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BP quits failed Russian test area

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By Ed Crooks

Published: March 2 2009 22:28 | Last updated: March 2 2009 22:28

BP has abandoned the Sakhalin 4 oil exploration area in Russia after wells drilled there came up dry, marking a further disappointment in what had previously been seen as one of its most promising regions.

The news comes as BP delivers its annual strategy on Tuesday for analysts and investors, facing questions about how it can sustain investment for future growth if oil stays at $45 a barrel.

BP confirmed on Monday that its joint venture with Rosneft, Russia’s biggest oil company, had walked away from a licence to explore the West Schmidt block in the Sakhalin 4 region off the far eastern coast of Russia.

BP and Rosneft launched the venture in 2006 with a plan to invest $700m in the Sakhalin 4 and 5 areas. One estimate suggested that West Schmidt alone could hold 3bn barrels of oil and 255bn cubic metres of gas.

Sakhalin 1 and 2 have been important projects for ExxonMobil and Royal Dutch Shell, respectively.

However, a year ago it emerged that BP and Rosneft had suspended drilling in the area indefinitely.

Although the joint venture has retained its interest in the Sakhalin 5 region, where four wells have been drilled and three discoveries made, no further wells are planned, and BP is still analysing seismic data.

BP is on Tuesday expected to point out that it was the only one of the “big five” oil companies with increased production last year.

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