Rosneft Board Approves Acquisition of Northern Oil

The Rosneft Board has approved the transaction to purchase 100% registered equity in Northern Oil OJSC. The purchase price came to US $600 million.

Northern Oil's production facilities represent 13 deposits in the so-called Southern Area (south of the Timan Pechora oil and gas province) as well as 3 fields in the Gamburtsev Bank located in northeastern part of the province. Reserves of the deposits are estimated at 109 million tons of ÀÂÑ1 and 25 million tons of Ñ2, including fields of the Gamburtsev Bank with 50.4 (ÀÂÑ1) and 15 (Ñ2) million tons, respectively. Available reserves will make it possible to boost production in this company to 7 million tons.

A trunk pipeline links deposits of the company with the center of Russia's European part, northern and northwestern export directions. Northern Oil has its own industrial pipeline system that connects deposits of the company with the system of Transneft AC. As its top priority, Rosneft intends to finalize prospecting to specify and possibly increase its reserves.

Northern Oil has produced oil since 1994. In 2002, the company extracted 1.47 million tons and it plans to push up this indicator to 2.26 million tons. For this purpose, it is necessary to drill 82,500 meters of rock, to put on-stream 26 new wells, to proceed with construction of collection and transportation systems, and to expand oil pumping and preparation. It will take 3 billion rubles in capital spending to meet these targets. When making a decision to purchase this asset, experts at Rosneft Oil Company were guided by one of the core dimensions of the company's strategy - that of improving efficiency of production and curbing costs.