Rosneft President Sergei Bogdanchikov visited the Nefteyugansk District on July 6 and 7. His schedule included meetings with the Yuganskneftegaz management, summarizing the company’s performance in the first half of 2005, setting tasks for the second half of the year and long-term development objectives for the Rosneft subsidiary.

The Rosneft President visited a number of production facilities at Yuganskneftegaz’s Prirazlomny deposit. He met with construction contractors at the newly-built oil pumping station, and talked with young specialists at Integrated Preparation and Pumping Section No. 6 (with an average age of less than 35). He also visited Oil and Gas Production Unit No. 10 and joined an operations meeting there.

Today, the head of Rosneft held a meeting with Yuganskneftegaz’s young specialists. He analyzed head-office’s performance over the first half of 2005, as well as future prospects. The second half of the meeting involved a dialogue: the young oil experts asked questions about work on the company’s promising directions, new projects, personnel rotation policies and young specialist support programs. Sergei Bogdanchikov told them about major projects: the Sakhalin-1 project, the Vankor field (Krasnoyarsk Territory) development program, and the Kurmangazy field (the Caspian Sea shelf), a joint project with Kazakhstan, and operation projects.

The visit ended with a press conference. Sergei Bogdanchikov answered journalists’ questions in detail. With respect to Yuganskneftegaz, he confirmed target figures, according to which the company’s oil production will total some 52 million tons, up by 0.4% in comparison with 2004. He noted that the production level planned at the beginning of 2005 was 54 million tons. This was subsequently reduced to streamline Yuganskneftegaz’s production activities. ‘It is not profitable to create drilling facilities capable of extracting 54 million tons this year. We would have to create not 20 drilling teams, as we have now, but 30-35. That means we would have to eliminate 10 of them over subsequent years,’ the head of Rosneft explained.

With respect to Yuganskneftegaz oil production plans for future periods, Mr. Bogdanchikov said that the company would produce 57 million tons in 2006, and during the next 5 years, ‘reach the level of 70 million tons and maintain this level’.

To achieve this, he said, ‘one million meters must be drilled and over 300 wells developed each year’.

Sergei Bogdanchikov stressed that Yuganskneftegaz’s share in Rosneft’s total oil production would remain at the level of 60-70% over the next 3-4 years, and gradually decrease to 55% over the next 10 years. ‘In 2005 Rosneft plans to produce 75.35 million tons. Annual production will total 106 million tons by 2010, and 130 million tons by 2015,’ he added.

Vladimir Bulba, the Yuganskneftegaz CEO, who also took part in the conference, told journalists that the company’s investments in 2005 are set to total 32 billion rubles. In his words, the company will invest funds in achieving the target production rate, in supporting the work of 190 major repair teams, in conducting geological and technical works, and in financing some 450-500 objects such as roads and multiple-well platform construction.

He said that the company was planning similar investment volumes for 2006. ‘In 2006 the company intends to drill 318 wells, totaling some 1 million meters, conduct similar volumes of geological and technical works, and implement major pipeline repair programs,’ Mr. Bulba added.

With respect to the company’s plans for the construction of an oil refinery for the production of diesel fuel in the Nefteyugansk district, the head of Yuganskneftegaz said, a decision would be made in the near future. The Rosneft President did not rule out a positive decision on this issue. In his words, ‘subject to certain circumstances, the decision may be positive. For example, we have similar small but efficient enterprises in Purneftegaz, in Usinsk. There are 5 or 6 mini-stations producing diesel fuel in Kabardino-Balkaria and in the Stavropol Territory which are really efficient. And the Purneftegaz station also produces high-quality gasoline. So the idea is a good one, but needs economic evaluation,’ the Rosneft President said.

Social programs were also discussed at the conference. According to Mr. Bulba, Yuganskneftegaz will spend 200 million rubles on social projects in 2005. ’92 million rubles has already been allocated,’ he said.