Zarubezhneft Snatches Up Bid to Develop Fields in Nenets Autonomous Area

A tender for the right to exploit the subsoil resources aimed at geological study, exploration and hydrocarbons extraction on Central Khorovey Uplift (CKU) blocks No1, 2, 3 and 4, located in Nenets Autonomous Area, took place on May 7, 2008 in St. Petersburg.

Six Russian companies bid for this tender but only two made it to the final round: JSC Zarubezhneft and JSC NK Rosneft. After the Tender Committee examined the technical economic offers produced by the two companies, JSC Zarubezhneft was almost unanimously declared the winner for all four blocks (upon voting for one of the blocks one of the Committee members abstained). The Tender Committee pointed out the JSC Zarubezhneft's high level of elaboration of technical economic offers that were prepared on the basis of digital geological and hydrodynamic models. The integrated innovative approaches to field development using thermal-gas treatment and integrated oil rate enhancement technologies that were offered provide high level of hydrocarbons extraction upon minimal impact on the ecosystems of Far North, which is undoubtedly crucial for the region.

Besides that, JSC Zarubezhneft undertakes certain responsibility for the social economic development of the Nenets Autonomous Area.

In view of the results the Company received 13 oil fields of CKU with oil deposits in upper Frasnian and Famennian sediments of upper Devonian, which are deposited at depth of 3000 to 3400m: North Sekhoreiskoe, Visovoe, Verkhnekolvinskoe, West-Khosedayuskoe, Sikhoreyskoe, East-Sikhoreyskoe, North-Sikhoreyskoe, North-Oshkotynskoe, Syurkharatinskoe, Urernyrdskoe and East- Yanemdeyskoe, South-Syurkharatinskoe, Pyuseyskoe.

Exploration drilling and prospecting works program with be completed within five years following the license obtainment.

Oil production will commence on the fourth year of project efficacy (in 2011) and will reach its maximum on the tenth year of its implementation – 6.44 million tons per annum. The production for all the blocks mentioned is planned for 57 years. The accumulated volume of production for this period will amount to 112.6 million tons of oil, and the technological level of oil extraction ratio will amount to 0,461.

From the very first year of development the utilization of 95% of accompanying gas is contemplated; it will be used for power and heat production on Hydro Thermal Electric Stations.

JSC Zarubezhneft guarantees the abeyance of all environmental standards upon development of the area – environmental protection activities are budgeted at the amount of 8.7 billion rubles.

This project will be carried out with participation of the Vietnamese National Corporation of Oil and Gas Petrovietnam. A joint company is established for these purposes, in which JSC Zarubezhneft will hold 51% and Petrovietnam - 49%.