BP signs deal for drilling off Sakhalin

Allen Baker

Petroleum News contributing writer

BP has signed an operating and shareholding deal with Russian state oil company Rosneft that clears the way for drilling at their Sakhalin-5 project, off the northeastern tip of Sakhalin Island, Reuters reports. BP earlier had signed an agreement giving it 49 percent of the project, with the Russian state corporation holding the majority share.

A spokesman for BP in Moscow told Reuters that “drilling will begin in the nearest future.” The London-based company has agreed to finance all the development costs for Sakhalin-5, estimated at $2.5 billion to $5 billion over the next 10 years.

The find is expected to be huge. But there are no guarantees, and the same joint venture partners abandoned exploratory holes at two blocks in the Sakhalin-4 sector recently after disappointing results.

Sakhalin development is expensive and difficult, especially in the northern area. Sakhalin-5 is in the often ice-choked and technically challenging waters of the Sea of Okhotsk. BP says its 30 years of experience in Alaska give it an edge in producing oil in such a climate.

But the summer window is a short one, and the drilling will have to begin soon if it’s to be done this season.

In June, BP and Rosneft said they would use Transocean’s semi-submersible Sedco 600 for the first well, in water more than 300 feet deep. The rig had been taken to Singapore earlier for a $2 million overhaul, and was expected in Sakhalin last month.

The companies are planning to target a structure called Pela Leich in the Kaigansky-Vasvukansky block with up to five exploratory wells. Subcontractors were already lined up at that time. They are expected to include Schlumberger, SakhalinSelfServis, AmRusTrans RFI, and others.

Rosneft received an exploration license for the project in 2002, covering blocks in the southern part of the Sakhalin-5 totaling about 10,000 square kilometers.