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NOVATEK announces year-end 2006 reserves

Moscow, 14 March 2007. 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 2006. The Company added approximately 297 million barrels of oil equivalent (boe) of proved reserves under SEC1 standards, inclusive of 2006 production, and produced approximately 206 million boe2 for sale during the year.

Estimated total proved reserves as of 31 December 2006 increased to 4,664 million boe from 4,573 million boe as of year-end 2005. Total proved reserves of natural gas increased from 641 billion cubic meters (bcm) in 2005 to 651 bcm in 2006, an increase of 39 bcm, inclusive of 2006 production. Of significant importance was the growth in proved producing reserves of 929 million boe (not including production), or 35.4%, over 2005. In 2006, on a barrel of oil equivalent basis, NOVATEK replaced 144 percent of its production volumes from the appraised fields, or 190 percent over a three-year period (2004 to 2006), and at year-end 2006, the Company’s reserve to production ratio (or R/P ratio) is 23 years.

NOVATEK’s proved and probable reserves increased from 7,358 million boe at year-end 2005 to 7,445 million boe at year-end 2006. The Company’s estimated proved plus probable natural gas reserves, commonly referred to as «P2», totalled 1,015 bcm in 2006 as compared to 1,006 bcm in 2005, while proved and probable liquids reserves increased by 4.8 million tons year-on-year.

The 2006 results are based on reserve appraisal reports for East-Tarkosalinskoye, Khancheyskoye, Yurkharovskoye, Termokarstovoye and Sterkhovoye fields.

Presented below is a table summarizing NOVATEK’s proved reserves prepared under the SEC standards and proved plus probable reserves as of 31 December 2006, 2005 and 2004:

Reserve summary
Natural gas, mmcm
Proved (SEC basis1)
Proved plus Probable (“P2”)
Liquids, thous. Tons
Proved (SEC basis1)
Proved plus Probable (“P2”)
Total reserves, thous. Boe
Proved (SEC basis1)
Proved plus Probable (“P2”)

1 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.

2 Production for appraised fields only, total production including fields not appraised by D&M totaled approximately 209 million boe.

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 2006, 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.