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LONDON (Alliance News) - British oil giant BP PLC and Russian state oil company OAO Rosneft said Tuesday that they have signed a deal to jointly develop the Domanik shale formations in Central Russia's Volga-Urals region.
The two companies will form a joint venture that will be incorporated in Russia, with Rosneft owning a 51% stake in the company and BP owning the remaining 49% stake, said the firms in a statement Tuesday.
The deal comes amid US government-lead sanctions that were imposed in March against Russia over the Ukraine crisis.
Rosneft and BP signed a heads of agreement for the formations within the framework of the St. Petersburg International Economic Forum, signed by Rosneft President and Chairman of the Management Board Igor Sechin and BP Russia President David Campbell.
The signature ceremony was led by President of the Russian Federation Vladimir Putin. Sechin is said to be part of Putin's so-called inner circle and has been targeted by US sanctions.
The Heads of Agreement provides for implementation of a joint pilot project by Rosneft and BP relating to the Domanik formations. In the event of success, the deal includes the possible development of unconventional Domanik resources. BP holds almost 20% in Rosneft.
BP said it will compensate part of the historical costs to Rosneft for exploration of the Domanik formations and will provide carry financing of up to USD300 million for the pilot programme, which will be conducted in two phases at license blocks in the Orenburg Region.
Shares in BP last traded at 507 pence per share.
By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance
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