Rosneft and Sinopec Ink Deal for Veninsky Block

Rosneft and the China Petroleum and Chemical Corp. (Sinopec) have signed a Corporate and Shareholder Agreement related to their joint work in exploring and developing the Veninsky block of fields on the shelf of Sakhalin Island (Sakhalin-3 project).

According to the document, which was signed on March 26, 2007 in Moscow, the wholly owned subsidiaries of Rosneft and Sinopec – Rosneft International Limited and Sinopec Overseas oil and Gas Limited – will become the owners of Venin Holding Ltd., which was established in October 2006. Venin Holding Ltd. will in turn be the sole shareholder of Venineft, the license owner and operator of the Sakhalin-3 project. Rosneft will have a 74.9% stake in the project, with the remaining 25.1% going to Sinopec.

A transaction transferring Rosneft's stake in Venineft to the joint company should be approved by Rosneft's Board of Directors.

Oil resources at the Veninsky block are estimated at 169.4 million tonnes, and gas resources at 258.1 billion cubic meters. The Veninsky licensed sector covers approximately 5,300 square kilometers on the shelf of the Sea of Okhotsk with a depth ranging from 25-150 meters. Seismic survey data has revealed the presence of six promising structures at the block.

Rosneft received an exploration license to the Veninsky block in April 2003, which was subsequently re-registered as Venineft. On August 30, 2005, Rosneft signed an interim financing agreement with Sinopec. According to this document, Sinopec is to finance 75% of expenditures during the stage of geological exploration at the Veninsky block. Rosneft is responsible for financing 25% of the expenditures from its own resources. As of January 1, 2007, total investment in the project stands at USD 69.8 million.

In 2006, the first exploratory well was drilled at the Yuzhno-Aiyashskaya area at the Veninsky block. Promising oil and gas-bearing strata were found, and tests confirmed the presence of hydrocarbons. The well completely met its task and was dismantled. Drilling took place from the Kan Tan III semisub, which belongs to the Shanghai Offshore Drilling Company.

Upcoming plans include drilling a second exploratory well at the Severo-Veninsky structure and a third well at one of the structures in the Aiyashskaya group.