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NOVATEK announces year-end 2005 reserves

Moscow, 10 March 2006. 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 2005. The Company added approximately 572 million barrels of oil equivalent (boe) of proved reserves under SEC1 standards and produced 184 million boe for sale during 2005.

Estimated total proved reserves as of 31 December 2005 increased to 4.6 billion boe from 4.2 billion boe as of year-end 2004. Of particular importance, total proved reserves of natural gas increased from 585 billion cubic meters (bcm) in 2004 to 640 bcm in 2005, an increase of 9.4 percent or 55 bcm, after disposals of approximately 2 bcm. In 2005, on a barrel of oil equivalent basis, NOVATEK replaced 311 percent of its production volumes from the appraised fields after disposals, and at year-end 2005, the Company’s reserve to production ratio is 25 years.

NOVATEK’s proved and probable reserves, on an SPE basis, increased from 6.8 billion boe at year-end 2004 to 7.3 billion boe at year-end 2005, or 7.6 percent. Estimated proved plus probable natural gas reserves, commonly referred to as «P2», totalled 1,004 bcm in 2005 as compared to 923 bcm in 2004, representing a year-on-year increase of 8.8 percent. Proved and probable liquids reserves decreased slightly year-on-year due to asset disposals.

The results are based on reserve appraisal reports for NOVATEK’s 100 percent ownership interest in the East-Tarkosalinskoye, Khancheyskoye, Yurkharovskoye, and Termokarstovoye fields, and NOVATEK’s 80.6 percent interest in the Sterkovoye field. During 2005, NOVATEK disposed of its 66 percent participation interest in the proved reserves of OOO Geoilbent (covering the North Gubkinskoye and South Tarasovkoye fields) and the 100 percent interest in the South-Pyreinoye deposit, for an aggregate amount of approximately 67 million boe, which were previously appraised by Ryder Scott Co. LLP and D&M, respectively.

Presented below is a table summarizing ’s proved reserves prepared under the SEC standards and proved plus probable reserves under the SPE standards as of 31 December 2005 and 2004:

Reserve summary
% change
Natural gas, mmcm
Proved (SEC basis1)
Proved+Probable (SPE basis)
Liquids, thous. tonnes
Proved (SEC basis1)
Proved+Probable (SPE basis)
Total reserves, thous. boe
Proved (SEC basis1)
Proved+Probable (SPE basis)

*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 ends 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 for the East Tarkosalinskoye and Khancheyskoye fields. 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.

Conversion factors: 1,000 cubic meters equals 6.54 barrels of oil equivalent. Liquids have been converted from tonnes to barrels using D&M’s estimates from the 2005 and 2004 appraisal reports.

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 one of the largest independent natural gas producers 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 Area, 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.