RusEnergy

22 November 2006 - Upstream onLine - BP chief executive John Browne agreed terms for developing two blocks on Sakhalin Island with Russian partner Rosneft today, despite problems that have plagued other foreign oil companies on the island. Browne and Rosneft's president, Sergei Bogdanchikov, signed an agreement on developing the West and East Schmidt blocks, part of the Sakhalin-4 and Sakhalin-5 projects respectively, under which BP would finance exploration work including drilling six wells and Rosneft would reimburse it from production revenues,Reuters reported. "These agreements are the major step in the ongoing co-operation of our companies offshore Sakhalin," the text of the agreement read, a statement from Rosneft said. Rosneft said investment in West and East Schmidt so far exceeded $80 million and would amount to a further $700 million in the next five years. East Schmidt is estimated to contain 1.4 billion barrels of oil and 281 billion cubic metres of gas, while its western neighbour is thought to hold 3 billion barrels of oil and 255 bcm of gas. The visit by Browne, who also met the head of Russian gas monopoly Gazprom, contrasted with the less friendly receptions extended to BP's rivals ExxonMobil and Shell on Sakhalin in recent months. Both companies are leading projects on Sakhalin Island and both have been threatened with administrative measures and environmental checks that could delay or - in Shell's case - even derail a venture worth tens of billions of dollars. Analysts see the moves as part of a Kremlin strategy to reassert its control over the country's national resources. BP's Russian joint venture TNK-BP is also under pressure, with prosecutors threatening to withdraw operating licences from two valuable gas projects. But Shell and ExxonMobil's projects are majority foreign owned, whereas Rosneft owns 51% in both Sakhalin-4 and -5, while BP owns the remaining 49%. BP has also showed its support for Rosneft earlier this year by paying $1 billion for a stake of more than 1% in the company during its initial public offering of shares