Sibir Receives Approval to Develop Upper Salym Field

Sibir Energy plc announced that the Licensing Committee for the Khanty Mansiysk Autonomous Region has approved the work program for the first phase of development of the Upper Salym oil field. In approving the program, the Licensing Committee have affirmed the license is valid and extant and under no threat of revocation.

The licenses to develop the three Salym group fields, of which Upper Salym is the first to be developed, are held by Salym Petroleum Development (SPD), the 50/50 joint venture between Sibir’s subsidiary Evikhon and Shell Salym Development (SSD), a subsidiary of Royal Dutch/Shell. Protracted delays in the Production Sharing Agreement process in Russia had led to SPD deferring development of the fields. This in turn led to the authorities considering revocation of the Upper Salym license.

Sibir (on behalf of its subsidiary Evikhon), SPD and SSD have negotiated an agreement which effectively segregates the development of the Upper Salym field from the development of the remaining two fields of the Salym group.

In return for SSD's 50% share of the Upper Salym license, Evikhon will effectively fund and operate the development of Upper Salym. Accordingly, 100% of the recoverable reserves and the whole of the proceeds from sales of crude oil produced from this field will accrue to Evikhon. Sibir now expects development of the field to begin immediately.

SPD remains the operator of the remaining two licenses and the existing joint venture agreement between SPD, SSD and Evikhon remains in force. SPD continues its efforts to obtain a PSA under which these fields will then be developed.

Henry Cameron, CEO of Sibir, said: "I am pleased that uncertainty over the Upper Salym license has been resolved, enabling us to move forward with our plans to develop Upper Salym. We are considering a number of funding options, details of which we will announce in due course along with further details of the development program."