Urals Energy Wins Rights at Peschanoozersky

The Russian Ministry of Natural Resources has awarded ZAO Arcticneft, a subsidiary of Urals Energy that operates the Peshanoozersky Field on Kolguyev Island in the Barents Sea, the right to test zones—without depth limitations--below the existing Lower Triassic horizon in that field.

The Russian Federal Agency of Subsurface Use has extended Arcticneft’s Peschanoorzersky license to allow the testing of zones below the existing Charkobozhskaya Suite in the Lower Triassic Horizon. Urals said the amendment to the license was made at no cost to the company.

Based on the results of a 1986 test well that tested the deeper Permian horizon, Urals Energy expects to develop a new zone with significant hydrocarbon potential. Well No. 29 tested approximately 180 barrels of oil per day when drilled in 1986. Geologic data indicate that the well penetrated the edge of a Permian-age reef structure at 2,743-2,761 meters TVD.

Urals Energy plans to test the Permian horizon by re-entering Well No. 29, run a vertical seismic survey to confirm the structure, and drill a side-track wellbore. Based on the results of this re-entry, the company expects to identify several new exploratory well locations and to commence further drilling in 2007.

Based on the results of the exploratory program, an application for a production license for the Permian horizon will be made and a reserve report by DeGolyer & MacNaughton will be commissioned. According to a 1986 report by the Peschanoorzersky Field’s prior owner, possible or C3 (Russian State reserve category) reserves for the deeper Permian horizon were estimated to be 6 million tons or approximately 48 million barrels.

Urals Energy already plans to drill four development wells in the Peschanoozersky Field in the second half of 2006.

“The Arcticneft license extension is yet another example of the undeveloped potential of Urals Energy’s asset base,” said William R. Thomas, Urals Energy’s CEO. “By applying good geoscience to an existing field, we are delivering the potential for significant reserve and production increases with very attractive economics. This also demonstrates the value of a diversified portfolio of producing and exploration assets in Russia.”