1st Phase of Uzbekistan Project Environmental Audit Complete

The first phase of the environmental audit consisting of an assessment of the current state of the environment on the contract blocks has been completed within the framework of implementation of the PSA between the consortium of LUKOIL and Uzbekneftegaz and the Government of Uzbekistan covering the Kandym group of fields, Khauzak, Shady and Kungradsky blocks.

In particular, the results of environmental expeditions and laboratory tests were used to study the socio-economic, weather and geological-geographic features and biological resources of the Khauzak, Shady blocks and Kandym group of fields. A review of the sanitary and hygienic situation in the population centers located in the area was also conducted.

In addition, field operations were also concluded on the Kungradsky block. In their course meteorological parameters and radiation were metered, and air, soils, as well as surface, subsurface and wastewater was sampled for gamma spectrometer analysis. Specimens of fauna were also caught for ecotoxicology and postmortem analysis. All specimens and samples were preserved and delivered to laboratories for analysis and off-site processing of results. Definition of the initial state of the environment at the Kungradsky block is planned for February 2005.

Presentation and approval of the final report on the initial state of the environment on the contract area in the Environmental Committee of Republic of Uzbekistan is planned for March 2005. Based on the results of a tender the Baku branch of LUKOIL-VolgogradNIPImorneft was selected as the contractor for the work.

Various organizations from Uzbekistan, such as the UzLITIneftegaz, Technoengineering and Ecotekhproyekt institutes, the specialized State Inspection of Analytical Control, and the Nuclear Physics Institute of the Academy of Sciences of Uzbekistan, were subcontracted to perform the work. All work was carried out with the involvement and under control of representatives of the Environmental Committee of Republic of Uzbekistan. The total value of the work was USD 1.125 million.

The PSA for 35 years was signed on June 16 and entered force on November 24, 2004. The volume of approved original gas in place in the contract territory totals 283 billion cubic meters. The planned amount of capital expenditure for the project is about USD 1 billion. The start of commercial production of gas is planned for 2006. At its peak production will reach 9 billion cubic meters per year.