplanned shutdowns. . completion of task and then issue of invoice’ contract. one LNG ‘Boil Off’ compressor.• Support Times o To support the fleet and maintain up time it was decided to retain two core engines on the island. These will be located onshore in the SEIC LNG plant currently under construction in the south of the island. At the Siemens turbocompressor plant in Duisburg. SGT-100 and SGT-200. now in 2004 we have achieved 97%. Currently they are supported by the conventional ‘planned or unplanned event. Germany. issue of purchase order. STC-SH10-6-A and one LNG ‘Flash Gas’ compressor STC-SV10-6-A are being assembled. our availability was below expectations. All rights reserved. • Novation of Contract to Siemens Moscow o On signature of the contract a commitment was made by the senior management o f ALSTOM (the previous owners of the gas turbine business in Lincoln) that the contract would be novated to our Moscow legal entity. It is also an idea to incorporate these two Siemens units into the scope of the LTSA. Questions 12 © Siemens AG 2005. Discussions are under way to develop this contract along similar lines to the LTSA. • Availability o In the first two years of the contract. The Future • Incorporation of Compressors o The two SGT-200-2S mechanical drive packages are coupled to two Siemens STC-SV gas injection compressors. This has been re-confirmed by Siemens senior management.

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