Washington, March 11, 1998. - LUKOIL and CONOCO have signed a Memorandum of Understanding to proceed with efforts to develop petroleum reserves in the 1.2-million-acre Northern Territories area of Russia’s Timan-Pechora Region

In the memorandum of Understanding, the companies agreed that LUKOIL will hold a 60 percent participating interest in the Northern Territories project, with CONOCO holding the remaining 40 percent.

The Northern Territories are believed to hold recoverable reserves of over 1 billion barrels of crude oil and 2 trillion cubic feet of natural gas. Estimates indicate that full development of these resources could have a combined direct and indirect impact of as much as $25 billion on the Russian economy during the life of the project.

LUKOIL and CONOCO will deliver the formal plan for development of the field as well as the draft Production Sharing Agreement to the Ministry of Fuel and Energy no later than mid-December 1998. Once the companies’ proposals are received by the Ministry, a request will be made to Russia’s Duma to include the Northern Territories on Russia’s list of projects to be developed under production sharing agreements.

Vagit Alekperov, President of LUKOIL, and R.E. (Rob) McKee, Executive Vice-President of CONOCO, signed the Memorandum on behalf of their companies. Russian Fuel and Energy Minister Sergei Kirienko witnessed the document on behalf of the Ministry, and U.S. Commerce Secretary William Daley and U.S. Energy Secretary Federico Pena witnessed for the U.S. Government.

“LUKOIL attaches great significance to the development of fields in Russia’s Northern Territories, and specifically, in the Timan-Pechora Region,” Alekperov said at the signing ceremony. “We view this project as on of those promising the best prospects for our company, and we are glad to have CONOCO as our partner in implementing it.”

“CONOCO was an early investor in Russia, and has been producing oil for more than three years from the Ardalin field in Timan-Pechora,” Said McKee. “At the same time, we carried out extensive drilling to evaluate the large Yuzhno-Khylchuyu (Y-K) field. Now with LUKOIL, we are one step closer to making this giant development a reality.”

LUKOIL is Russia’s largest vertically integrated oil company. In 1997, the company with subsidiaries produced 461 million barrels of oil, CONOCO, the energy subsidiary of DuPont, is the seventh largest U.S. petroleum company.

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