KCA DEUTAG Wins Siberian Drilling Contract

KCA DEUTAG, a subsidiary of Abbot Group plc, has been awarded an interim arrangement relating to the provision of drilling services for the development of Salym, West Siberia by Salym Petroleum Development N.V. (SPD), a 50-50 joint venture between Shell and OAO Evikhon.

This agreement is expected to lead to the award of a formal contract in the near future, with an estimated value of approximately US $42 million.

As a result of the contract two new EUK 3900 rigs will be built at a cost of US$16m, including drill string and BOP equipment, and KCA DEUTAG is in final discussions with the Russian construction company, Uralmashzavod, on the design of these rigs.

The Salym fields, located in the Khanty-Mansiysk Autonomous Okrug in Western Siberia, 190 kilometers from the town of Nefteugansk, are West Salym, Upper Salym and Vadelyp. SPD holds production licenses for all three fields, but West Salym is the largest of the three, accounting for about 80 percent of the total estimated recoverable reserves.

KCA DEUTAG will begin drilling development wells from cluster locations in April 2005 and the contract is for four years, with the extension options.

First oil from West Salym is expected by the end of 2005 with production peaking at 120,000 barrels per day in 2009. Oil will be evacuated via a tieback to the existing Transneft pipeline system. Upper Salym is already on production, whilst first oil from Vadelypis is planned for 2006.

"This contract builds on our earlier work for Sibneft in Siberia and the offshore contracts in Russia announced in September last year," commented Maurice White, Chief Executive of KCA DEUTAG. "Russia is one of our prime targets for the further development of KCA DEUTAG and our continuing success in this country reflects this."

The new rigs are based on the SPD requirements and are fit to work under the extreme environmental conditions the rigs will encounter in Siberia. The steel on the rigs is manufactured for temperatures of minus 45 degrees Celcius and the work floor and substructure are fully covered to give appropriate protection against outside temperature and winds.

The rigs are manufactured in such a way that the total rig, including tank system and generator sets, can be skidded on a rail system for fast rig moves on a cluster, which should typically take not more than one day.