Richard Spiesí Speech Ìbp and Development of Russian offshore Oil & Gas Potentialî (at the International Oil Forum Ìoil of Russia:the Present and the Futureî November 16, Moscow

OUTLINE OF RICHARD SPIESí SPEECH ìBP AND DEVELOPMENT OF RUSSIAN

OFFSHORE OIL & GAS POTENTIALî (AT THE INTERNATIONAL OIL FORUM

ìOIL OF RUSSIA:THE PRESENT AND THE FUTUREî NOVEMBER 16, MOSCOW)

BP IN RUSSIA

The BP Group is an energy company that operates across six continents and employs

around 96 000 people worldwide. Our products and services are available in over than

100 countries and we conduct exploration and production of oil & gas in 26 countries.

BP is a reliable partner of Russia and has made Russia a key element of the

corporationís long-term growth strategy, and has invested and conducted business here

over 15 years.

Our growing commitment to Russia is guided by our Groupís values - BP is progressive,

performance-driven and innovative, as well as environmentally conscious. It is also built

around specific promises and we made production growth, technology transfer, and a

belief in the importance of strong corporate governance and corporate citizenship.

In Russia we do business with Russian private and state companies, jointly developing

oil & gas projects and establishing strong local energy companies. These Russian

companies operate within the conventional legal and fiscal framework (that is to say, not

under PSAs). And they play an important role in bringing material benefits to this

country and its people ñ this is an example of how the principle of mutual advantage,

which is central to BPís values, is applied in Russia.

You will be familiar with TNK-BP, where BP owns 50 % stake.

But today I would like to speak about our other joint venture in Russia. Our activities in

Sakhalin are important elements of BPís growth plans. They are prospective rather than

actual developments. But BP is very excited by the potential of this area.

I was recently given the responsibility for managing all BPís offshore projects in Russia.

I am delighted to have this opportunity ñ and it is a great challenge as well as a

wonderful opportunity as there is huge oil and gas development potential in the Russian

offshore ñ for example in Sakhalin, where we are active through our partnership with

Rosneft.

ELVARY NEFTEGAZ is our joint venture with Rosneft in SAKHALIN, which is

carrying out exploration work in the Sea of Okhotsk, north of the island. Rosneft has

51% of the joint venture and BP 49%.

Elvaryís exploration programme is the first offshore Sakhalin in 20 years. The joint

venture made its first discovery in 2004 with an exploration well on the Pela Lache

prospect. In 2005, Elvary made its second discovery with a well drilled on the

Udachnaya structure.

In 2006, exploration continued with two wells drilled in the Kaigainsky-Vasukansky block

of Sakhalin 5 license area, and a further discovery. For the first time, Elvary drilled two

wells in one season. This superior drilling perfomance is attributed to learning from

previous seasons, slimmer wellbore designs, use of the Riserless Mud system,

improved shallow drilling efficiency and waste management.

Rosneft and BP have also conducted five site surveys across the West and East Shmidt

licenses, for which BP has a separate exploration agreement with Rosneft. A major 3D seismic programme (some 3000 + sq kilometers) has also been conducted over the

Shmidt license area.

Planning for 2007 is currently underway ñ the expectations are: another multi-well

exploration programme, additional 2D & 3D seismic surveys, and further baseline data

collection, including environmental and social survey work.

Elvary itself will be a unique company in Sakhalin, as it has been established as a joint

venture between international oil and gas major and a Russian State oil company.

Elvary draws on the strengths of both partners. Rosneft is a major oil and gas producer

with decades of experience and expertise in developing Russian projects. BP has global

experience of finding, developing, producing and marketing offshore oil and gas

resources. Together, BP and Rosneft are building a completely new company which will

be a world-class Russian company that operates to the highest international standards.

And like other BP companies and joint ventures around the world, it works closely with

government, regulators and the community ñ with all stakeholders ñ in all aspects of its

activities.

Sakhalin is a frontier oil and gas province that is developing now into a major production

hub. I would like to touch upon some technological challenges we are facing exploring

north offshore Sakhalin.

Most of the technologies required to develop and produce oil and gas, including annual

field operations, in the Sakhalin IV and V license areas (where ENG is exploring) do not

exist currently.