KCA DEUTAG Opens New Russian Head Office

KCA DEUTAG is investing US $1.7 million in a Russian regional head office in Tyumen, Western Siberia, to manage and support all of the company's onshore drilling operations in Russia. KCA DEUTAG will retain a representative office in Moscow and a branch office in Nojabrsk in Northern Siberia.

About 400 people will be employed by KCA DEUTAG from the head office complex, the majority of whom will work directly on the company's rigs. Nationals will account for 80% of the total number of employees.

Tyumen was chosen as the location for the company's Russian regional head office for its good transport connections and infrastructure and the availability of services, facilities and personnel. As well as offices, the complex will include a logistics centre and a workshop for technical maintenance and equipment integration. The office and yard are scheduled to become operational in the third quarter 2005.

Claus Chur, KCA DEUTAG's Director for Europe/ Middle East & Russia, said: "We have opened this service base in Tyumen to develop further our operations in Russia, which we have identified as a key strategic growth area for the company."

"We are already the leading independent drilling contractor in the rapidly emerging markets of the former Soviet Union and we have a growing presence in Western Siberia. There are more significant development opportunities for KCA DEUTAG in Russia and we are confident that we shall achieve further contract wins as the pace of expansion of these markets accelerates."

KCA DEUTAG first entered Siberia five years ago after winning a contract with Sibneft for drilling horizontal wells in the Nojabrsk district in Northern Siberia.

In March 2004 KCA DEUTAG won a US$42m, four-year contract for the provision of drilling services for the development of Salym, West Siberia by Salym Petroleum Development N.V., a 50-50 joint venture between Shell and OAO Evikhon. As a result of this contract KCA DEUTAG commissioned Russian construction company Uralmashzavod to build two new EUK 3900 rigs, which are scheduled to start drilling development wells in April this year, with first oil expected from West Salym at the end of 2005.

In the second quarter of 2004, KCA DEUTAG was also awarded a US$13 million contract for the provision of a fully winterised land drilling rig to provide drilling services in the Nadym Area of West Siberia. KCA DEUTAG has been working as subcontractor to Schlumberger Integrated Project Management who was the primary contractor to RITEK, the Russian oil and gas company.

The rig provided for this work was KCA DEUTAG's own 2000hp T-2000 rig, which is the most modern land rig in Russia and was specially modified for projects in this area, where temperatures can fall to minus 45 degrees Celsius.