Sibneft-Yugra Joint Venture Deal Signed

Moscow, 21 February 2001; Sibneft has signed funding and operating agreements with Sibir Energy, paving the way for the creation of the Sibneft-Yugra joint venture company. The partners this week also gave the green light to an aggressive investment blueprint, designed to more than triple production from the joint venture's fields in 2001.

Sibneft-Yugra plans to invest more than $50 million this year, with the aim of hiking production to around 5,000 barrels per day (250,000 tonnes) in 2001 from 1,500 barrels per day (73,000 tonnes) last year. The bulk of the spending will be focused on the south part of the Priobskoye field, where a new pipeline will be built linking the field to the Transneft pipeline system, with the remainder going on the development of the smaller Palyanovskoye field.

Under the pilot phase set to commence in 2001, the partners initially plan to drill 25 new wells and bring back on stream another 14 wells which had previously been shut-in. Sibneft-Yugra will also begin work on constructing geological models of the fields, which will form the basis for a full field development blueprint due to be completed in late spring.

Sibneft in November reached agreement with Sibir Energy on the creation of a joint venture to develop an estimated 2.1 billion barrels of recoverable reserves controlled by Sibir's Yugraneft subsidiary. The partners hope to raise production from the joint venture's fields to a target of 60,000 barrels per day (3 million tonnes) by 2008.

Under the terms of the operating agreement, Sibneft production unit Noyabrskneftegas will operate the fields at cost on behalf of the joint venture. Sibneft vice president Andrei Matevossov will serve as general director of Sibneft-Yugra, with Sibir chief executive Henry O. Cameron serving as chairman of the board of directors.