Licensing

In accordance with current legislation of the Russian Federation, hydrocarbon exploration and production in Russia is subject to licensing. As of December 31, 2008 Rosneft, its subsidiaries and affiliated companies held 534 licenses for geological study, exploration and production of hydrocarbons.

Most of the Company’s production and development licenses run until 2013-2030. Rosneft has been working in recent years on additional extension of licenses for its major fields. By the end of 2008 licenses for more than 30 major fields had been additionally extended for 25 years, and the license for the Priobskoye oil field (the Company’s biggest) is now valid through 2044.

Rosneft is a highly conscientious user of subsoil resources, strictly observing all its license commitments. Agencies responsible for supervision and control of subsoil resource use carried out 12 checks at Company production subsidiaries during 2008 to ascertain observance of license and environmental commitments. Materials to this effect were prepared and submitted to supervisory agencies for joint review. As of the end of 2008, supervisory agencies had no outstanding issues with respect to the Company.

Steady expansion of the exploration and production portfolio through acquisition of new licenses in strategically important regions is an integral part of Rosneft’s long-term development strategy. The Company continued to monitor auction sales of license areas and took part in auctions for the most promising and strategically important areas, primarily in Western and Eastern Siberia.

In February 2008 the Company won an auction for rights to carry out geological studies, exploration and production of hydrocarbons at the Umotkinsky area in Irkutsk Region (Eastern Siberia). The estimated resources of the area exceed 700 mln barrels of oil equivalent. The license was obtained in May 2008 at cost of RUB 1,120 mln (USD 46.7 million at the CBR exchange rate in effect at the date of payment) and runs until April 2033.

In April 2008 the Company obtained a license for geological study, exploration and production at the South Teplovsky area in Khanty-Mansiysk Autonomous District (Western Siberia), after winning an auction for the license in December 2007. The license cost RUB 77 mln (USD 3 mln) and is valid for 25 years.

Also in 2008 the Company obtained five licenses to carry out studies for prospecting and appraisal of hydrocarbon deposits in low-lying strata of the Malobalyksky, South-Balyksky and Mid-Balyksky license areas in Khanty-Mansiysk Autonomous District as well as the North-Mineralny and North-Bragunsky areas in the Republic of Chechnya.

The Company maintained efficient management of its existing license portfolio during 2008:

• duration of nine hydrocarbon production licenses were extended for 25 years;
• 146 requests for changes and additions to existing licenses were prepared and filed with federal and territorial agencies responsible for subsoil use, of which 28 were for postponement of exploration work, 30 for license extension and 88 for actualization of licensing agreements.