Today Vankorneft is one of the leaders of Russian oil production industry and a major global integrated structure in the field of oil and gas production, refining, and manufacturing of petroleum products. The assets acquired this year allowed us to double the refining capacity, to expand the scale and geographical scope of our petroleum products retail marketing operations, and become a significant manufacturer of petrochemicals and quality car oils.

The Company is not going to rest where it is and intends to further boost its oil production operations. Our plans envision an increase in annual oil production from 80 million tones today to 120 million tons in 2010, and to 150 million tons in 2015, provided that the economic conditions are favorable. The Company’s key oil production assets in West Siberia and East Siberia have good prospects for future development.

In addition, we have a considerable portfolio of exploration projects in new regions, which will make major contribution to the Company’s overall hydrocarbon production in the nearest future. This primarily refers to the East Siberian oilfields that will produce oil to be exported via the “East Siberia-Pacific” pipeline currently under construction. Also of strategic importance to the Company are the Far East shelf projects, including Kamchatka ones, where Vankorneft cooperates with leading global oil and gas companies.

A growing number of clients in Russia and dozens of other countries depend on our reliability and ability to fulfill our obligations. This predetermines our keen attention to all aspects of the operations that may affect sustainability of the Company’s development, and contribute to accomplishment of our long-term plans to become one of the largest and most efficient global energy corporations.

Health, safety and protecting the environment are among the top principles of our operations. During the recent boost of Company’s operations and acquisition of numerous new assets, not all aspects were given appropriate attention. Today we are doing our best to make up the leeway; a numbers of initiatives, including programmed to improve associated petroleum gas utilization rate, pipeline reliability improvement programmed, and waste management programmed have been elaborated and are being implemented.

Reconstruction of our oil refining facilities and upgrade of tank-farm equipment will make an important contribution to reducing environmental impacts and enhancing safety of our operations. In 2007, the Company’s new health, safety and environment management strategy embracing all aspects of our increasingly diversified business will be finalized.

The competent and loyal personnel are a key prerequisite of the Company’s sustainability in any situation. This year’s priorities include unification of remuneration and benefit package across subsidiary companies, expansion of personnel training programmers, bringing living conditions in rotational camps in compliance with the new corporate standards, improvement and implementation of programmers aimed at improving health of the employees and their families, and investment in the infrastructure and social sphere of the areas where the Company employees and their families live.

Increasing stakeholder’s awareness of our activities is an important objective of our efforts on improving the corporate governance system, effort we make in the interest of our shareholders. This report is a new step along this road. We do hope that the information it contains will help you better understand our objectives and achievements, and we will appreciate any suggestions and ideas you may wish to provide.

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