LUKOIL IN SAUDI ARABIA

The Company’s activities in Saudi Arabia began in March 2004 with the signing of the contract between LUKOIL and the Government of Saudi Arabia after LUKOIL was declared the winning bidder at the tender for exploration and production of gas fields on Block A in the Rub al-Khali Desert. The duration of the contract is 40 years.

A joint venture with Saudi Aramco, the state oil company, was established to implement the project, with LUKOIL holding an 80% interest in the venture while the other 20% belong to Saudi Aramco. The joint venture was named LUKOIL Saudi Arabia Energy Limited (LUKSAR). In the summer of 2004 the Company opened its office in Al-Khobar. In the event of a commercial discovery of hydrocarbons the produced gas will be supplied to the domestic market in Saudi Arabia.

The joint venture’s work program for 2005-2009 includes completion of 2D and 3D seismic surveys, processing and interpretation of acquired seismic data, preparation of a geological map of the contract area, drilling of nine exploration wells and assessment of the hydrocarbon reserves of the block.

LUKSAR has announced the discovery of hydrocarbons accumulations on February 12th, 2007. LUKSAR is currently undertaking appraisal activities for this discovery which is expected to finish in year 2011.