Existing KCA Rig Continues Operation in West Siberia

KCA DEUTAG has been awarded an interim agreement relating to the provision of one fully winterized land drilling rig to provide drilling services in the Nadym area of West Siberia for the Russian oil and gas company RITEK.

KCA DEUTAG will be working as subcontractor to Schlumberger Integrated Project Management who will act as the primary contractor to RITEK.

This agreement is expected to lead to the award of a formal contract in the near future, with an estimated value of approximately US$13 million and follows the announcement on 8 March 2004 that KCA DEUTAG had been awarded a $42 million contract 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.

Commenting, Claus Chur, Group Director Land Division of KCA DEUTAG said: "These contracts reinforce our strategy for long term internationalization especially in the key target market of Russia."

As a result of the new contract, KCA DEUTAG will operate its own 2000 HP rig in the harsh environment of West Siberia. The rig T-2000 has been specially modified for projects in this area and has already performed well in operations for another client, which started in January 2003.

The Sredne-Khulymskoe field is located in the Jamalo Nenezki Autonomous Okrug in Western Siberia, approximately 400 km from the present location of rig T-2000 in Nojabrsk. RITEK, intends doubling its production in the next few years. In the first, phase six horizontal wells will be drilled in the Nadym field from two different clusters.

KCA DEUTAG has already started mobilization of the rig and equipment. Over 250 truckloads need to be transported, mainly via winter roads within a limited time frame. Drilling operations are scheduled to commence at the beginning of May and will take approximately 15 months.

"The continued operation of rig T-2000, which is the most modern land rig in Russia, is very important to us," said Chur. "It confirms that this rig and its personnel have produced outstanding performances in the extreme environmental conditions of West Siberia in temperatures of minus 45 degrees Celsius. "Russia is one of our prime targets for the further development of KCA DEUTAG and our continuing success in the country reflects this."

RITEK is a 'daughter' company of Lukoil Corporation; Lukoil Corporation and Lukoil West Siberia own over 50% of the company.