Russian Subsoil Legislation Russian Federation Law on Subsoil Subsoil of federal importance: Subsoil blocks located within the Russian Federation bearing: recoverable reserves of oil 70 mln tons+, recoverable reserves of gas 50 bcm+ 2) Subsoil blocks within inland sea waters, territorial waters, continental shelf of the RF Key limitations: If the field is discovered within the subsoil of federal importance with participation of foreign investors, the Government of the Russian Federation can make a decision to deny the right for exploration and production of the mineral resources with the subsequent reimbursement of cost. In certain cases it is prohibited to transfer the right to use the subsoil of federal importance to a legal entity with the participation of a foreign investor. The user of the subsoil block of federal importance in the RF continental shelf can be the legal entities having experience in developing RF shelf for more than 5 years, RF share in the charter capital should be more than 50%, RF should hold directly or indirectly more than 50% of the voting shares. Federal Law on the Continental Shelf Stipulates the status of the continental shelf of the Russian Federation Does not stipulate any special exclusions for the legal entities with participation of foreign investors in hydrocarbon deposits development

strategic importance for state defense and security Russian legislation in the sphere of control over foreign investments in power sector Federal Law # 57-FZ On the procedures of foreign investments to companies of strategic importance for state defense and security Strategic activities: 1. Providing services to the subjects of natural monopolies (OJSC Gazprom, OJSC AK Transneft) 2. Geological surveys and (or) exploration and production of natural resources in the subsoil of federal importance Fundamental concepts: Support of the defense and the security of the state Establishing statutory restrictions for foreign investors When foreign investors participate in the charter capital and/or in transactions which could lead to establishing control over a company Transactions of foreign investors and their obligations are agreed and defined by the Government Commission for Control of Foreign Investment in the Russian Federation

Production Sharing Agreement (PSA) Federal Law on Production Sharing Agreement Production Sharing Agreement (PSA) is a contract under which the Russian Federation entrusts the investor to conduct prospecting, exploration and extraction of mineral resources within the confines of a defined subsoil area on a compensated basis and for an established period of time Boundary conditions: The Investor shall give priority for participation in the project to the Russian: Contractors Employees (not below 80%) Equipment (not below 70% of the total scope)