In compliance with its obligations under the contract with the Algerian National Agency for the Valorization of Hydrocarbon Resources (ALNAFT), the Gazprom Group has commenced drilling of the first prospecting well (Rhourde Sayah-2) in Africa within the El Assel license area of Algeria’s Berkine basin.

The well drilling is provided for in the minimum scope of geological exploration activities according to the terms and conditions of the tender won by Gazprom EP International B.V. for hydrocarbons exploration and drilling of four wells in the onshore El Assel area.

In the meanwhile, Gazprom EP International carries our large-scale 3D seismic surveying in other parts of the license area.

According to preliminary estimates, drilling of the first well is to be completed in June 2010 and another three wells are to be drilled within 2 years.

Background:

Algeria's proven natural gas reserves account for 4.5 trillion cubic meters (second-largest in Africa after Nigeria – 5.15 trillion cubic meters). The bulk of natural gas reserves are concentrated in the central and eastern parts of the country.

The country’s proven oil reserves stand at 1.68 billion tons (third-largest in Africa after Libya and Nigeria). In the energy balance of Algeria natural gas makes up 62.5 per cent, oil – 34.5 per cent, coal – 2.5 per cent, hydro energy – 0.5 per cent.

The Algerian State Oil and Gas Corporation (ASOGC) Sonatrach is involved in oil and natural gas exploration, transportation and marketing, and controls most of gas production and wholesale trade.

On August 4, 2006 Gazprom and Sonatrach signed the Memorandum of Understanding. The document identified the following key areas for cooperation deepening: geological exploration, production, transmission, gas transport and distribution system development, asset swaps, processing and marketing of oil and natural gas in Algeria, Russia and in third countries.

Gazprom EP International B.V. is Gazprom’s wholly owned subsidiary managing the Company’s international assets in the hydrocarbon exploration and production area.

Gazprom was announced the winner of the hydrocarbon exploration and development tender for the onshore El Assel block on December 13, 2008. Following the tender results, Gazprom signed a contract with Algeria’s National Agency for the Valorization of Hydrocarbons Resources (ALNAFT), which came into effect on May 3, 2009.

Gazprom EP International is operator of the said project in partnership with the Algerian State Oil and Gas Corporation Sonatrach. Gazprom and Sonatrach hold a 49 and a 51 per cent stakes in the project.

The El Assel license block is located in the Berkine Basin, 500 kilometers south of Algeria’s capital city Algiers and 150 kilometers from the town of Hassi Messaoud – a gas production center.

By now, 3D seismic survey has been performed over the area of 1,100 square kilometers out of the projected 2,700.

The project operator is Gazprom EP International. The first well will be drilled at an estimated depth of 4,400 meters. The target horizons are the Triassic and Cambrian-Ordovician sandstones.