Novatek
About Novatek
We are Russia’s largest independent natural gas producer and the second-largest natural gas producer in Russia after Gazprom, in each case according to the CDU-TEK for 2010. We are principally engaged in the exploration, production, processing and marketing of natural gas and liquid hydrocarbons and have over 17 years of operational experience in the Russian oil and natural gas sector. In 2010, we accounted for approximately 8% of the natural gas produced in Russia, providing approximately 15% of total natural gas deliveries through the UGSS to the domestic market, according to the CDU-TEK.

Our core strategy is to maintain our position as the leading independent natural gas producer in Russia, based on reserves and production, by increasing our hydrocarbon production on a sustainable and profitable basis, while efficiently expanding our hydrocarbon resource base, optimizing our marketing channels and exploring complementary and value added projects. We supply natural gas to Russia’s domestic market and are focused on meeting the anticipated growing demand in Russia, and, as such, we expect to benefit from expected increases in regulated prices for natural gas sold and forecasted increases in power generation capacity and infrastructure investments in Russia.

Our exploration, development, production and processing of natural gas and liquid hydrocarbons are primarily conducted within the Russian Federation and our principal operating areas are concentrated in the YNAO in Western Siberia. According to Government Statistics and BP’s 2009 Statistical Review, the YNAO is the most significant gas producing region in Russia, accounting for approximately 83% of Russia’s natural gas production and approximately 16% of global natural gas production. Our three core fields—Yurkharovskoye, East-Tarkosalinskoye and Khancheyskoye—accounted for approximately 64% of our total proved reserves, as appraised using the SEC’s reserve methodology, as of 31 December 2010, and 99.7% of our production volumes in 2010. We also hold licenses for prospective fields and license areas located in the YNAO and we acquired a 50% interest in a concession for an offshore block in Egypt in 2007.

Since 2007, we have consistently increased our natural gas production. Our net natural gas and liquid hydrocarbons production totaled 28.3 bcm and 2.4 mmt in 2007, 30.4 bcm and 2.6 mmt in 2008, 32.4 bcm and 3.0 mmt in 2009 and 37.2 bcm and 3.6 mmt in 2010, respectively. As of 31December 2010, we had 8,088 mm boe of proved reserves, of which approximately 93% were natural gas reserves, as appraised using the SEC’s reserve methodology. Over the past three years, our average reserve replacement ratio has been 551%, on a boe basis, as appraised based on proved reserves using the SEC’s reserve methodology.