Licensing

Under Russian law exploration or production of minerals can only be carried after an appropriate license has been obtained.

As of December 31, 2010 Rosneft, its subsidiaries and affiliates held 565 licenses for geological study, exploration and production of hydrocarbons. Most of the Company’s production licenses are valid through 2013–2051.

Rosneft has been working in recent years to secure further extension of licenses for its major fields (the Russian Law, On Subsurface Resources, permits license renewal on the initiative of mineral users, provided that no violation of license conditions has been committed). Licenses for 80 of the Company’s main fields were extended for a further 25 years in 2007-2010.

Validity of 36 licenses were extended for 25 years during 2010, and 131 applications for amendments and additions to current licenses were prepared and submitted to federal and regional agencies with responsibility for mineral use, of which 24 were for changes in exploration work schedules, 48 for extension of license terms, and 59 for updating of the terms of license agreements.

Rosneft is a highly conscientious user of subsurface resources, strictly observing all of its license commitments. In 2010 agencies responsible for supervision and control of subsurface use carried inspections of Company subsidiaries – LLC RN-Krasnodarneftegaz, LLC RN-Stavropolneftegaz, LLC RN-Yuganskneftegaz – to check observance of license conditions. Materials were prepared and submitted to supervisory agencies for joint review based on the findings of the inspection. Supervisory agencies had no outstanding issues with Rosneft in respect of subsurface use as of the end of 2010.

Steady expansion of the exploration and production portfolio through acquisition of new licenses in regions, which are of strategic importance to the Company, is an integral part of Rosneft’s long-term development strategy.

During 2010, Rosneft continued to monitor auction sales of license areas and took part in auctions for areas which are most promising and strategically important for the Company.

The Company acquired six prospecting licenses to search for and evaluate hydrocarbon deposits, including two licenses in the Republic of Chechnya and four at areas in Samara Region. The Company also received eight licenses for exploration and oil production as a result of discovery of fields in Samara Region (including fields discovered before 2010).

Rosneft won five auctions for rights to geological study, exploration and production of hydrocarbons at subsurface areas in Samara Region during 2010. Total payments for acquisition of the licenses were RUB 888 mln.

Rosneft acquired six licenses in the reporting year for blocks on the Russian shelf: Nekrasovsky (Sea of Okhotsk), South-Russky (Sea of Pechora), South-Chernomorsky (Black Sea) and East-Prinovozemelsky 1, 2 and 3 (Kara Sea). License payments for these blocks were RUB 3.2 bln. As of the end of 2010 a further 25 Company applications for license blocks on the Arctic and Far East shelf were under consideration by the Federal Agency for Mineral Use (Rosnedra).