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February 15, 2008 |
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ROSNEFT OIL: BP Joint Venture Lulls Sakhalin Drilling Operations OAO Rosneft Oil Co. and BP Plc have put off drilling operations at Russia's Sakhalin island, citing heavy costs and low success, Ed Crooks writes for the Financial Times. BP told FT that the exploration program in the region "hasn't been the huge success that some thought it might be," adding that there are no plans to drill wells this year. "Sakhalin is frontier exploration," Andy Inglis, BP Plc, was quoted by FT as saying. "We had early success in the Kaigansky- Vasuykansky license. In 2007, we did not have continuing success as we moved into the Shmidt area." CJSC Elvary Neftegaz, a joint venture between Rosneft (51%) and BP (49%), will now focus the exploration program on gathering and evaluating seismic and other data. Elvary have drilled six wells in the area, three of which led to discoveries. As reported in the TCR-Europe in Nov. 26, 2006, Rosneft and BP signed operating agreements for joint activity on the East- Schmidt (Sakhalin-5) and the West-Schmidt (Sakhalin-4) license blocks. It was planned that exploration activities on both blocks including drilling of six wells will be financed by BP until commerciality is confirmed; following commercial discovery the expenses will be reimbursed from Rosneft's share of production. The companies agreed to US$700 million in the area. BP said the cost of exploration was around US$50 million per well in 2006, but costs in the industry have since continued to rise sharply, FT relates. Steven Dashevsky, a managing director of Unicredit Aton in Moscow, told FT the Sakhalin 4 and 5 areas remained interesting for the long term. "[Sakhalin 4 and 5 areas are] not assets for the next four or five years, but maybe in 10 years' time," Mr. Dashevsky told FT. About Rosneft Headquartered in Moscow, Russia, OAO Rosneft Oil Co. -- http://www.rosneft.com/ -- produces and markets petroleum products. The Company explores for, extracts, refines, and markets oil and natural gas. Rosneft produces oil in Western Siberia, Sakhalin, the North Caucasus, and the Arctic regions of Russia. * * * As of Feb. 7, 2008, OAO Rosneft Oil Co. carries a BB+ long-term corporate credit rating from Standard & Poor's Ratings Services. S&P said the outlook is positive. |
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