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Rosneft Oil Company

July 6, 2005

Production Sharing Agreement on Kurmangazy structure signed

On June 6, 2005, in the city of Astana, the RF Minister of Energy and Mineral Resources, the KazMunayGaz President and the Rosneft President concluded a Production Sharing Agreement for the Kurmangazy structure.

The Kurmangazy structure is situated in the Kazakh part of the Caspian Sea, and is within the jurisdiction of Kazakhstan pursuant to the Treaty on the Demarcation of the Northern Part of the Caspian Sea, dated July 6, 1998, between the Republic of Kazakhstan and the Russian Federation, and according to the Protocol to the Treaty dated May 13, 2002.

Under the Protocol, exploration and production at the Kurmangazy structure will be performed jointly by the authorized organizations of the two countries: KazMunayTeniz and RN-Kazakhstan.

At the same time, KazMunayTeniz and RN-Kazakhstan signed a Joint Development Agreement for the Kurmangazy structure hydrocarbons, setting forth mutual rights and obligations in the project’s implementation.

The Kazakh operator, KazMunayTeniz’s 100%-owned subsidiary, will perform all the oil activities involved in the project.

The project participants estimate the structure’s recoverable reserves at some 1 billion tons.

According to the terms of the PSA, the contractors are to implement a minimal exploration program: to evaluate the environmental effect of the exploration works, and to drill two prospective wells.

Under the PSA, the project participants are to pay a signature bonus to the Kazakh Republic budget, as well as a commercial discovery bonus.

The agreement also envisages expenditure on training and further training of the Kazakh specialists, and on certain social projects.

According to the terms of the PSA, the parties are to use as many Kazakh employees, goods, and services as possible.

The main revenues to the budget of the Republic of Kazakhstan will be generated following the start of commercial development. Total future revenues to budgets of various levels are estimated at 31 billion US dollars.

Both participants have high expectations for the structure due to its size and advantageous location. The project will help to bolster the Kazakh Republic’s raw materials base.

This event is evidence of the dynamic integration between the Republic of Kazakhstan and the Russian Federation.

 

 

 

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