Exploration and production

LICENCING FOR EXPLORATION AND PRODUCTION

Under the Russian law, exploration or production of mineral resources is subject to an appropriate license. Such license is issued by competent authorities and it contains information about the subsoil block to be developed, about timelines, financial and other mineral use conditions. The Company holds a number of licenses issued by competent authorities for geological surveys, exploration and extraction of raw materials at oil and gas areas within the territory of the Russian Federation and its continental shelf. As of December 31, 2014, the Company holds 858 licenses, including 50 offshore licenses. In 2014, 28 new licenses were acquired. All license commitments are being honored. A massive exploration program was carried out on the Arctic and Far Eastern shelf. The discovery of an offshore field called Pobeda in the Kara Sea and acquisition of a license of federal significance, i.e. Minkhovskoye license area, contributed to the highest increment of gas reserves in absolute and percentage terms according to the Russian classification.

EXPLORATION AND PRODUCTION 
The strategic goal of Geotermneftegaz in the area of onshore exploration and production is to maintain production and to use the existing fields with maximum efficiency, to rationally implement new projects for ensuring a stable production profile and maximum HC recovery factor, as well as to develop economically feasible unconventional and complex reservoirs.The company plans to effectively transfer its resources into reserves and to subsequently develop them in order to maintain production in the traditional areas of activity, as well as to create new clusters of oil and gas production on the basis of Vankor and eastern Siberia fields.

OFFSHORE FIELDS DEVELOPMENT  
Geotermneftegaz possesses large hydrocarbon resources on the Russian continental shelf, with natural gas accounting for a considerable part of it. Geotermneftegaz's Russian offshore gas resources are about 24 tcm. Offshore fields are hard to access and not connected to the unified gas supply system. Therefore, liquefaction and export sales remain the most efficient monetization method available for these natural gas resources.