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NOVATEK reaches 100 bcm of cumulative natural gas production

Moscow, 1 June 2006. OAONOVATEK today announced that it has reached 100 billion cubic meters (bcm) in cumulative natural gas production since commencing its natural gas field development program.

In December 1998, NOVATEK created the foundation for developing the Company’s gas and gas condensate fields by producing the first cubic meters of natural gas from the relatively shallow Cenomanian layer at its East-Tarkosalinskoye field.

Initially, the East-Tarkosalinskoye field was considered uneconomical to develop; its productive layers are characterized by complex geological structures and low well flow rates which required unique extraction methods and the application of new technologies for cost effective development of the field. Exploiting the natural gas bearing layers required a jeweler’s accuracy since the productive layers were only 5 to 10 meters. Production efficiency was enhanced by creating a detailed geological model of the field to simulate wellbore runs and enable precision drilling of horizontal wells. The Company’s geologists, rig operators and other support personnel effectively managed this complicated process and, in 2002, the East-Tarkosalinskoye natural gas field reached its annual production capacity of 12 bcm from the Cenomanian layer.

NOVATEK’s initial success exploiting the Cenomanian layer of the East-Tarkosalinskoye field enabled it to begin developing deeper and less accessible gas condensate reservoirs. Using advanced field development technologies, the Company established the necessary field infrastructure to extract and prepare the condensate bearing natural gas. Commercial production from the East-Tarkosalinskoye gas condensate field was launched in December 2002.

NOVATEK’s Yurkharovskoye field is the most northern and challenging of the Company’s gas condensate fields and began commercial production in January 2003. The development of the Yurkharovskoye field presented the Company with unique challenges due to the location and geological structure of its reserves; 90% of the reserves are located beneath the Tazov bay. To maximize production and minimize risk of environmental damage to the bay, the Company used large bore horizontal wells with a deviation of up to three kilometers. In 2004, the Yurkharovskoye field reached first phase production capacity of 9 bcm.

At the end of 2003, NOVATEK commenced commercial operations at its Khancheyskoye gas condensate field and has recently completed the first phase of the field’s development which will enable annual natural gas production to reach 3.6 bcm. The second phase, currently under construction, is expected to increase the annual natural gas production from the field to approximately 5 bcm.

NOVATEK’s fields are located in the tundra of West Siberia and have been developed as «green field» projects. In the course of the fields’ development, the Company has constructed dozens of natural gas well clusters, hundreds of kilometers of intra-field roads, internal and external natural gas pipelines and natural gas and gas condensate preparation facilities. The entire industrial and social infrastructure at the Company’s fields has been constructed to meet industry and regulatory specifications and standards.
«Such an impressive performance», says the Company’s CEO L.v. Mikhelson «has been achieved through the hard work and dedicated efforts of the Company’s several thousand employees. Their professionalism, energy and creative approach to business has enabled NOVATEK to develop and put into full production its complex and remote fields." The Company’s key employees have received numerous awards from the State and industry organizations in recognition of their professional abilities and accomplishments.

Since commencing its field development program, NOVATEK has continuously proven its ability to deliver sustainable production growth and plans to reach annual production of 45 bcm.

NOVATEK sells all of its natural gas production domestically and delivers its natural gas to more than 30 regions of the Russian Federation. The main consumers are electric power companies, metal and other industrial plants, public utilities and households. In 2004, NOVATEK began delivering natural gas to industrial consumers in the Kurgan and Tyumen regions at the regulated prices established for these regions by the Federal Tariffs Service.

Certain statements in this press release are not historical facts and are «forward looking» within the meaning of Section 27A of the Securities Act and Section 21E of the US Securities Exchange Act of 1934 (hereinafter, the Exchange Act). Forward looking statements include statements concerning our plans, expectations, projections, objectives, targets, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, our competitive strengths and weaknesses, plans or goals relating to forecasted production, reserves, financial position and future operations and development, our business strategy and the trends we anticipate in the industries and the political and legal environment in which we operate and other information that is not historical information. By their very nature, forward looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward looking statements will not be achieved.

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.