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Frequent Legal Issues for Contractors on
Sakhalin Oil and Gas Projects
(Appearing soon in the Russian Energy Law Journal)

Introduction and Table of Contents

Construction of the complex offshore oil and gas projects on the island of Sakhalin is gaining momentum as the operators of the Sakhalin I and II projects, Exxon Neftegas Ltd. and Sakhalin Energy Investment Company, continue awarding contracts for the completion of installations currently estimated to reach a total cost of $22 Billion. Contractors and subcontractors of diverse nationalities are now participating in these gigantic undertakings that include such varied construction as oil and gas pipelines, offshore drilling platforms, icebreakers and oil tankers, harbor facilities, the world’s largest LNG plant, airport improvements, oil spill containment facilities, office buildings, employee housing, medical facilities and hundreds of kilometers of road construction with multiple river crossings.

Each contractor and subcontractor is faced with certain legal issues that are unique to the specialized work required by its contract. But at the same time, there are many common issues encountered by most of the companies operating on Sakhalin. The Sakhalin office of Russin & Vecchi International Legal Counsellors has assisted clients in meeting these requirements on repeated occasions. This day-to-day experience with common legal concerns was collected and presented at the Sakhalin Oil and Gas Conference in London in November 2003 by six attorneys from the Russin & Vecchi Russian Practice Group.

The following articles summarize the materials presented at Russin & Vecchi’s Sakhalin Oil and Gas Post-Conference Legal Workshop. Readers who would like to discuss any of the issues presented in these papers are invited to contact Russin & Vecchi attorneys at the coordinates listed immediately after the articles.

Table of Contents

I. Legal Theory and Sakhalin Practice
II. Management and Control of a Russian Enterprise
III. Meeting Russian Content under Sakhalin I and II PSAs
IV. Drafting a Company Charter: What to Include and What to Avoid
V. Antimonopoly Considerations of Investments in Sakhalin Projects
VI. Labor Contracts: Dos and Don’ts
VII. Secondment Contracts, Direct Employment and Body Shops
VIII. Extreme North Considerations
IX. Obtaining Visas
X. Annual Quotas for Foreign Employees and the Sakhalin Administration
XI. Procedures for Obtaining Work Permits
XII. Personal Income Tax Considerations
XIII. Maritime Considerations: Oil Spill Prevention
XIV. Cabotage
XV. Water Use Licensing
XVI. Overview of the Major Aspects of Licensing Procedures
XVII. Leasing Real Property in Russia: A Lessee’s Perspective

The contents of these papers should not be construed as legal advice, and readers are cautioned from applying this summary information to concrete factual situations without further legal consultation. Due to space limitations, the information contained in these articles is not exhaustive. There are therefore likely additional applicable legal requirements with regard to most factual circumstances.

If you would like to receive a copy of this publication in a Word file, please e-mail us at lawyers@russinvecchi.com.



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