PROSPECTS FOR THE OIL AND GAS PROJECTS IN THE REPUBLIC OF SAKHA

(YAKUTIA)2010

Prospects for the oil and gas projects

The energy resources in Eastern Siberia and Far East have strategic importance for Russia. Intensive works are carried out for development of the oil and gas infrastructure in these regions

The Republic of Sakha (Yakutia) is the largest part of those regions

The Republic of Sakha (Yakutia) with Sakhalin represent the richest region of Eastern Siberia and Far East regarding their proved oil and gas reserves

Russia

The Republic of Sakha (Yakutia)

Construction of the Eastern Siberia – Pacific Ocean pipeline (ESPO) carries the following tasks: development and operation of the East Siberian oil fields supply of the oil to the Russian market supply of the oil to the market of the Asia-Pacific Region

The first phase of the pipeline (ESPO-I) was launched December 28, 2009 on the route:

Taishet (Irkutsk region) – Lensk (Republic of Sakha, Yakutia) –

– Skovorodino (Amur region)

The oil pipeline ESPO-I represents 2694 km length with capacity of 30 mln tonn per year, 1458 km of which lie on the territory of the Republic of Sakha (Yakutia) close to the oil and gas deposits

The Eastern oil pipeline: Eastern Siberia – Pacific Ocean

August 29, 2010 the Russia – China branch of the ESPO with capacity of 15 mln tonn per year was opened on the route:

Skovorodino (Amur region) – Daqing (China)

Construction of the second phase of the pipeline (ESPO-II) is expected to be completed by the end of 2013, representing the route:

Skovorodino (Amur region) – Pacific Ocean oil port Kozmino (Primorsky region)

(today the oil in this route is delivered by rail)

The oil pipeline ESPO-II will represent 2046 km length with capacity of 80 mln tonn per year

Additional oil pumping stations being under construction, aiming increasing capacity of the ESPO pipeline. On the territory of the Republic of Sakha (Yakutia) there are five oil pumping stations to be constructed.

The Eastern oil pipeline: Eastern Siberia – Pacific Ocean

In 2007, the state project Eastern Gas Programme has been approved by the Russian government

Goals of the Programme: Creation in Eastern Siberia and the Far East, a unified system of production,

transporting and supplying gas Providing a single export channel to the markets of China and other countries

of the Asia-Pacific Region

Main principles of the Programme: Supplying gas to Russian consumers Market prices Single export channel Effective conditions for export Gas processing, petro chemistry and production of helium

The Eastern gas pipeline: the Eastern Gas Programme

OAO « Gazprom » – coordinator for implementation of the Programme

In 2008 OAO « Gazprom » obtained the license for exploration and development of Chayandinskoe field (the Republic of Sakha, Yakutia) - one of the largest oil and gas field in Russia.

The unique deposit will constitute the main resource base for the Oil and Gas production center in Yakutia. The putting in operation of the center is scheduled for 2016. This will ensure previous creation of the local gas infrastructure and systems for exporting of gas.

According to the Eastern Gas Program, the export gas pipeline will go through the territory of the Republic of Sakha (Yakutia) in the same corridor with the ESPO-I oil pipeline

The Eastern gas pipeline: the Eastern Gas Programme

Solution «East» recommended by the Eastern Gas Programme (Source: OAO « Gazprom » 2006)

The Ministry of Natural Resources of the Russian Federation realises the licensing the oil and gas sites in the Republic of Sakha (Yakutia)

The development of oil and gas resources in this region will contribute to filling the available capacities of the oil and gas export, thereby will facilitate implementation of the strategic projects of ESPO and the Eastern Gas Program

According to the preliminary planning in the Republic of Sakha (Yakutia) 54 sites of the total area 177.7 km2 are identified for licensing. 24 of those sites to date remain unallocated.

Many licensing sites are located in immediate proximity to the corridor of the ESPO oil and the Eastern gas export pipelines

Licensing of sites for oil and gas development in the Republic of Sakha (Yakutia)

Mr. Viktor Nikolaevich KHMARIN– Head of the team

Mr. Afanasy Nikolaevich MAKSIMOV

Founded airline «Ilin» and oil company «Yakol». Managed JSC «Sakhaneftegaz» as a President of corporation for 5 years. In 2002 has been elected as the most successful entrepreneur in the Republic of Sakha (Yakutia). Deputy of the National Assembly of the Republic of Sakha (Il Tumen).

Mr. Iouri Mikhailovich SEMENOV

PhD University of Claude Bernard (France). MBA from Warwick Business School, the University of Warwick (UK). Worked as a consultant in international projects (France, Denmark, UK, Russia).

Core team for the oil and gas investment projects in the Republic of Sakha (Yakutia)

The team has at its disposal:

Scientists in geology and mineralogy and experts with experience in geological work in the Republic of Sakha (Yakutia) of 25 – 40 years, participating in discovering and exploration most of the oil and gas deposits in the Republic of Sakha (Yakutia)

Managers with experience in oil and gas industry for more than 20 years in senior leading positions of major oil and gas companies

Core team for the oil and gas investment projects in the Republic of Sakha (Yakutia)

The team is aiming a strategic partnership in order to meet the following goals: Acquiring through open auctions new prospective oil and gas sites for licensing

subsoil usage

Exploring hydrocarbons on the acquired licensing sites through local operating oil and gas companies in order to perform

CAPITAL GAINS THROUGH SELLING PROJECT’S STAKES

(short-term perspective) Increasing shareholder value of the projects by discovering new oil and gas deposits Selling project stakes

Developing oil and gas fields on the acquired licensing sites through local operating oil and gas companies in order to perform

PRODUCTION AND SUPPLYING HYDROCARBONS

(medium and long-term perspective) Supplying oil and gas to the market of the Asia-Pacific Region

Core team for the oil and gas investment projects in the Republic of Sakha (Yakutia)

Forms of expected cooperation:

Creating joint-venture using new companies

Creating joint-venture using existing and operating private companies which hold licenses for development of oil and gas sites

Core team for the oil and gas investment projects in the Republic of Sakha (Yakutia)

Structure of possible cooperation:

The team provides: Geological information (capitalized by many years of work) Geological exploration and operation expertise Licenses for oil and gas subsoil usage Staff Operating facilities Strong local connections

Strategic partner provides:  Financial resources

Core team for the oil and gas investment projects in the Republic of Sakha (Yakutia)

Strategic advantage of the team:

Disposal of Geological information capitalised by many years of works (allows “easy”

discovering of oil and gas deposits without investing important capital in exploration works)

Geological exploration and operating expertise (allows effective management of the capital invested for development of the oil and gas deposits)

Access to the natural resources

Strong connection with the government

Core team for the oil and gas investment projects in the Republic of Sakha (Yakutia)

Strategic partnership will allow:

Strategic partner go through difficult administrative and legislative barriers for taking part on oil and gas projects of federal importance in Russia

The partners set up joint activities based on mutually beneficial conditions for short, medium and long terms, increasing shareholder value of the projects

With approaching the dates of exploitation of the ESPO oil pipeline and the Eastern Gas Programme gas pipeline, the market value of the actual projects will grow, increasing their stakeholders value

Core team for the oil and gas investment projects in the Republic of Sakha (Yakutia)