Rosneft Oil Company and Chinese Petrochemical Corporation (Sinopec) executed the bilateral agreements indicative of successful development of cooperation between the largest national oil companies of Russia and China.

On November 11, 2006, in Beijing Rosneft and Sinopec have signed a shareholder agreement establishing the joint management principles for the jointly acquired Russian company of OJSC Udmurtneft, and on November 13 in Hong-Kong companies have signed a share transfer agreement regarding Udmurtneft shares allocation to the joint management venture through which Rosneft and Sinopec would control Udmurtneft. They also signed a loan agreement with the Bank of China which facilitated the acquisition financing.

Under the achieved agreements, the Board of Directors of the Udmurtneft will include 9 members: the General Director to be nominated by Rosneft; four Rosneft representatives and four Sinopec representatives. The joint Advisory Committee is established at the Board of Directors to address the strategy and business planning issues and is to include five people from each company.

In March 2006 in Beijing Sinopec and Rosneft signed a Memorandum of Cooperation and agreed upon the joint acquisition of Udmurtneft assets planned to be sold by TNK-BP. In April 2006 Rosneft and Sinopec entered the Option Agreement whereby Rosneft would acquire the shares of Udmurtneft from the Chinese company, should the latter (Sinopec) have won a tender on the Udmurtneft acquisition from ?N?-??. Rosneft and Sinopec under the said Agreement were to establish a joint venture to manage Udmurtneft production activities with the Russian company holding a 51% stake and the Chinese — 49%.

In June 2006 Sinopec was pronounced a winner by TNK-?? upon the open auction for the shares of Udmurtneft, and in August the company completed the acceptance of properties from the previous owner, followed by the visit of Rosneft and Sinopec Presidents, Mr.Bogdanchikov and Mr.Cheng Tonghai to Udmurtia, where they could see the newly acquired assets.

By now, a session of the new shareholders of Udmurtneft took place, the new Board of Directors was established and launched. The company production and commercial operations are performed as normal.

During the meeting of Rosneft and Sinopec Presidents on November 11 in Beijing, it was decided that in order to provide further efficiency of Udmurtneft operations, companies would jointly develop a business plan and a five-year development program for Udmurtneft. In order to set up grounds for long-term development of the Udmurtian venture, the new shareholders will expand the investment scope of exploration and development, as well as the upgrade of production infrastructure.

Successful teamwork of Rosneft and Sinopec in Udmurtneft project is the evidence of considerable outlooks of the two oil companies' cooperation in exploration and development, oil refining and sales of petroleum products. Both companies are certain about the efficient cooperation serving to reinforce further strategic partnership between Russia and China.

Udmurtneft was established in 1973. At present, OJSC Udmurtneft is producing over 60% of the oil in the Volga-Ural region of Russia. In 2005, the company produced 5.98 million tons of oil (43.6 million barrels), with daily production standing at 16,400 tons (115,000 barrels). As of December 31, 2005, Udmurtneft’s proved reserves stand at 78.4 million tons (551 million barrels), proven and probable reserves — at more than 131 million tons (922 million barrels) of oil equivalent, as estimated by DeGolyer & MacNaughton.