ROSNEFT AND BP WIND UP DRILLING SAKHALIN-5 WILDCAT WELL

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YUZHNO-SAKHALINSK, October 6 (RIA Novosti) - The Rosneft and British Petroleum companies have completed drilling the first prospecting well on a shelf field within the Sakhalin-5 project, the BP Sakhalin office has said.

Drilling was done by the Elvary Neftegas Holdings BV company, set up by Rosneft and BP for geological survey of the Kaigan-Vasyugan section of the project.

"Drilling has detected large oil and gas volumes in some highly producing formations", the BP said. The well lies to the north from other blocks developed within the Sakhalin projects almost 50 kilometres away from the shore at a depth of 114 metres.

The well highlights the start of the prospecting drilling programme at the present stage of studying the Sakhalin shelf.

Having met the goals for this year, the drilling rig has been stopped. The companies have taken the decision to mothball it. Well tests and collection of additional information will be done later. "Together with BP we will thoroughly study the materials collected, which are promising unlike the Sakhalin-4 well, found empty", Rosneft vice-president Ramil Valitov told journalists.

The Sakhalin-5 project includes the Eastern Shmidt block of 25,000 square kilometres. The offshore field of hydrocarbons lies on the Okhotsk sea continental shelf north-east of the Sakhalin island. The recoverable reserves are estimated at 600 million tonnes of oil and 600 billion cubic metres of gas.

According to the SakhalinNIPIneft Institute, part of Rosneft-Sakhalinmorneftegaz, Sakhalin-5 needs 33 billion dollars of investments and the investors' anticipated profit might total 104.2 billion dollars.

The project participants -- British Petroleum Amoco (49 percent), OAO NK Rosneft (25.5 percent) and OAO Sakhalinmorneftegaz (25.51 percent) - have set up an alliance for the development of two promising sections of the project.

At the sitting in Moscow on July 23, 2002, the alliance members decided to setup a joint operator company to carry out geological prospecting with subsequent production of oil and gas from the Kaigan and Vasyugan sections within Sakhalin-5. On the members' behalf, Rosneft drew a licence for geological survey of parts of the shelf. Under the licence agreement, geological survey will be done in 2002 through 2006.

In line with the agreements reached, at the stage of geological survey BP will finance all work, including its Russian partners' shares, and, in ten years to come, additionally invest up to five billion dollars to preserve its share in the project.

In the meantime, realisation of the Sakhalin-5 project is a matter of remote future: the expected production of hydrocarbons may begin in 2013.

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