Sibneft Strikes Joint Venture Deal With Sibir Energy

Moscow, 20 November 2000; Sibneft has reached agreement with UK-based independent Sibir Energy plc to develop the south part of the Priobskoye field and the Palyanovskoye fields under a joint venture. The deal marks an important step towards Sibneft’s goal of expanding its portfolio of upstream assets beyond its home base in Noyabrsk.

Sibneft will contribute financing and technical expertise to the joint venture. Ownership, management and board representation in relation to the joint venture will be split equally between the two partners. The venture will receive licenses to the south part of the Priobskoye field and the Palyanovskoye field from Yugraneft, a company controlled by Sibir Energy, in addition to Yugraneft’s interest in the adjacent Kamennoye block. The venture will control estimated recoverable reserves of over 2.1 billion barrels.

Sibneft and Sibir Energy have already begun to review development plans for the south part of Priobskoye and Palyanovskoye. Pilot production from the Palyanovskoye field is currently running at around 1,500 barrels per day, and the partners plan to commence production at the south part of the Priobskoye field early next year. The Palyanovskoye and Kamennoye fields have both been approved for development under production sharing agreements.

Sibneft president Eugene Shvidler welcomed the signing of the agreement. “This new venture will play an important role in helping Sibneft to meet its aggressive long-term growth targets. Sibneft aims to achieve sustainable growth in production through a combination of robust organic growth from our existing asset base combined with the acquisition of new, high-quality assets, which this deal represents.”

Sibir chief executive officer Henry Cameron commented: “Sibneft’s commitment guarantees the immediate development of the Yugraneft fields. The joint venture terms will ensure flexible and cost effective development of the fields. In addition to underpinning shareholder value, this deal enables Sibir to apply its resources to further expansion in Russia and to achieve its aim of becoming the pre-eminent vehicle for foreign investment in Russia.”

Sibir Energy is a UK-based independent with upstream interests predominantly in Russia and the UK. The company controls licenses to two fields located near Nefteyugansk, and it also has a 50% interest through its Evikhon subsidiary in the Salym Petroleum Development venture with Royal Dutch/Shell.