BP to Invest $220 Million in Sakhalin Project

Rosneft said that BP is planning to invest approximately $220 million by 2006 in a joint project with Rosneft to explore for oil on Sakhalin Island. BP will invest approximately $20 million during 2003 and during 2004 the amount will increase to $100 million as exploration drilling begins. Right now plans call for an investment of around $220 million to drill three exploration wells before 2005-2006, but if additional reserves are found, this sum could rise to $300-$400 million to proceed with more exploration, said Rosneft.

Earlier this year BP purchased a 50% interest in oil firm TNK for $6.75 billion. BP has said it would bring all operations in Russia under the umbrella of the new company, TNK-BP, including its stake in the Sakhalin joint venture, if its partner Rosneft did not oppose the plan.

Rosneft and BP have two joint projects on the island's northeastern shelf, Sakhalin-4 and Sakhalin-5, in which BP owns 49 percent and fully finances the exploration, while Rosneft holds 51 percent. The two blocks of the Sakhalin-4 project are estimated to hold about 880 million barrels of oil and 540 billion cubic meters of gas. Preliminary reserves of the Sakhalin-5 project are estimated at 4.4 billion barrels of oil and 600 billion cubic meters of gas. Both projects will require several billion dollars in investment to build offshore platforms and infrastructure in very difficult weather conditions.