BP And Rosneft Become Closer?

BP and Rosneft are setting up a joint firm to explore and develop a second project on the remote eastern Russian island of Sakhalin. The joint firm will work on the Kaigansk-Vasyugansk area of the Sakhalin-V project following a recent acquisition by Rosneft of a license for it from the natural resources ministry, the two companies said in a statement.

Rosneft and BP agreed last year to jointly develop the Sakhalin-4 project. BP will own 49 percent of each project and fully finance the exploration, while Rosneft will hold 51 percent in Sakhalin-4 and Sakhalin-5. The move will boost BP's position in oil-rich Sakhalin, which is currently weak compared with its rivals.

Shell has been producing oil since 1999 from an offshore platform and is planning, with Japanese firms, to build the world's biggest liquefied natural gas (LNG) plant by 2006 as part of its Sakhalin-2 project. ExxonMobil also recently decided to go ahead with its Sakhalin-1 project and to produce the first oil by 2005 after more than a decade of exploration.

BP and Rosneft said they agreed to carry out seismic exploration on Sakhalin-5 in July-September and start exploration drilling in 2004. The two blocks of the Sakhalin-4 project, Astrakhanovsky and Shmidtovsky, are estimated to hold about 120 million tons (880 million barrels) of oil and 540 billion cubic meters (bcm) of gas. Preliminary reserves of the Sakhalin-5 project are estimated at 600 million tons (4.4 billion barrels) of oil and 600 bcm of gas. Both projects will require several billion dollars in investment to build offshore platforms and infrastructure in very difficult weather conditions.

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