Timan Teams Up with Gazprom Subsidiary

Timan has signed a strategic Memorandum of Cooperation ("MOC") with Zapsibgazprom OAO, a subsidiary of Gazprom OAO. The purpose of the MOC is to set out the principles of strategic cooperation between Timan and Zapsibgazprom for the development of Timan's oil assets. In the Russian Federation such agreements are commonly the first step in agreeing binding commitments at a future date.

It is envisaged that, within two months of signing the MOC, working teams and committees will be set up with the objective of developing specific areas for cooperation.

The main principles set out in the MOC for future discussion are as follows:

- Participation by Zapsibgazprom in the exploration and development of Timan's oil and gas portfolio, which could result in investment of up to US$500 million.

- Participation by Zapsibgazprom in the development of Timan's oil field at NGPT, in the Timan-Pechora Basin, involving drilling and construction of facilities for approximately 2,600 oil wells.

- Participation by Zapsibgazprom in Timan's exploration activities in the KNG area of the Timan-Pechora Basin (4 appraisal/exploration/production wells) and in exploration of Timan's off-shore licenses in the Russian section of the Caspian Sea (2 exploration wells).

- Cooperation to ensure that necessary equipment is secured and that all staff are appropriately trained.

- Cooperation in relation to technical and operational support needed in drilling and building necessary infrastructure at Timan's subsidiaries NGPT, KNG and Geoterm.

Under the MOC, which is non-binding at this stage, it is also possible that Zapsibgazprom may agree to participate in either the share capital of Timan or its subsidiaries at some point in the future.

In addition any services provided by Zapsibgazprom would be paid for on terms to be agreed.

Alexander Kapalin, CEO of Timan, commented:

"This strategic agreement with Zapsibgazprom is a significant achievement for Timan and a vote of confidence in our plans. We believe cooperation with Zapsibgazprom will provide a huge boost to our development program, especially exploration of the highly prospective Geoterm license. We look forward to working constructively with Zapsibgazprom and remain focused on optimizing our near-term production opportunities, of which Nizhnechutinskoye field (NGPT) is our main priority."