Regional Influence in Oil and Gas Development: A Case Study of Sakhalin

The offshore oil and gas reserves off Sakhalin Island in Russia's Far East are one of Russia's more promising locations for new field development and by 2010 Sakhalin's oil production is expected to account for 7 percent of the demand in the Asia-Pacific region. Not surprisingly, Sakhalin regional authorities seek to ensure a level of regional control over off shore oil and gas development, along with the corresponding economic benefits, despite a relatively weak position in light of Moscow's efforts to centralize authority. This article examines ways in which regional administrations can and do influence the process of off shore oil and gas development in the Russian federation through a case study of the Sakhalin Oblast Administration. Regional authorities on Sakhalin have managed to retain an influential role for themselves via: 1) encouraging onshore infrastructure for off shore oil and gas operations; 2) working to smooth the way for development at the federal level; 3) insisting on local content and contracts when possible; and 4) finding opportunities for regional and local benefit via impact assessment processes. This analysis is based on a review of publicly available primary sources (e.g. company documents) and interviews carried out with regional authorities and foreign executives in Yuzhno-Sakhalinsk in September 2006.