Winning the tender in May 2008 for the right to exploit the subsoil resources aimed at geologic exploration and hydrocarbons extraction on “Central Khorovey Uplift (CKU) blocks 1, 2, 3, 4” with C1-category reserves of 78 mm tones of oil, located in Nenets Autonomous Area, became the breakthrough of the Company.

The integrated innovative approaches to field development using thermal-gas treatment and integrated oil rate enhancement technologies that were offered provide high level of hydrocarbons extraction upon minimal impact on the ecosystems of Far North, which is undoubtedly crucial for the region.

Exploration drilling and prospecting works program with be completed within fife years following the license obtainment. Oil production will commence on the fourth year of project efficacy (in 2011) and will reach its maximum on the tenth year of its implementation – 6,44 million tons per annum. From the very first year of development the utilization of 95% of accompanying gas is contemplated; it will be used for power and heat production on Hydro Thermal Electric Stations.

Zarubezhneft JSC guarantees the abeyance of all environmental standards upon development of the area – environmental protection activities are budgeted at the amount of 8,7 billion rubles.

The assignment of the right to JSC «Zarubezhneft» to exploit the subsoil resources aimed at geological study, exploration and hydrocarbons extraction on «Central Khorovey Uplift (CKU) blocks ¹1, 2, 3 and 4» will allow the Company to implement the program of exercising the national technologies and further improvement of oil extraction rate enhancement, which was defined by the Decree of the President of the Russian Federation ¹ 137 dated February 3rd 2004.

Activities regarding the preparation and implementation of production-sharing agreements

In 2001 the Government of the Russian Federation took the decision to authorize Zarubezhneft to provide assistance in ensuring the interests of the Russian Federation in the preparation and implementation of production sharing agreements concerning subsoil areas and hydrocarbon fields.

Under the above mentioned decision of the Government Zarubezhneft JSC executes the following functions:

• it provides expert and analytical as well as organizational and technical assistance to the governmental committee in working out the terms of subsoil areas usage and preparing the draft production sharing agreement concerning Prirazlomnoye oilfield, acting as the part of the above-mentioned committee; carries out the necessary examinations, calculations and prepares the relevant documents and papers.

Prirazlomnoye PSA – is the first project in this country concerning the development of oil-bearing structures of the Russian Arctic shelf situated in the areas of complicated glacial environment and severe climatic conditions. The project will be implemented with the use of domestic military-industrial complex potential and with the Russian subcontractors’ participation which is limited by the Russian law.

• it provides expert assistance and analytical support to the country’s representatives in the governing bodies of Sakhalin-1 and Kharyaginskoye oil field projects that are now being implemented in the Russian Federation on PSA terms, it carries out work program examination, calculates expenditure estimates, analyzes implementation reports and other documents. The investment capital of the above mentioned production sharing agreements where Zarubezhneft performs the functions of an authorized organization exceeded 4 billion US dollars by the end of 2004, and it will grow by 1.8 billion dollars in 2005.



• it participates in preparing legislative acts and legal documents drafts directed towards regulating relations in the context of production sharing agreements as well as improving the subsoil usage system in the Russian Federation as a whole.