Study Shows Increase in Reserves at Yuzhnoye Field

Sibir reports that, following a Feasibility Study on oil recovery from the Yuzhnoye oilfield, which is operated by its subsidiary Magma, the officially-approved estimated C1+C2 recoverable reserves figure has increased by almost 30 million barrels.

The Feasibility Study was carried out by Magma in accordance with its obligations under the conditions of the Yuzhnoye license. Magma conducted the Study in conjunction with VNIINeft, a leading Russian petroleum institute. The work involved appraisal of 3 new wells, 489 km of 2D seismic and geological and hydrodynamic modelling of the reservoir. The Study was presented by Magma to the Central Commission for Oilfields Development ("CKR"), an authorized body of the Russian Ministry for Natural Resources, on 27 October 2004. The CKR approved the Study on May 4, 2005.

As a result the estimated remaining C1+C2 recoverable reserves in the Yuzhnoye oilfield amount to 10.691 million tons (80.5 million. bbls) compared to the previous official number of 6.728 million tons (50.7 million. bbls). The C1 category oil figure (considered by Russian standards to be proved) has been approved at 9.784 million tons (73.7 million barrels).

The Yuzhnoye oilfield was discovered in 1986 and its development commenced in 1991. As of 1 January 2005 the cumulative oil extracted from Yuzhnoye was 2.26 million. tons (17 million bbls). Magma produces Siberian Light quality crude (38 degrees API) for which the tons/barrels conversion factor equals 7.53. In October 2004 Magma commenced the implementation of the 20-well drilling operation which is currently ahead of schedule and should be completed in Q1 2006 whereupon the production from Yuzhnoye is expected to top 7,500 bopd. Production in Q1 2005 amounted to 6,647 bopd compared to 5,347 bopd achieved in Q1 2004.