Start of production sharing under Sakhalin-2 Project

“Production sharing began ahead of plan. This is not only a result of favourable market conditions, but first of all result of efforts of the whole company and its employees in production optimisation which was constantly supported by our shareholders”, - said Andrei Galaev, Chief Executive Officer of Sakhalin Energy.

According to PSA production sharing starts when all project expenses are recovered. Total amount of recovered expenses for Sakhalin-2 Project implementation is US$24.5 bln. It comprises Phase 1 and Phase 2 Capex and Opex.

In 2012 alone, according to company’s forecast, based on oil price of 100 USD/bbl, Russian Party will receive some US$0.5 bln of profit production. Above that amount will come royalty and profit tax.

In total in 2011 more than US$1.14 bln in taxes and other mandatory payments were transferred to budgets of various levels.

Total amount of money transferred to Russian Party according to PSA for the project up to date (1995-2011) is about US$3 bln. Total revenue of the Russian Party until the end of project’s lifecycle is to exceed US$100 bln.