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NOVATEK announces year-end 2007 reserves

Moscow, 9 April, 2008. OAO NOVATEK today announced that DeGolyer and MacNaughton (D&M) have completed their comprehensive reserve appraisals of the Company’s oil and gas reserves as of 31 December 2007. The Company added approximately 220 million barrels of oil equivalent (boe) of proved reserves under SEC1 standards, inclusive of 2007 production, and produced approximately 206 million boe2 during the year.

Estimated total proved reserves (SEC) as of 31 December 2007 increased to 4,678 million boe from 4,664 million boe as of year-end 2006. Total proved reserves of natural gas increased from 651 billion cubic meters (bcm) in 2006 to 653 bcm in 2007, an increase of 31 bcm, inclusive of 2007 production. Of significant importance was the growth in proved producing reserves of 304 million boe (not including production), or 9%, over 2006. In 2007, on a barrel of oil equivalent basis, NOVATEK replaced 107 percent of its production volumes from the appraised fields, or 158 percent over a five-year period (2003 to 2007), and at year-end 2007, the Company’s reserve to production ratio (or R/P ratio) is 23 years.

During 2007, for the first time, NOVATEK appraised its reserves under the PRMS reserve reporting standard which was approved in March 2007 by the Society of Petroleum Engineers, the World Petroleum Council, the American Association of Petroleum Geologist, and the Society of Petroleum Evaluation Engineers. The Company will cease reporting reserves under the previous proved and probable (P2) reserve methodology and adopt the new PRMS reserve standards for reporting proved and probable reserves. The Company will maintain reporting SEC proved reserves for financial reporting purposes.

Under this PRMS reserve reporting methodology, the Company’s proved reserves totaled 5,100 million boe as compared to 4,678 million boe under the SEC reserve case.

NOVATEK’s proved and probable reserves increased from 7,445 million boe at year-end 2006 (under the previous reserve methodology) to 7,562 million boe (PRMS) at year-end 2007. The Company’s estimated proved plus probable natural gas reserves, commonly referred to as «P2», totalled 1,029 bcm in 2007 as compared to 1,015 bcm in 2006, while proved and probable liquids reserves increased by approximately 2,5 million tons year-on-year.

Natural gas reserves, bcm

 
2007
2006
2005
2004
2003
Proved (SEC case)
653
651
641
585
576
Proved (PRMS case)
704
n/a
n/a
n/a
n/a
Proved plus Probable ("P2", SPE basis)
n/a
1,015
1,006
923
784
Proved plus Probable ("P2", PRMS case)
1,029
n/a
n/a
n/a
n/a

Liquids reserves, mmt

 
2007
2006
2005
2004
2003
Proved (SEC case)
49
50
46
43
48
Proved (PRMS case)
61
n/a
n/a
n/a
n/a
Proved plus Probable ("P2", SPE basis)
n/a
100
95
97
80
Proved plus Probable ("P2", PRMS case)
102
n/a
n/a
n/a
n/a

Total reserves, mm boe

 
2007
2006
2005
2004
2003
Proved (SEC case)
4,678  
4,664
4,573
4,178
4,149
Proved (PRMS case)
5,100   
n/a
n/a
n/a
n/a
Proved plus Probable ("P2", SPE basis)
n/a
7,445
7,358
6,821
5,771
Proved plus Probable ("P2", PRMS case)
7,562
n/a
n/a
n/a
n/a

1 The Company’s 2007 reserve results are based on reserve appraisal reports for the East Tarkosalinskoye, Khancheyskoye, North Khancheyskoye, Yurkharovskoye, Termokarstovoye fields and Olimpisky license area. The evaluations were conducted on a U. S. Securities and Exchange («SEC») basis provided that due to a lack of clear SEC guidance, D&M has relied on our representations that we intend to (i) extend the term of our licenses to the end of the economic lives of the fields and (ii) proceed accordingly with the development and operation of the fields, in order to include certain volumes of reserves estimated to be producible beyond the primary terms of the licenses. Reserve information in this press release includes reserves recoverable up to as well as beyond the current license expiration date. The SEC based reserve appraisals also do not include estimates for probable and possible reserves. During 2007, the Company successfully extended the East Tarkosalinskoye licesnse term to 2043.

2 Production for appraised fields only, total production including fields not appraised by D&M totaled approximately 207 million boe.

Conversion factors. 1,000 cubic meters equals 6.54 barrels of oil equivalent. Liquids have been converted from tons to barrels using D&M’s estimates from the reserve appraisal reports for the years ended 31 December 2003 through 2007.

Forward-looking statements. Some of the information in this press release may contain projections or forward-looking statements regarding future events or the future financial performance of OAO NOVATEK. We caution you that these statements are not guarantees of future performance and involve risks, uncertainties and assumptions that we cannot predict with certainty. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in the forward-looking statements. We do not intend to update these statements to make them conform to actual results.


PAO NOVATEK is the largest independent natural gas producer in Russia, and in 2017, entered the global LNG market by successfully launching the Yamal LNG project. Founded in 1994, the Company is engaged in the exploration, production, processing and marketing of natural gas and liquid hydrocarbons. Upstream activities of the Company’s subsidiaries and joint ventures are concentrated mainly in the prolific Yamal-Nenets Autonomous Region, which is the world’s largest natural gas producing area and accounts for approximately 80% of Russia’s natural gas production and approximately 15% of the world’s gas production. NOVATEK is a public joint stock company established under the laws of the Russian Federation.