At its meeting in Moscow Board of Directors discussed a number of issues associated with preparation for the company’s extraordinary general meeting of shareholders, scheduled for June 7.

In particular it was proposed to the shareholders to reelect the Board of directors’ staff. 12 candidates for the Board were proposed for election:

1. Alexander Nekipelov, Russia Academy of Sciences Vice-President;
2. Andrey Kostin, Vneshtorgbank President;
3. Andrey Reus, Deputy Minister of Industry and Energy; 
4. Gleb Nikitin, Head of Division of the Federal Property Management Agency;
5. Hans Jorg Rudloff, Head of Executive Committee of Barclays Capital;
6. Igor Sechin, Deputy Head of Russian Federation Presidential Administration;
7. Kirill Androsov, Deputy Minister of Economic Development and Trade;
8. Oleg Gordeev, OJSC OC Russneft Vice-President;
9. Sergei Oganesyan, Head of the Federal Agency for Energy;
10. Sergei Bogdanchikov, OJSC OC Rosneft President;
11. Sergei Naryshkin, Head of the Office of Russian Federation Government, Minister of Russian Federation;
12. Yuri Medvedev, Deputy Head of the Federal Property Management Agency.

It was also decided, within the context of Rosneft’s consolidation, to increase the company’s charter capital by issuing additional common registered non-documentary shares in Rosneft through the conversion of common and preferred shares in Rosneft-Krasnodarneftegaz, Rosneft-Purneftegaz, Rosneft-Sakhalinmorneftegaz, Rosneft-Stavropolneftegaz, Yuganskneftegaz, Rosneft-Komsomolsk Refinery, Rosneft-Tuapse Refinery, Rosneft-Arkhangelsknefteprodukt, Rosneft-Nakhodkanefteprodukt, Rosneft-Tuapsenefteprodukt, and of common shares in Severnaya Neft and Selkupneftegaz. It is proposed that 7,438,514,449 shares with a par value of 0.01 rubles be issued.

The Board also proposed that the meeting of shareholders add to the agenda the issue of the increase in the company’s charter capital through the issue of 400 million additional shares with a par value of 0.01 rubles by closed subscription.

The Board also approved a number of internal documents, stated to comply with practices of public companies, namely:

• Regulations on the Formation and Operation of the Committees of Rosneft’s Board of Directors;
• Regulations on the Audit Committee of Rosneft’s Board of Directors;
• Regulations on the HR and Remuneration Committee of Rosneft’s Board of Directors;
• Regulations on the Strategic Planning Committee of Rosneft’s Board of Directors;
• Regulations on Rosneft’s Dividend Policy;
• Regulations on Internal Control over Rosneft’s Financial and Economic Activities;
• Regulations on Rosneft’s Counting Commission;
• Regulations on Rosneft’s Corporate Secretary;
• Regulations on Rosneft’s Information Policy;
• Regulations on Rosneft Insider Information;
• Rosneft Code of Corporate Behavior.

Rosneft’s Board of Directors also approved the results of the company’s production and commercial operations in the first quarter of 2006.

According to Rosneft’s management accounts (here and hereinafter), during the period from January through March of this year, Rosneft ranked second amongst Russian oil companies in terms of oil production volumes. The share of crude extracted by Rosneft in the first quarter, according to information from the Central Control Office for the Fuel and Energy Sector, comprised 16.3% of the volume produced in Russia (as compared with 15.6% in the same period of 2005).

The company is continuing to retain its leading position amongst Russian oil companies, ranking second in terms of gas production, first in terms of utilization of its own refining capacities (100%, against an industry average of 80%), and holds a leading position in terms of reserves, with coverage currently standing at 28 years.

In the first quarter of 2006, the company as a whole (including Aday Petroleum) extracted 19 million tons of oil, a 7% increase over the figure for the same period of 2005 (17.8 million tons). Gas extraction totaled 3.6 billion cubic meters, increasing 16.5% over the figure for the first quarter of 2005.

284,100 meters of rock were drilled over this period (compared with 199,700 meters in January-March 2005, an increase of 42.3%). Of this amount, production drilling totaled 269,100 meters (compared with 187,900 meters, an increase of 43.2%).

In February this year, Rosneft won an auction for the licences to develop three subsoil areas, two of which are in the Krasnoyarsk territory (Vadinsky and Tukolandsky), the other in the Taimyr Autonomous District (Pendomayakhsky).

As part of the Tuapse Trough development project on the Black Sea shelf, interpretation continued of 2D seismic data (4,100 linear km.), obtained and acquired in 2004-2005, and the estimate of reserves at top-priority objects were updated, with the simultaneous development of a program of additional exploration works for this year.

The 2006 budget for the Verkhnechonsk deposit development project in the Irkutsk Oblast was approved; works were conducted on the development of Well No. 1001 and the clearing of the pipeline route.

As part of the Sakhalin-1 project, 101,600 tons of oil and 42.8 million cubic meters of gas have been extracted since the start of this year. Works continued on the construction of the on-shore oil processing facilities at the Chaivo deposit, of the oil pipeline and terminal at the Port of De-Castri (Khabarovsk Territory), and of a residential complex at Yuzhno-Sakhalinsk. Drilling of Well Z-7 was completed from the Yastreb drilling rig, and Wells Z-21, Z-23 and Z-25 were drilled. 5 wells were also drilled from the Orlan platform.

As part of the Sakhalin-4 (West-Schmidt sector) and Sakhalin-5 (East-Schmidt sector) projects, field seismic data collected in 2005 were processed. During the development of the Kaigansko-Vasyukansk sector (Sakhalin-5), preparations were made for the exploratory drilling to be performed this year, and works were conducted to modernize the Transocean Legend drilling rig and design a complex for underground waste disposal.

As part of works on the West Kamchatka shelf, data from previous seismic research of 11,700 linear km. were studied, and the processing of 2D seismic data was completed. With the participation of the Korean National Oil Corporation (KNOC), an agreement on the integrated interpretation of 2D seismic data was agreed with Schlumberger Logelco Inc. An agreement was signed with Sakhalin Shelf Services LLC for the development of a program of auxiliary services, including the recovery of drilling waste.

As part of the Sakhalin-3 project (Veninsky block), the results of the tender for the integrated interpretation of 2005 3D seismic data were confirmed. The processing of 3D data for the South-Ayashsky structure of the Veninsky block was completed at the Moscow computing center, WesternGeco.

The total volume of primary distillation of Rosneft’s oil at Russian refineries in January-March 2006 comprised 6 million tons, an increase of 19.6% over 2005 levels for the same period. The total volume of oil products produced by Rosneft at Russian refineries comprised 5.6 million tons, 18.8% higher than in the first quarter of 2005.

Rosneft’s refineries refined 2.7 million tons of crude (106.4% of Q1 2006 levels, when 2.5 million tons were refined).

In particular, the Komsomolsk Refinery refined 1.7 million tons of oil, 10% more than in the same period of 2005. Refining levels comprised 62.2%, an increase of 3.6% over the Q1 2005 figure. The share of light oil products in the range of goods produced increased.

The Tuapse Refinery refined 997,600 tons of oil over the reporting period, 1% more than during the same period in 2005. As a result of the increase in the utilization of the catalytic reforming unit, production of gasolines increased by 15.7%. Refining levels comprised 56.5%, an increase of 1.1% over the same period in 2005. The AT-3 unit underwent repairs at the refinery in the first quarter of this year.

Sales of oil products (including oil products bought in) totaled 5.9 million tons (4.7 million tons in Q1 2005, an increase of 23.8%), with 2.5 million tons sold on the domestic market (2.1 million tons, an increase of 19.9%), including 1.4 million tons via sales subsidiaries. This is 13.6% more than in the same period of 2005 (1.3 million tons).

Over January-March, Rosneft’s oil product supply enterprises sold, at the company’s own network of filling stations, 244,000 tons of oil products, 115.6% of the 2005 figure (210,900 tons – in Q1 2005).

According to preliminary Russian accounting standards data for the first quarter of 2006, pre-tax consolidated profits increased to 53.6 billion rubles, or by 52.2% as compared with Q1 2005 figures (35.2 billion rubles for the first quarter of 2005), and net profits increased to 40.8 billion rubles, or 49.8% as compared with Q1 2005 levels (27.2 billion rubles).