Financial Times: Sakhalin fills BP with eastern promise: “… yesterday, Royal Dutch/Shell said it had found oil at its Seria field in Brunei, which could indicate the presence of 100m barrels of recoverable reserves in the area.” (ShellNews.net)
By James Boxell
Published: October 7 2004
BP has made what it says is a "significant" oil discovery near Sakhalin Island in east Russia.
Sakhalin is one of the world's most promising oil and gas regions but BP has been lagging behind rivals Royal Dutch/Shell and ExxonMobil, which both have vast projects in the area.
However, BP said yesterday that its discovery in the offshore Sakhalin 5 block at the north of the island marked the "modern stage" of the area's development.
While Exxon and Shell have been developing fields that were known about but not fully appraised, BP is looking at an unexplored area.
Sakhalin 5 represents the next step in BP's Russia strategy as it moves beyond the development of existing onshore sites with TNK, its joint venture partner.
Rosneft, BP's Russian partner in Sakhalin 5, has estimated that the field could contain 4.4bn barrels of oil reserves and 500bn cu m of gas, figures described by one analyst as "lurid".
BP distanced itself from any "premature" assessment of what the field could hold.
It said that the first exploration well had found "significant volumes of oil and gas in a number of high quality sandstone reservoirs". But it was impossible to predict accurately how much oil the field contained from one well.
The well has been closed because of seasonal bad weather and BP has not tested it. Sakhalin is divided into six offshore blocks.
It is in the Sea of Okhotsk, which often freezes for six months of the year, which makes exploration extremely difficult.
Shell's Sakhalin 2 project has estimated reserves of 1.2bn barrels of oil and 500bn cu m of gas and has been producing oil since 1999. The Anglo-Dutch group is spending more than $10bn (£5.6bn) on building the world's biggest liquefied natural gas plant in the area.
Exxon said its $12bn Sakhalin 1 project has potential reserves of 2.3bn barrels of oil and 17,000bn cu ft of gas.
BP owns 49 per cent of Sakhalin 5, with Rosneft - currently being acquired by Gazprom, the Russian gas monopoly - controlling 51 per cent. BP will pay for all exploration and development costs, which could total $3bn to $5bn if the field is successful. Each exploration well costs about $100m.
BP would recoup costs from oil and gas sales if the area starts producing.
TNK, its Russian partner has declined to become involved in Sakhalin.
Separately yesterday, Royal Dutch/Shell said it had found oil at its Seria field in Brunei, which could indicate the presence of 100m barrels of recoverable reserves in the area.