BP Closes Sakhalin Office

This should not come as much of a surprise to anyone who’s been paying attention:

UK supermajor BP will close its office in Sakhalin island after it decided to scrap further drilling at Sakhalin 4 and Sakhalin 5, BP’s Moscow office said today.

BP said its joint venture with Russia’s largest oil producer Rosneft, Elvari NefteGaz, will only carry out geological exploration at Sakhalin 4 and Sakhalin 5, where drilling has so far not been seen as successful.

It had been rumoured around the island that BP’s exploration activities had not bourne fruit, but it is hard to believe that this is all there is to the picture.  The Sakhalin 4 and 5 developments are in the far north of the island in deep water which is mostly frozen.  To develop the fields would have required extremely complex engineering and enormous investment, with artificial islands having to be constructed in places.

Having seen Shell being forced to hand over control of the Sakhalin II project, Exxon being told it is not allowed to export the gas from the Sakhalin I project, and its own major stake in the Kovytka field transferred to the Russian government, it is probably unlikely that BP’s shareholders have much stomach for pouring billions of dollars into Russia.

Summer 2007 could prove significant yet.



Tomorrow my wife and I are going on holiday to the south of Vietnam for two weeks, possibly getting a quick trip to Cambodia whilst we’re at it.  At least one older American gentleman I work with on Sakhalin has grumbled that they never showed him any beaches when he was last there.

And for the benefit of one reader who knows who he is, I’ll try to find if any of the market stalls flogging American kit left over from the war has a lime-green, bell-bottomed leisure suit whose owner might have left it behind.  

Back on 18th February, see you shortly afterwards.