Updated September 2, 2008

   United Oil Group Ltd (UOG), the division of En+ Group owned by Oleg Deripaska, and Japan Oil, Gas and Metals National Corporation (JOGMEC) signed a joint venture

agreement to implement projects in the area of hydrocarbons exploration, prospecting and extraction on the territory of Russia.

   The newly established company will take part in the auctions on granting licenses for the right to use subsoil resources, as well as examine the o

pportunities of purchasing the companies that already own such licenses.

The Krasnoyarsk Territory, the Irkutsk Region and the Sakha Republic (Yakutia) are the priority regions for the activity of the established JV because these territories have the enormous resource potential. UOG will own 51% of stocks in the established company, and JOGMEC – 49%.

   The Japanese company has long been taking interest in the Russian subsoil.

So, in April, 2008, JOGMEC established the JV with Irkutsk Oil Company LLC – CJSC INK-Sever – for hydrocarbons exploration, prospecting and extraction as well.

The Severo-Mogdinsky block located 150 km from the ESPO oil pipeline (Eastern Siberia-Pacific Ocean oil pipeline) became the first asset in CJSC INK-Sever. In May, 2008 the corporation declared that it had planned to establish the JV with Rosneft to extract oil in the Eastern Siberia (within easy reach of the ESPO) or on Sakhalin's offshore. Such activity of the Japanese company is quite obvious: JOGMEC is the state corporation that was established in February, 2004, and the company is responsible for providing Japan with the stable deliveries of oil, natural gas, nonferrous metals and other mineral resources. "I'm convinced that if we make a joint effort, we will manage to launch the first projects in the nearest future and transport the produced hydrocarbons to Japan through the ESPO oil pipeline", as JOGMEC ESPT Director Hirokazu Tada said.

According to the revised plans, the first part of the ESPO will be launched by the end

of 2009, and the whole pipeline system will function in 8 years.

   "The cooperation with the Japanese partner is the access to the new sources of funding necessary for the geological exploration within the implementation of large projects in the area of oil extraction", as En+ chief executive Vladislav Soloviev marked.

Expert comments
Alexander Petrov, the head of Univer Investment Group analytical department

   The joint venture of UOG and JOGMEC is prospective for both parties.

Japan doesn't have its own full resource base, therefore the opportunities' diversification of resources' delivery is very important, so, the participation of the Russian state company

is sound. On the other hand, UOG will take advantage of the financial, as well the technological, support within the geological exploration.

Still, Russia's activity of keeping the foreign participants out of the important resource objects can be named as the major risk for the company. However, if we take to account the serious Basel's lobby, the government plans on

the development of geological exploration and the necessity of filling the ESPO pipeline, the risks in this direction are quite moderate. The additional risks can result in the permanent problems for the JV, as well as in the extension of completion of the ESPO construction.

The terms of this project have been put off several times, and some experts think that this tendency is kept, therefore the plans of the Japanese partner related to this oil pipeline can be frustrated.