Kovykta Project Development

Presentation to James A. Baker III Institute & the Carnegie Endowment for International Peace

Presented by Harry Griffith

Deputy General Director,

OJSC RUSIA Petroleum

Moscow, Russia

September 30, 2005

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Agenda

•Field Project

•Transportation

•Markets

•Conclusions

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The Relative Size of the Project

EASTERN SIBERIA STATE OF TEXAS

FIELD OF KOVYKTA

100 km

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The Kovykta Field

Field • Extremely continental climate, average annual temperature below zero, sporadic permafrost;• Elevation: Ranging from 380 m to 1503 m above mean sea level.• 80 km to the nearest settlement, 350 km to Irkutsk city, 180 km to the station at Baikal-Amur Railroad;• License area: 10.3 thousand km2;

Reserves• Reserves associated with Precambrian Parfenovsky;• Average effective thickness: 14-15 m.• Occurrence at 2650 – 3300 subsurface• Gas reserves:

1.9 tcm gas84 mmt condensate

• Average flow-rate per well: 350 to 500 103m3/day;

History 1987 – Discovery by the state enterprise «VostSibneftegas»; 1991 – First reserves approval by the State Reserves Committee of the USSR; 1992 – «RUSIA Petroleum» formed to carry out exploration and development; 1999 – Start of the International Feasibility Study (IFS); 2001 – Inclusion of the Kovykta into the List of Subsoil blocks for PSA terms; 2003 – IFS completion with report submitted to the government 2004 – Announcement of Irkutsk Regional Gasification Project

131 210

16

277

593

34

1129

755

81

1407

572

840

200

400

600

800

1000

1200

1400

1600

1991 1995 2001 2003

C1, mcm

C2, mcm

Condesate, Mt

TNK-BP

InterrosIrkutsk Oblast

RUSIA shareholders

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Kovykta Phase 1 - Regional Project

Sayansk

Magistralniy

Okunysk

Sayansk

FIELD

Number of wells 14 new + 4 existing

Number of well pads 6

Number of CPF’s 1

Transportation

Component A B C

Length (km) 393 285 160

Diameter (inches)

24 24 6

Pressure (bar)

100 63/20 8

MARKETS

Component Phase 1a Phase 1b Customer

Methane0.001 bcma to Zhigalovo

2.5 – 4.0 bcma plateau

Industrial & municipal heat & power

C2+ and helium

NA280 kt of C2+and 7 mcm of He

Sayansk Chimplast& Geilimash

CondensateMinimal for remote well sites

163Kta plateau

RFE refineries via BAM

A

B

C

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Kovykta Phase 2 – Export Project

Market First Gas Plateau Sales Gas

Irkutsk 2008 4 bcm/a

North East China

2011 12 bcm/a

North China 2014 8 bcm/a

Korea 2011 10 bcm/a

Component IFS Estimate

Field & Facilities $6,5 bln

Russia Pipeline $5,6 bln

China Pipeline $5,2 bln

Korea Pipeline $0.7 bln

Total $18 billion

Kovykta Reserves

Development Capex

Sales Gas (bcm/a)

Indicator Value

Reserves bcm 1472

Build Up Period 9 years

Plateau Period 23 years

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Kovykta Gas Pipeline

Transneft Oil System /Taishet-Nakhodka PL

YURUBCHENO-TOKHOMSKOE

KOVYKTA

CHAYANDA

Sayansk

Irkutsk

ShenyangVladivostok

Yuzhno-Sakhalinsk

Skovorodino

Khabarovsk

Dalian

SAKHALIN

Harbin

Transportation Options

Manzhouli

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Gas Supply & Demand in Asia Pacific Region

0

20

40

60

80

100

120

140

160

180

200

bcm

a

2010 2020

China

0

10

20

30

bc

ma

2010 2020

Taiwan

0

5

10

15

20

25

bcm

a

2010 2020

USA West Coast

0

20

40

60

bcm

a

2010 2020

0

20

40

60

80

100

120

bc

ma

2010 2020

Total demand

Supply

Non-contracted demand

South Korea

Japan

30 BCM(2020)

Sakhalin I,II,III

Kovykta

Yurubcheno-Tokhomskoye

Chayanda

70 BCM(2020)

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Securing the Market Window

• North East Asia’s fast growing markets are the most logical target for East Siberian pipeline gas. Chinese annual demand growth 12 %, Korean 5,6 %

• Diversity and security of supply for Chinese and South Korean markets

• Market window in 2008 – 2011 exists in both China and South Korea; competition will be between Russian Pipeline gas and LNG imports in both markets. Next available market window 2015 – 2020

• Pipeline vs. LNG competition: With no deliveries of Russian pipeline gas, new LNG terminals will be built up in the markets of Korea and China. The LNG supplies will be sourced from Indonesia, Australia and Middle East, increasing price competition.

0

10

20

30

40

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Dem

an

d b

cm

/a

Domestic Imports North China North East China

Domestic Gas

Kovykta or LNG

Imports to NE

Imports to N

Market window in China

0

5

10

15

20

2008 2009 2010 2011 2012 2013 2014 2015

Dem

and

bcm

a

Expected Gas Shortage Build Up

Market timing in South Korea

Market Window

Kovykta delay

Conclusion

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Key Issues for Kovykta

Pipeline Routing

Market Demand Assurance

Stakeholder Alignment Project Development

• Kovykta gas is exported to

China & Korea or west to

UGSS

• Southern or Northern

route for Export

• Volumes & Pricing

• Timing of the Market

Window

• Deadlines for decision-

making

Governments:

• RF

• China

• Korea

Partner Companies:

• Gasprom

• TNK-BP

• CNPC

• Kogas

• Intergovernmental

Agreements

• Signing Long-Term

Contracts for Gas Supply

• Conducting Technical

Assurance

• Establishing Partnership

Configuration

• Secure Financing