Statement of the General Director Dear colleagues and partners of Zarubezhneft! In September 2009 “Zarubezhneft” celebrates its 42nd anniversary. During these years the Company won high reputation in the international and Russian oil community. Our experts are by right proud of that they helped to build up national oil and gas industries in Iraq, Vietnam, Syria, Yemen, Libya and other countries. Gained experience and specialized knowledge of work in various parts of the world provides currently a basis for further growth and development of the Company. The most successful project of Zarubezhneft is the Russian-Vietnamese Joint Venture Vietsovpetro founded in 1981 for the development of south offshore Vietnam. From the beginning of JV “Vietsovpetro” operation cumulative production exceeded 180 millions tons of oil and the Russian treasury got USD8 milliards from the joint venture activity. At the present day leading foreign oil and gas companies are implementing more than 30 petroleum contracts offshore Vietnam. However JV Vietsovpetro remains the leader of oil production in Vietnam

The JV “Vietsovpetro” activity under the Intergovernmental agreement had to be finished at the end of 2010. However in 2006 the Joint declaration on ontinuation of cooperation after 2010 was passed between the Presidents of the Russian Federation and the Socialist Republic of Vietnam. In order to develop this arrangement in October of 2008 in Moscow in the presence of the Presidents of Russia and Vietnam the Intergovernmental agreement on further cooperation on the basis of the JV "Vietsovpetro" was signed. This agreement provides for transformation the Joint Venture after 31 of December, 2010 into the limited liability company "Vietsovpetro" with two participants – JSC “Zarubezhneft” and Oil and gas group “Petrovietnam”.

For the purpose of increasing its resource potential JV “Vietsovpetro” conducts geological exploration works in block 04-3 and in summer, 2009 it was announced of the commercial discovery in it. The JV has also started development of a new block 04-1 offshore Vietnam. In July of this year during drilling of the planned 19th well at the “White tiger” oil field oil flows were attained. This will enable to noticeably increase petroleum reserves of the JV “Vietsovpetro".

Another effectively developing joint project with Petrovietnam but now also including the Japanese company Idemitsu is the development of Block 09-3 offshore Vietnam, where commercial reserves of oil have been recently found. Zarubezhneft holds 50% share in the project. Development of Block 09-3 is of higher-priority for the Company at the present time.

Since 2007 the Republika Srpska (Bosnia and Herzegovina) is within the field of activity of JSC “Zarubezhneft”. The company has been carrying out a project of reconstruction and modernization of the oil refinery “Bosanski Brod”, as well as the factory producing motor oil in Modrica, and the crude marketing company “Petrol” that owns 78 petrol stations. In 2008 “Zarubezhneft” repaired and put into operation the first line of the oil refinery “Bosanski Brod” with a capacity of 1.2 millions tons per year. After all reconstruction works that are planned to be finished at the end of 2009, capacity of the refinery will be 4, 2 millions tons. In the spring of 2009 the main hydrocracked base oils and paraffin production line was brought into operation in the plant in Modrica. JSC “Zarubezhneft” plans to develop retail chain on the territory of adjacent states, primarily in the countries of the Balkan region. Thus “Zarubezhneft” provides presence of the Russian State in the Balkans that is based on long-standing good neighborly relations and mutually profitable conditions.

Resumption of partnership with Cuba became an important result of the Company’s work. In 2008 main fields of cooperation with the state oil and gas company “Cubapetroleo” were determined. They include conduction of geological works and development of oil and gas fields, oil recovery enhancement at the Cuban oil field “Boca de Jaruco” and shipment of spare parts and special equipment for the facilities in the oil and gas industry. It’s worth noting that in November of 2008 “Zarubezhneft” received the certificate of a higher category “A” to work in Cuba. Thus the specialists of the company have the right to conduct geological and experimental operating works in the country. At the present time five contracts with “Cubapetroleo” are prepared for signing, four for geological exploration works and development of four blocks and a contract for the application of enhancing oil recovery methods at the Cuban oil field “Boca de Jaruco”. In this regard it ought to be noted, that "application of advanced Russian technologies for oil field development" and "development of modern methods for enhanced oil recovery in order to expand exports of hi-tech services" have been determined pursuant to Decree of the President of the Russian Federation ¹ 137 dated February 03, 2004, as a priority field of Zarubezhneft`s activities.

Many foreign companies from Africa, Latin America, Middle East and CIS are looking forward to establish cooperation with “Zarubezhneft”. In the foreseeable future “Zarubezhneft” plans to return to India, to start operation in Turkmenistan. “Zarubezhneft” is studying the situation and holding negotiations on participating in current projects of some other countries.

In 2008 “Zarubezhneft” set upon realization a project in Russia that is the project of development of oil fields in four blocks of the Central Khoreyver Uplift (CKU) in the Nenets Autonomous Area. In May of 2008 JSC “Zarubezhneft” won the auction for the right to use natural resources for geological survey, exploration and production of hydrocarbons in the CKU blocks 1, 2, 3, 4 in the Nenets Autonomous Area. In order to participate in the project long-time Vietnamese partner of “Zarubezhneft” Oil and Gas State Corporation «Petrovietnam» was invited. For this purpose in summer of 2008 the “Joint Company Rusvietpetro” was established. In March of this year executives of «Petrovietnam» visited the industrial facilities of JC the “Rusvietpetro” in the Nenets Autonomous Area and gave a positive evaluation of the progress. According to the forecast plan up to the end of 2010 the JC “Rusvietpetro” should achieve the production of around 450 thousands tons of oil. In 2011 it is planned to produce 2 millions tons.

At present collective of JSC Zarubezhneft looks forward with optimism. Serious and long experience, compleat professionalism of the staff and close cooperation with leading industry research centers in the area of development and application of advanced technologies for oil recovery enhancement instill confidence in successfully dealing with national tasks in hydrocarbon resources development in the Russian and international markets.

N.G. Brunich

The General Director of JSC Zarubezhneft