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Gazprom Neft

October 18, 2005

Sibneft president Eugene Shvidler assesses 2005 operating performance

Moscow. October 18, 2005.  Sibneft’s total consolidated crude oil production for 2005 is expected to reach 45.2 million tons if current daily output levels remain constant until year-end, representing an increase of 0.3% over last year’s total.  Consolidated figures include forecasted production for Sibneft of 33.1 million tons, plus 12.1 million tons from the company’s 50% interest in Slavneft. Without Slavneft, Sibneft’s production would decline by 2.8% from 34.04 million tons last year.

“Over the company’s 10 year history, the main criteria for judging Sibneft’s efficiency have not been gross production volumes or increases in commodity prices, but consistent growth in revenues and in profits returned to shareholders,” said Sibneft president Eugene Shvidler. “Sibneft has achieved excellent financial results thus far this year: in the first half, net profit rose by 44% despite rising operating expenditures and costs for utilities and oilfield services.”

“We evaluate our operational data on a consolidated basis, including all of our petroleum-related businesses. We do not set apart our 50% of production at Slavneft, whose leadership works in concert with our management team and which is included in our overall strategy,” Mr Shvidler stated. “In August of this year, Sibneft and TNK-BP began splitting Slavneft’s crude oil output, and the division of Slavneft’s marketing network has been completed. Products from the Yaroslavl Refinery are also divided equally, so Slavneft is effectively integrated into its parent companies.”

“In 2006, Sibneft plans to maintain a positive production trend by fully compensating for output declines at older fields, increasing geological exploration work and bringing new oilfields online.”

“Our investment policy is not focused on boosting output at any single field at the expense of others, but on achieving success across a range of projects. This year, our key strategies have been to establish new oil production subsidiaries in Khanty-Mansiisk and Tomsk to operate fields outside of our traditional base in the Yamal-Nenets region; to acquire exploration and production licenses in new operating regions; and to maintain a high level of production growth at Slavneft’s fields. Each of these efforts has been executed in line with our expectations,” Mr Shvidler noted.

“Our goal is not only to efficiently develop existing and new oilfields, but simultaneously to expand our retail presence across Russia.  Over the past few years, the volume of petroleum product sales through proprietary service stations has grown exponentially and in many regions the Sibneft brand is recognized as representing high-quality goods and services.  In 2005, Sibneft added more than 100 proprietary service stations to its network. The development of a strong retail business is in line with global industry trends in terms of effectively increasing a company’s market value.”

Evaluating the company’s export performance this year, Mr Shvidler underscored that crude oil shipments to destinations outside the CIS rose by 11.7% in the first half of 2005 thanks to the work of Sibneft’s Vienna-based trading subsidiary Siboil GmbH. “The creation in recent years of an efficient export system has given Sibneft constant access to attractive export markets, even during world market fluctuations.”

“Each year marks another milestone in Sibneft’s development, and each stage in this process has seen the company become more efficient, more attractive to investors, and broader in its operating geography. Despite some challenges over the course of the year, viewing 2005 through the prism of our key objectives, I believe we have been very successful and have prepared this company to continue its progress together with Gazprom.”

 

 

 

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