Sibneft To Triple Investment, Hike Production

Moscow, 14th March 2000: Sibneft plans to triple upstream investment in 2000, company president Eugene Shvidler has announced. The company also aims to increase production from its fields for the first time in ten years.

Sibneft plans capital expenditure of $220 million at its Noyabrskneftegas upstream subsidiary, with production targeted to rise to 16.5 million metric tons from around 16.3 million metric tons in 1999. Sibneft will make extensive use of enhanced recovery methods, and will increase the number of well workovers.

The company plans to extend cooperation with international oilfield service company Schlumberger under the framework of an alliance agreement signed in 1999. Sibneft will increase its use of hydrofracturing, and will also take additional steps to improve efficiency, including the use of coiled tubing, new technology for entering reservoirs and higher quality drilling fluids.

Initial flow rates from new wells are expected to be 40%-50% higher than in 1999, when they averaged 35-40 metric tons per day. This was almost double the figure for the previous year of 22 tons per day. Sibneft plans to more than double drilling levels to 750,000 metres, and it is targeting an annual average of 800,000 meters in the longer term.

Sibneft will continue its efforts to secure approval for the development of fields under production sharing agreements (PSAs). The legislature of the Yamal-Nenets autonomous district approved the Romanovskoye field for PSA development earlier this year under a provision in the PSA law which allows smaller fields to be approved directly by the regional legislature. Sibneft also hopes to secure approval to develop the Sugmut, Yarainerskoye and Novogodnoye fields under PSAs.

Sibneft plans to invest $30 million at its Omsk refinery. The company hopes to make significant progress towards completing construction of an alkylation unit, which is due to come on stream in 2001, and it will also continue work on upgrading a catalytic reforming unit. Production of high-octane gasoline is set to increase significantly in 2000.

Sibneft president Eugene Shvidler summed up the company’s investment strategy: “The company’s shareholders are interested not in volume, but in the effective management of its assets, in its profits and in its share price. We will act according to these priorities.”