Chadbourne & Parke LLP Representing Rosneft on Sakhalin 5 Project;
Shareholders and Operating Agreement Signed
MOSCOW — July 29, 2004 — Chadbourne & Parke LLP represented OAO NK Rosneft (Rosneft), the Russian state-owned oil company, which recently signed a Shareholders and Operating Agreement with British Petroleum (BP) with respect to the Sakhalin 5 offshore oilfield (the Kaigan-Vasuykansky block), one of the largest oil and gas projects in Russia.
The Sakhalin 5 project is located off the northeastern coast of Sakhalin Island, north of Japan in the Russian Far East. Sakhalin is one of Russia’s most promising oil regions, and has the advantage of being near the major energy consumption markets of East Asia. Drilling of the first prospecting well in the Kaigan-Vasuykansky block, which will be about 4,400 m (over 14,400 feet) deep, began on July 19.
The agreement provides for the formation of a management company, Elvary Neftegas Holdings BV in which Rosneft will hold 51% and BP will hold 49% in the new entity. Under the agreement, BP will finance all geological exploration under the project and a portion of the development operations.
Rosneft is a long-time client of Chadbourne’s Moscow office. Chadbourne advised Rosneft on structuring the operating and holding entities related to Sakhalin 5, as well as on the legal aspects of the project. Chadbourne partner Shane R. DeBeer and associate Svetlana Sinyova of the Moscow office represented Rosneft on this project.
Mr. DeBeer previously led Chadbourne’s representation of Rosneft in connection with Sakhalin 3, advising on an operating structure agreement between Rosneft and Texaco (now Chevron-Texaco) and Mobil (now Exxon-Mobil). Rosneft has interests in many other Sakhalin projects as well as many other oil and gas fields throughout Russia.
The cost of the Sakhalin 5 project is expected to reach several billion dollars, depending on the size of the field, whether it contains primarily oil or gas, what infrastructure may be needed, and other factors.
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