Tyumen Oil Sees Pact with BPAmoco, Privatization, as Platforms for Growth.

Business Editors

MOSCOW--(BUSINESS WIRE)--Dec. 22, 1999

Tyumen Oil Company (TNK) said today an agreement between its shareholders and BPAmoco to settle a business dispute, and TNK's complete privatization, will help the company grow and consolidate.

"These actions will help Tyumen Oil become among the top 15 oil companies worldwide based on crude oil reserves and production," said Simon Kukes, president and CEO of TNK.

As part of the agreement TNK's shareholders reached with BPAmoco, announced earlier today, TNK will work in a joint venture to develop the potentially highly productive Samotlor oil field in Siberia. The company hopes to resume production from idle wells and drill new wells. BP Amoco will provide technical assistance to the project, marking one of the most significant partnerships TNK has with a Western oil company.

For TNK, the joint venture will mean greater efficiency and cost-effectiveness in developing the Samotlor field and an adjacent field, Chernogorneft. A single infrastructure can be set up, costs can be cut, taxes can be optimized and the nearby large city of Nizhnevartovsk will receive a boost to its economy, Kukes said. In addition, a Production Sharing Agreement which received final approval in Russia today for the Samotlor field could be expanded to Chernogorneft. PSAs simplify the tax regime and will help ensure stability of production of the oil fields.

Today's completion of the privatization of TNK, which involved the Russian government selling its 49.8 percent stake in the company to private investors, will help the company in several ways.

"The privatization helps lay the groundwork for TNK to offer its shares to the public in Russia and the West, makes the company more attractive to strategic investors -- especially in upstream and marketing -- and will help TNK consolidate its subsidiaries," Kukes said.

TNK also said it was pleased that the Export-Import Bank of the United States, acting Tuesday, had placed only a temporary delay on its approval of loan guarantees to help upgrade the Samotlor field and a refinery at Ryazan near Moscow. Final approval would mean creation of about 6,000 jobs in the United States in connection with the two projects. ABB Lummus Global, part of ABB Ltd., would use $198 million of the loan guarantee to modernize Ryazan to increase gasoline production from 14 percent to 25 percent of total output. Halliburton Co., meanwhile, would use $292 million of the loan guarantee to rehabilitate the Samotlor.