BP, Rosneft Slow Work at Sakhalin

BP and Rosneft plan to scale back work at their joint offshore projects near Sakhalin Island this year after failing to find commercial oil reserves.

Elvary Neftegaz, BP's and Rosneft's venture for the Sakhalin-4 and Sakhalin-5 projects, will study geological data this year and doesn't plan to drill any wells, BP spokesman Vladimir Buyanov said by telephone Tuesday.

BP intends to work on Sakhalin through Elvary, reducing the "activity" of its existing representative office because of the decrease in the planned work, Buyanov said. The office may be shut down by April, Interfax reported, citing the regional administration.

International majors on Sakhalin have cut back growth plans over the last year. Gazprom has demanded ExxonMobil sell gas from Sakhalin-1 domestically instead of to China, and has bought control of Shell-led Sakhalin-2. BP had aimed to boost Russian output through its Sakhalin projects. TNK-BP agreed last year to sell its Kovykta gas field to Gazprom and has said oil output will not grow until new fields come on stream by the end of 2009.

Elvary drilled two wells last year at Sakhalin-4 and four wells at Sakhalin-5 in 2004 through 2006, according to Rosneft's web site. The venture has not found sufficient oil reserves at Sakhalin-5 to begin commercial production, Rosneft chief executive Sergei Bogdanchikov said in September.

Rosneft owns 51 percent of Elvary Neftegaz and BP owns 49 percent.