The Koltogorsky Blocks comprise a group of eight exploration properties covering 2,100 square kilometers with an estimated 970 million barrels of C3 resources (Russian classification1) in the Nizhnevartovsk District of the Khanty-Mansiysk Autonomous Region in Western Siberia. The newly acquired exploration acreage lies near the giant Samotlor oil field, one of the largest in the world, and is bordered on the west by a number of Samotlor satellite fields and on the east by a range of other producing properties in Russia's most prolific oil producing region.
Sibir plans to spend $50 million for the exploration campaign, drilling eight wells to an average depth of 3,000 meters by the end of 2008 in accordance with license requirements. The company will use three drilling rigs to carry out the exploration program and plans to spud its first well in July of this year. Well testing results from the first well are expected in December of 2007 with full results of the campaign completed by the end 2008. Exploration operations will make use of over 2,500 kilometers of processed and interpreted 2D seismic profiles which indicate the existence of 35 identifiable oil traps in the Lower Cretaceous and Jurassic at depths of 2,600 to 3,200 meters.
Sibir's Magma subsidiary, which operates the Yuzhnoye and Orekhovskoye fields, will manage all exploration activities bringing to bear its over 15 years of operational experience in this area of Western Siberia to ensure a safe, efficient and cost effective operation.
Commenting on the announcement, Sibir CEO, Henry Cameron, said, "The completion of the Koltogorsky transaction signals the launch of significant exploration operations on this promising property. This new chapter in the company's development demonstrates Sibir's commitment to Russia and its aim to become the international company of choice for foreign investment in Russia's oil and gas sector. The exploration potential of the Koltogorsky blocks together with the exploration potential of our existing interests in Salym, Yushnoye and Orekhovskoye is a cornerstone of Sibir's plans to grow its reserves base through the drill bit.
The completion of the Koltogorsky transaction is just one of many important achievements expected for Sibir in 2007. At Salym, production is poised to exceed 80,000 barrels of oil per day (bopd) and reach at least 100,000 bopd by the end of the year. In the downstream Sibir expects to announce an agreement in principle to increase its stake in Moscow Oil and Gas Company before the end of the second quarter of 2007. In addition our stake in the BP branded retail network continues to exceed all internal expectations and it is expected that it will soon be contributing to Sibir by way of a handsome dividend."
The Russian classification of C3 hydrocarbon resources constitutes prospective resources presumed to exist based on indicative geological and geophysical evidence, but as yet unverified by drilling.
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