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March 4, 2004

OAO NOVATEK production start-up at Khancheyskoye field

Tarko Sale
Yamal-Nenets Autonomous Region

OAO NOVATEK, the largest independent Russian gas producer, celebrated the ceremonial opening of the Khancheyskoye gas-condensate field. The field, with gross reserves of 185 billion cubic meters of gas and 30 million tons of condensate (ABC1-C2), is one of the most promising projects NOVATEK has in the development pipeline. The field was discovered in 1990 and is located 75 kilometers to the east of Tarko-Sale in the Yamal-Nenets Autonomous Region, which accounts for approximately 90 per cent of all Russian gas production.

The first phase of field development began in 2001 and included the construction of a gas processing facility, a gas-turbine power station, a 75 kilometer pipeline to the East-Tarkosalinskoye field and a hotel complex. Currently, the field has 16 production wells, a majority of which are horizontal, and daily production volume is 4.5 million cubic meters of gas and 1,200 tons of condensate. In 2004, production will reach approximately 2.3 billion cubic meters of gas and 740,000 tons of condensate. After the second phase of the development is over in 2006, the estimated field output will reach 5.2 billion cubic meters of gas per year. In total, NOVATEK capital expenditure to date has been approximately US$130 million..

Speaking at the ceremony today, OAO NOVATEK Chief Executive, Leonid Michelson said: ”The start-up of the Khancheyskoye field in 2004 will allow OAO NOVATEK to reach total net production of 20 billion cubic meters of gas, which ranks OAO NOVATEK second only to Gazprom in Russian gas production. In 2004, the Company plans to invest between US$ 250 - 280 million in field development and exploration activities, as well as the construction of a gas-condensate stabilization plant, which is in close proximity to NOVATEK’s fields including Khancheyskoye.”

OAO NOVATEK pays close attention to the environmental impact of their industrial activities together with the well being of the indigenous populations. The Khancheyskoye field, located in the basin of the Taz River and the Pechelto lake system, is in full compliance with environmental and legal requirements. As a result of previous conservation work, 55 hectares of re-cultivated lands were returned to the state forest fund, and last year, the Company stopped flaring gas at the field. For 2004, the Company has allocated over RUR 8 million for further environmental and conservation work. Furthermore, the Company is gradually implementing an environmental management system in accordance with ISO 14000 requirements as part of its overall commitment to conduct its operations in accordance with international best practices.

Indigenous people living on the territory of the Khancheyskoye field regularly receive assistance from the Company in the form of snowmobiles, fuel, as well as material aid for medical treatment. To further support the Region, an agreement was signed in 2001 regarding mutually beneficial co-operation between the Company and the Association of Minority Groups of the North “Yamal – for posterity!”. According to this agreement, the Company has financed a program of activities for the development of traditional industries and the protection and preservation of the indigenous population and customs.

Press service of OAO NOVATEK
+7 (095) 721 22 07

Investor Relations Department
+7 (095) 730 60 20

For Editor:

OAO NOVATEK is the largest independent gas producer in Russia and second only to OAO Gazprom, the world’s largest natural gas company. The Company upstream operations geographically concentrated in the prolific Yamal-Nenets Autonomous Region in West Siberia which accounts for approximately 90% of all Russian gas production. Through it related affiliates and subsidiaries, OAO NOVATEK controls mineral licenses which convey the right to explore and develop hydrocarbon fields holding estimated natural gas reserves of over 1.5 trillion cubic meters. In 2003, the Company produced 20.4 billion cubic meters (“bcm”) of natural gas of which 13.5 bcm accrued to its net interests in its various production assets. Based on current development plans, OAO NOVATEK forecasts its net production to increase between 45 bcm to 50 bcm over the next five years.




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