Shell Joint Venture to Proceed with Salym Development

Salym Petroleum Development and its shareholders, OAO Evikhon and Shell Salym Development B.V., are pleased to announce that SPD and the Ministry of Natural Resources have signed a protocol which provides the way forward for the development of the Salym oil fields in Khanty Mansiysk Autonomous Okrug. Under the terms of this agreement SPD and the Ministry have agreed to set up a Joint Working Party to consider issues related to the development of these fields including changes to the License Agreements. During the period of Joint Working Party activities, the Ministry will not take any action to revoke the Salym Licenses and SPD will withdraw its legal challenge to the warning notices which have been served on it by the MNR. Development of the Salym Fields will continue during this period.

John Barry, Chairman of the Shell Companies in Russia, and Henry Cameron Chief Executive of Sibir Energy plc, parent company of Evikhon, noted this was a major step forward which paves the way for the Ministry of Natural Resources and SPD to work constructively on the Salym development which will make significant contributions to the income of the Russian Federation and to the economic development of the Khanty Mansyisk Autonomous Okrug.

The shareholders in SPD recently announced that they had allocated a budget of US$ 1 billion for the development of the Salym Fields.

The Salym group of fields is located in the Khanty-Mansiysk Autonomous Okrug in Western Siberia, 190 kilometers from the town of Nefteugansk. It includes West Salym, Upper Salym and Vadelyp. SPD holds production licenses for all three fields. First oil from West Salym is expected by the end of 2005 with production expected to peak at 120,000 barrels per day in 2009. Oil will be evacuated via a tie-back to the existing Transneft pipeline system. Development of Upper Salym has already begun, and Vadelyp will be developed after start of production from West Salym."

Commenting further on the protocol with the Ministry of Natural Resources Henry Cameron said: "The agreement between the MNR and SPD demonstrates that it is possible in Russia to have strong differences in opinion and resolve these in a mature and amicable way."