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Rosneft Oil Company

September 20, 2006

Delegations from Rosneft and Sinopec visit Udmurtneft production facilities and meet with the leadership of Udmurtia

On September 19 a Rosneft delegation headed by company president Sergei Bogdanchikov and representatives of the China Petroleum and Chemical Corp (Sinopec), led by its board chairman, Chen Tonghai, visited the Udmurt Republic, where the two companies’ new joint asset-Udmurtneft-is based. The Rosneft and Sinopec representatives toured the Gremikhinskoye field, held a production meeting to assess the performance for the first eight months of this year, discussed the expected results of carrying out the business plan, and met with the work collective. In addition, representatives of the Russian and Chinese companies met with the republic’s leadership, which is showing high interest in the future of Udmurtia’s largest oil-producing enterprise.
During their visit to the Udmurtneft facilities, Bogdanchikov and Chen declared that what they had seen „leaves a positive impression“. As the Rosneft chief explained, this „is based above all on the fact that we see superbly trained people: both young and experienced, who understand and know how to produce oil“. Bogdanchikov also remarked that the Rosneft-Sinopec partnership in Udmurtia is „the biggest example of cooperation between a Russian oil company and a Chinese state-owned oil company“. According to him, „this year trade between Russia and China is expected to reach $30 billion, and Rosneft accounting for 25-27 percent of it“.

Responding to reporters’ questions, the Rosneft president said the annual level of investment in Udmurtneft’s operations will be 4.5 billion rubles. He said investment in Udmurtneft is currently 2-2.5 billion a year. The amount of investment, therefore, may increase by 80-120 percent.

„The enterprise is operating successfully, it has a lot of experience in oil production, all of Udmurtneft’s facilities are kept in order and comply with all requirements, including ecological ones, and production levels in the past few years have not fallen“, Bogdanchikov noted. He expressed confidence that Udmurtneft with its new stockholders „will be able to continue raising production levels“.
Chen Tonghai, in turn, declared that „Sinopec and Rosneft have the most advanced technologies, both upstream and downstream“. „And all of them will be used for the further development of Udmurtneft, including occupational safety and environmental conservation technologies“, the Sinopec chief asserted.
At the meeting with the Udmurtneft work collective, the Rosneft president said: „The appearance of a new owner should not be viewed as some kind of extraordinary event“. According to him, „the collective’s task is to fulfill the business plan, produce oil and spend as little money as possible on it“.

„In other words, there is essentially nothing new. We will just try to bring in what we know how to do better; and whatever is better not done, we will try to preserve“, Bogdanchikov noted.
Regarding social issues, the Rosneft chief promised that the wages of Udmurtneft employees will be „competitive with all surrounding enterprises and even somewhat higher“. He also said that social programs in the company will be brought into line with Rosneft standards.
The Sinopec chief endorsed all of the objectives cited by Bogdanchikov. Chen Tonghai noted that „it is essential to conduct geological exploration work more actively, expand the resource base, lower the cost of production, increase profits, and on that basis raise wages and improve the lives of Udmurtneft employees“.

At a press conference to discuss the meeting between the Rosneft and Sinopec leaders and the chairman of the Udmurt Republic government, Yuri Pitkevich, its participants said that they „reached full mutual understanding on all matters that were discussed“. Bogdanchikov said that the agreement on cooperation with the government of Udmurtia would be signed before the end of November. He added that the agreement between the company and the republic would contain „provisions on taxes, on capital construction, on investment“. The Rosneft chief cited, in particular, four areas of strategic cooperation: intensification of geological exploration, increasing the oil-recovery factor, acquisition of additional assets and reduction of costs for profit optimization.

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