Sibneft - Yugra

In November of 2000, Sibir entered into an agreement with Sibneft, a major Russian oil company, to establish Sibneft - Yugra (SY), a 50:50 joint venture between Sibneft and Sibir-controlled Yugraneft for the purpose of developing the South Priobskoye oilfield in the Khanty-Mansiysk Autonomous Area of Western Siberia.

As per the terms of the joint venture between Sibir and Sibneft, Yugraneft licenses and assets necessary for the development of the oilfield were transferred to SY by Sibir and Sibneft was obliged to provide all of the development capital to exploit the reserves of oil and gas. Sibneft was appointed operator of the JV and Sibneft executives in turn were appointed to manage the joint venture’s affairs under power of attorney granted by Sibir and Sibneft.

Sibir subsequently contributed a portion of its shares in Yugraneft as founding capital for the Moscow Oil and Gas Company (MOGC) downstream joint venture. In April of 2004 when MOGC sought to register its shares in Yugraneft, it discovered that Sibneft executives had abused their position of fiduciary trust to dilute Yugraneft’s share in the SY joint venture from 50% to less than one percent through share issues which Sibir did not authorise and of which Sibir was not aware. Sibir estimates the lost value to its shareholders from this dilution at $1.5 billion. Subsequent to these events Sibneft was acquired by Gazprom and is now known as Gazpromneft.

Since Sibir discovered the dilution it has been engaged in numerous legal actions both in Russia and abroad against Sibneft and the offshore entities that Sibneft used to effect the dilution. Today, in addition to legal actions that are still pending in Russia, Sibir continues to pursue the reinstatement of its interests in SY through discussions with the Russian government and with Gazpromneft directly. Sibir remains steadfast in its aim to secure restitution of its interest in the South Priobskoye field and will not rest until this is achieved. Sibir will provide updates on this matter as events develop.