BP, Rosneft To Sign Sakhalin-5 Deal March 3, 2004, Dow-Jones MOSCOW -(Dow Jones)- Russian state oil major OAO Rosneft and BP PLC Friday will sign a deal to develop an oil and gas project in Russia's far east, the Itar- Tass news agency reported Wednesday. "The deal will allow us to drill the first exploration well this year," the agency quoted Rosneft Vice President Sergei Alexeyev as saying. Rosneft and its subsidiaries hold 51% of the Sakhalin- 5 venture, located off the coast of Russia's Sakhalin Island, while BP owns 49%. Under an earlier agreement, BP has agreed to finance Rosneft's share of exploring the tract, which has estimated reserves of between 700 million and 800 million metric tons, (or between 5.1 billion and 5.8 billion barrels) of crude oil and 450 billion cubic meters of natural gas. Officials at BP and Rosneft weren't immediately available for comment. Earlier this year, Dow Jones Newswires reported that Rosneft had asked BP to cover development costs at the multibillion-dollar project. At the time, Rosneft offered to drill exploration wells this year, but wanted BP to carry the costs of developing Sakhalin-5 if oil was discovered. BP would recoup these costs, plus interest, once production begins. The discovery of oil or gas at Sakhalin-5 could lead to substantial new Russian investments for BP, which recently invested $7.7 billion to create TNK- BP (TNKB.YY), Russia's third-largest crude oil producer. Sakhalin Island is host to some of the largest direct foreign investments in Russia's hydrocarbons sector. The Sakhalin-2 project - led by Royal Dutch/Shell (NYSE:RD - News) Group (RD, SC) - is already producing oil, while the ExxonMobil Corp.-led (XOM) Sakhalin-1 venture was declared commercial in 2002. Not all Sakhalin projects have met with as much success, however. The Russian government recently said it wouldn't issue a license to another consortium comprising ExxonMobil, ChevronTexaco Corp. (NYSE:CVX - News) and Rosneft, to develop the Sakhalin-3 block on the basis of a 1993 tender.