Actuality January 15, 2008

   Oil Company Alliance, controlled by the Russian businessman Musa Bazhaev, and Swedish West Siberian Resources Ltd. (WSR) announced about amalgamation.

Alliance will get 60 % in the incorporated company which capitalization is evaluated at $2,5 billion.

   The transaction scheme, according to the signed memorandum of intentions, provides that stockholders of West Siberian Resources get 100 % of OC Alliance stocks, paying by stocks from planned additional issue of WSR. As a result Alliance Group becomes the owner of 60 % stocks of the incorporated company, and shares of the largest stockholders of WSR now (that are investment company Alltek, Ltd.

and Spanish oil company Repsol) will decrease by 7,2 % and by 4 % respectively. Alliance will get not less than two places in WSR board of directors.

Now in the company board of directors

there are six people. The present head of WSR Maxim Barskiy will keep a post

of the general director of the incorporated company, Eric Fors of the chairman of WSR board of directors. The transaction is planned to f inish

in March, 2008.

   Some time ago the head of Alliance Group Musa Bazhaev informed, that he was going to carry out

the transaction on purchase of a new oil-extracting asset in Russia in the near future.

Purchase of such business should allow Alliance to increase extraction to 4-5 million tons of oil a year by 2010.

Now the Russian oil company, supervising Khabarovsk oil refinery, JSC "Amurnefteproduct", JSC "BAMnefteproduct", OJSC "Primornefteproduct", OJSC "Khabarovsknefteproduct", LLC "Far Eastern Alliance", LLC "Alliance-Khabarovsk" and "Alliance-oil" has the only one extracting division that is OJSC Tatnefteotdacha giving only 430 thousand tons of oil a year.

Meanwhile, oil refinery in Khabarovsk will be able to process about 4,5 million tons of oil after reconstruction.

    In turn, WSR, extracting about 1,5 million tons of oil a year, lacks own processing assets.

Thus, amalgamation looks quite logical and consecutive step to creation of vertically integrated oil company. Evgenia Dyshljuk, the analyst of Uralsib bank, notes that amalgamation will provide WSR with access to the oil refining market, and also will allow to double the size of the company and to get the additional income at the expense of synergy effect. Analysts of UniCredit Aton add that the extensive network of filling stations of Alliance in the Far East will create additional cost of a processing segment of the company which supervises approximately 30-35 % of the retail market of gasoline in this region. Michael Zanozin from Sobinbank also considers amalgamation of Alliance with WSR to be reasonable, in his opinion, as a result of the united company organization more effective logistical chains will be created, the question about utilization of processing capacities will be solved and there will be a possibility of cheaper money attraction.

   However Vladimir Vedeneyev, an analyst of Bank of Moscow, not denying the obvious pluses of amalgamation, at the same time reminds, that presently the centre of WSR extraction growth is not Western Siberia, but Timano-Pechora, in connection with it oil transportation to Khabarovsk oil refinery is not effective. Besides, the WSR resources in any case will be insufficient for utilization of Alliance oil refinery which capacity makes 4,3 million tons at current volumes of processing in 3,2 million tons.

   Though the united company, possessing resource base in 72 million tons, plans in 2009 to utilize the processing capacities independently, nevertheless, it seems that it is possible to name it vertically integrated only by formal signs. As the director of department of amalgamation and absorption of the Independent Consulting Group 2? Audit – Business consulting Maxim Rozov, extracting and processing assets of the company are located too far and to connect up-stream and down-stream in one chain will be rather money-losing and hardly profitable. Thereupon, in his opinion, both Alliance and WSR, most likely, will continue to work in former modes after amalgamation.