Transmeridian Inks Transportation Deal with KazTransOil

Transmeridian Exploration's subsidiary, Caspi Neft TME, has executed transportation agreements that allow for the use of the national crude oil pipeline and terminal system for the South Alibek production. "This is the first step in allowing the company to complete its plan for a pipeline connection to the existing KazTransOil terminal located about 1.5 kilometers from the South Alibek Central Production Facility," commented Lorrie T. Olivier, the company's Chairman and CEO.

Current design is to install a pipeline transfer and measuring system to handle up to 30,000 barrels of oil per day for phase one of the project. A further technical agreement for operations with the Western Division of KazTransOil would be required once all the technical aspects and the connection to the terminal are finalized. Suppliers have given a 6-month delivery time table for the required pumping and metering instrumentation required by the KazTransOil technical specifications. The Company expects to be able to begin construction of the pipeline tie-in this year along with treating facilities that will allow for pipeline deliveries by 2nd Quarter 05.

The Company has an agreement in principal with a local crude marketing firm which will allow for North Sea Brent based pricing and rail export until the pipeline connection can be realized. This will entail trucking the crude to a local rail terminal about 35 miles from the field where it will then be railed to either Western European refineries or the Black Sea export terminals. The pricing will be based on a dated North Sea Brent quote less a transportation and quality adjustment in a range of $13-$14 per barrel. "While this mode of export is not ideal this would increase the net back per barrel significantly if prices remain in the $30 range," explained Mr. Olivier. Local truck sales continue to increase with higher local prices. The company is now making field deliveries with a net back of $13.33 per barrel.