Sibir Spuds Orekhovskoye Well in Western Siberia

Sibir has spudded the first development well at the Orekhovskoye oil field in the Khanty-Mansiysk Autonomous District of western Siberia. The field is operated by Sibir subsidiary OAO Magma and holds 49 million barrels of C1 and 5.3 million barrels C2 under the Russian reserves classification system.

This first development well is expected to take 30 days to drill to a depth of 2,800 meters and will target reservoirs in the upper Jurassic. Magma, together with Russian contractors, is managing drilling operations and expects to put this first well on stream in June 2008. Overall 9 new wells will be drilled in 2008 which, together with existing exploration wells, will be completed and fractured, to bring total production from the field to 500,000 barrels by the year-end. An additional 12 wells will be put on stream in 2009 resulting in further incremental production.

This first phase of development is expected to require $95 million of capital expenditure for infrastructure and drilling. Infrastructure development will include construction of two well pads, an infield road, a power substation, power lines to the pads and a 22 km pipeline to the existing Central Processing Facility (CPF) at Yuzhnoye where crude will be brought to Transneft specification for transport.

Commenting on the announcement, Sibir CEO Henry Cameron said, "After some initial delays due to changes in the development permitting process and unseasonably warm winter weather, we have now successfully launched the development drilling program at Orekhovskoye. Development of the Orekhovskoye field will allow Magma to grow its total production from the Orekhovskoye and Yuzhnoye fields to an estimated 13,000 barrels of oil per day (bodp) by 2010."