BP, Rosneft Launch Sakhalin-5 Drilling

British oil giant BP and Russian state-run Rosneft will use Transocean's semisub, Sedco 600, for the first deepwater exploratory well at the Kaigansko-Vasyukansky block under the Sakhalin-5 project.
BP reported Interfax that the drilling contract is one of BP and Rosneft's largest in the current drilling season and they plan to drill this summer.

"We have a very restricted window for drilling, a whole lot of effort has been put into ensuring safety and environmental protection during operations on the island's northeastern shelf. Depth at the drilling site is more than one hundred meters, so special deepwater drilling equipment is needed. The alliance is very serious about drilling operations and other joint work and intends to observe all safety and environmental requirements," one BP source said.

The rig will arrive in June from Singapore, where it is undergoing a $2 million overhaul. Rosneft and BP concluded the main drilling and support contracts several months ago. Among the subcontracting companies are Shlumberger, SakhalinShelfServis, AmRusTrans RFI, Sakhalinmorneftemontazhy, Sakhalin Ecological Company, AVMK, the customs agency Evraziya, Dalsatcom, Sovintel, the institute SakhalinNIPImorneft and others. Sakhalin-5 plans call for drilling five exploratory wells.

BP noted that significant development and infrastructure construction work can only be planned if exploration goes well, so a lot is riding on this first well.

"In the future, assuming the availability of equal competitive opportunities, we think it necessary to actively bring mainly Sakhalin-based Russian companies onboard the Sakhalin-5 project," this source said.

BP is financing 100% of the spending involved in the geological studies and evaluation of the Kaigansko-Vasyukansky block. Drilling the first well will cost more than $50 million. If commercial reserves are confirmed, BP and Rosneft will coordinate further financing strategy.

Elvari Neftegaz, Sakhalin-5 project operating company, has been registered as a project operations company in Yuzhno-Sakhalinsk this year, and has received license to do prospecting work at the Kaigansko-Vasyukansky block. The company's stockholders are Rosneft (51%) and BP (49%). These two plan to sign the main Sakhalin-5 project agreements this summer or possibly in June.