TNK�BP AnnouncesTerms of CorporateRestructuring

Bob DudleyPresident and CEO

On January 14, 2005, TNK�BPannounced the terms of its compre�hensive corporate restructuring pro�gram. This restructuring is designedto deliver a simple and efficient cor�porate structure that ensures highlevels of corporate governance andenables all shareholders to participatein the company's success.

The restructuring program's ultimate goal is to consolidateownership of all TNK�BP oil and gas assets in Russia into a sin�gle company, owned by majority and minority shareholders andregistered in Russia. The new structure will reduce the numberof legal entities, streamlining business processes and reducingcosts. It will facilitate greater transparency, improve manage�ment information required for optimal decision making andensure fair treatment of all shareholders. As such, it will fullymeet the new standard for operating in the Russian Federation.

Through our heritage companies we have inherited a verycomplex, multi�tiered corporate structure. This is typical ofRussian oil companies, as the industry consolidated and manycompanies were built from parts over time. Right now we haveover 600 legal entities within the group. Our goal is to stream�line this structure, make it efficient, transparent and relevantto the current needs of the business.

Restructuring ProcessA few words on the mechanics of the restructuring process. Asthe first step, at the end of 2004, we registered a Russian compa�ny called TNK�BP Holding, domiciled in the Uvat District of theTyumen Region. This company will eventually consolidate allshareholdings in TNK, ONACO and Sidanco. Thus the first stepof the restructuring process, namely the creation of an onshoreRussian holding company, has been successfully completed.

The next phase in the process is the accession of TNK,ONACO and Sidanco into the new holding company. Theaccession of TNK, ONACO and Sidanco to TNK�BP Holding

was approved by the majority and minority shareholders ofthese companies at their respective Extraordinary GeneralMeetings (EGM), which took place on March 1, 2005.Approval of 75% of shareholders present at the EGMs wasrequired and was comfortably achieved at each of the meetings.All shareholders who voted for accession will now exchangetheir shares for shares in TNK�BP Holding on the conversionterms recommended by the Boards of Directors of TNK,Sidanco and ONACO.

Those shareholders of TNK, ONACO and Sidanco who chosenot to vote or who voted against may request a buy�out andreceive cash for their shares. However, if they do not do this,then their shares will be converted into shares of TNK�BPHolding. The table below indicates the 100% equity value of

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april 2005

Corporate Restructuring Terms Announced (p. 1)

CFO Kent Potter Discusses Corporate Restructuring (p. 3)

CEO Bob Dudley’s Speech at the Russian Economic Forum (p. 6)

TNK�BP Holds Roundtable on Impact of Oil Prices (p. 8)

TNK�BP Website Named ‘Best Corporate Site’ (p. 9)

Overview of 2005 Business Plan (p. 9)

Company 100% Equityvalue, RUR Billion

Conversion ratio (shares in TNK-BP

Holding)

Buy-out price pershare, RUR

TNK-BP Holding 517.8 N/A N/A

TNK 292.5 2.66 92.5

ONACO 35.1 1.89 65.6

Sidanco 160.1 23.49 815.9

Accession of TNK, ONACO and Sidanco to TNK�BP Holding

Existing group structure

each company, the conversion ratio for shares in TNK�BPHolding and the buy�out price.

In deciding upon the conversion terms, the Boards of Directorsconsidered a number of factors, with the primary driver beingthe valuations conducted by the independent appraiser,Deloitte. Russian law requires that any valuation be carriedout independently, and Deloitte determined all of the criticalassumptions (such as production rates, oil price and discountrates) using reputable international and independent sources.The results of this valuation indicated that more than 50% ofthe value of TNK�BP Holding comes from its ownership inOAO TNK, with roughly 30% from Sidanco, less than 10%from ONACO and the remainder from additional companiesincluding Rospan and stakes in various upstream and othersubsidiaries.

In terms of value distribution across TNK�BP's integratedbusiness portfolio, Deloitte estimates that more than 90% of

the value is in the upstream business, with the remainingamount in refining and marketing. Of the value in theupstream, approximately one�third is in our subsidiaries withminority shareholders. TNK�BP's international financial advi�sor, Morgan Stanley, has confirmed that the methodologiesused in the valuation process conform to international stan�dards. It is interesting to note that the values of the three com�panies being bought out compare very favorably to previousacquisitions on a per�barrel of reserves basis. BP paid $1.85 perbarrel for its interest in TNK�BP while ConocoPhillips recent�ly paid $1.46 per barrel for its stake in LUKOIL. Deloitte val�ued TNK at $2.0 per barrel, ONACO at $2.5 per barrel and

2

TNK�BP Holding is currently man�aged by TNK�BP Management, incommon with the approachadopted for OAO TNK, and doesnot have a board of directors.However before completion of theaccessions of TNK, Sidanco andONACO, we expect to seechanges to the governance struc�ture. The existing TNK�BP Holdingshareholders, together with thoseof TNK, Sidanco and ONACO whohave elected to exchange theirshares for shares in TNK�BPHolding, will decide on this at ajoint EGM later this year.

Following the completion of theaccessions, TNK�BP Holding willreplace OAO TNK as TNK�BP'sprincipal onshore borrower. TNKInternational Ltd will continue tobe the guarantor for the externaldebt. TNK�BP Holding will distrib�ute income to its shareholders asdividends, as determined inaccordance with Russian jointstock company law by the Boardof Directors and shareholders.

Following the completion of therestructuring program, TNK�BPHolding will consolidate the

majority of TNK�BP's Russian oiland gas assets. The temporaryexceptions to this are the follow�ing companies: the network ofBP�branded retail sites inMoscow, RUSIA Petroleum andSlavneft. These assets willremain outside of TNK�BPHolding until an agreement withthe other shareholders is reachedand the respective businessesare structured. In addition, TNK�BP's assets in Ukraine are notbeing consolidated into TNK�BPHolding, although a similarrestructuring process will beimplemented, over time, withregard to TNK�BP's business inthat country.

The chart on this page illustratesthe main dimensions of the newcompany today on a consolidatedbasis. The upstream dimensions(i.e., reserves and production) forTNK�BP (excluding Slavneft) andTNK�BP Holding are virtually iden�tical, while the key differences arein refining and retail, where TNK�BP numbers are higher thanthose of TNK�BP Holding. The dif�ference reflects TNK�BP'sUkrainian business.

TNK�BP Holding Profile

CCoommppaannyyAAggggrreeggaattee vvaalluuee11 //

PPrroodduuccttiioonn22 (($$ 000000ss))AAggggrreeggaattee vvaalluuee //

RReesseerrvveess33

TTNNKK��BBPP HHoollddiinngg $ 17 $ 2.4

TTNNKK $ 20 $ 2.0

OONNAACCOO $ 14 $ 2.5

SSiiddaannccoo $ 16 $ 3.1

Results of the independent valuation, per barrel of production and per barrel of reserves

1 Aggregate value is the sum of equity capitalization and debt.2 2003 daily production in barrels.3 SPE (Society of Petroleum Engineers) proved reserves in barrels of oil

equivalent as of December 31, 2003.

1 TNK�BP Holding data exclude assets that are not part of therestructuring at this stage: Slavneft, RUSIA Petroleum, STBP Holding(BP�branded Moscow retail business) and the Ukrainian business.2 TNK�BP data, excluding Slavneft.3 Retail network includes TNK�BP�owned and jobbers' gas stations.

TNK�BP Holding: key metrics

Valuation and swap ratios for key subsidiaries

MMeettrriicc PPeerriioodd UUnniittssTTNNKK��BBPP HHoollddiinngg11 TTNNKK��BBPP22

Liquids production 2004 '000 bpd 1,450 1,450

SPE proved liquids reserves

as ofDec. 31,

2003billion bbl 9.1 9.1

Rated refining capacity

2004 '000 bpd 700 1,030

Refining throughput 2004 '000 bpd 440 570

Retail network3 2004 Retail sites 1,000 2,100

CCoommppaannyy 110000%% EEqquuiittyy vvaalluuee,,

RRUURR mmiilllliioonn

SSwwaapp rraattiioo((sshhaarreess iinn TTNNKK��BBPP

HHoollddiinngg))

1 Orenburgneft 70,392 24.28

2 Udmurtneft 32,193 273.93

3 Saratovneftegaz 8,938 81.95

4 Varyoganneftegaz 22,345 28.22

5 Orenburggeologia 4,050 1.64

6 Saratovsky NPZ 1,327 40.32

7 Neftemaslozavod 2,237 939.25

8Ryazansky Zavod

Neftekhimproduktov57 259.73

9 Kaluganefteprodukt 328 97.40

10 Tulanefteprodukt 137 33.62

11 Ryazannefteprodukt 1,824 1.17

12 Saratovnefteprodukt 1,960 22.06

13 Rostovnefteprodukt 160 2.53

14 Orenburgnefteprodukt 2,119 92.24

Sidanco at $3.1 per barrel. This supports the view taken byvarious financial analysts who have commented on the fairnessof the valuations.

Subject to government approvals, the second step in the cur�rent phase of restructuring will further consolidate TNK�BPHolding's ownership of its major subsidiaries by making a vol�untary offer to the minority shareholders in 14 of our largeroperating companies to swap their shares for TNK�BPHolding shares. Five of these companies are key upstream sub�sidiaries, three are refineries and the remaining six are market�ing and retail subsidiaries. The table on page 2 outlines theequity values and swap ratios for these 14 companies.

Although there is no legal requirement to base the swap ratioson an independent valuation, we made a conscious decision touse the independent valuation carried out by Deloitte for thispurpose. We believe this to be a fair and consistent approach.It is also important to note that the exchange offer is volun�tary and minority shareholders who choose not to swap willremain shareholders in their existing companies.

After the accessions of TNK, Sidanco and ONACO, and –assuming final government approvals are received – the con�version of some or all of the minority shareholders in the 14major operating companies, the new group structure will bemuch simpler, as shown in the table above. At this point, oneRussian company will hold most of the group's Russian assetsand operations, creating a much more transparent organizationfor management and shareholders alike.

We are working to complete the accessions of TNK, Sidancoand ONACO and the voluntary exchange offers to the 14 oper�ating subsidiaries this year. Upon completion of accessions andthe voluntary exchange offer, some shares of TNK�BP will bein free float. Ultimately, the percentage of floating shares willdepend upon the minority take�up, but if all minority share�holders swapped in the accession of TNK, Sidanco andONACO and during the voluntary exchange offer, the TNK�BP Holding free float would be just under 7%.

The next, and final, stage of the restructuring process, envi�sions accession of our large operating subsidiaries (both100%�owned and with minority shareholders) to TNK�BP

Holding. At that point, minority shareholders in these sub�sidiaries would once again have two options: to swap intoTNK�BP Holding, or to be bought out. New swap ratios willbe determined at that stage on the basis of a new independ�ent valuation. The commencement of this step remains sub�ject to successful completion of TNK, ONACO and Sidancoaccession to TNK�BP Holding, the voluntary offer andobtaining the relevant approvals.

Restructuring has been a complex and lengthy process, and itwill continue to require a substantial investment of resourcesand senior management time. Yet I believe this is an importantand necessary investment in transforming TNK�BP into amore transparent and better�governed company. Completionof corporate restructuring will ensure a step change in our cor�porate governance, and will generate substantial added valueto all shareholders.

The investment community and several of our largest minori�ty shareholders reacted favorably to our restructuring plansfollowing the announcement on January 14. This reaction isalso reflected in the robust increase in the share price for someof our subsidiaries, shares of which are quoted on the organizedstock exchanges in Russia.

Kent Potter: “AllStakeholders WillBenefit fromEconomies of Scaleand a Better�ManagedPortfolio”

TNK�BP CFO discusses corporate restructuring

Q: What is the essence of the restructuring project? Why isit taking place now? What benefits does it bring to TNK�BPand its shareholders?

After TNK�BP was established in 2003, we ended up with morethan 600 subsidiaries in the Group. From the start it was clearthat this structure must be optimized – not least, for the sake ofeffective governance.Our challenge is to sim�plify the company'sstructure so that busi�ness, financial and taxplanning are seamlessand accountability cas�cades down through�out the company.

The essence of therestructuring programis the consolidation ofthe majority of TNK�

3april 2005

Group structure after accessions

BP's oil and gas assets in Russia into one company that wouldbe owned by majority and minority shareholders.

Out of more than 600 subsidiaries, the three heritage hold�ing companies (TNK, ONACO and Sidanco) account for85% of TNK�BP’s oil and gas production, including that ofSlavneft. These three holding companies also account for ahalf of our minority shareholders (in terms of value).According to existing plans, the three holding companieswill merge into the new TNK�BP Holding during the firstphase of the restructuring. Before the first consolidationphase is complete, a voluntary swap offer will be made to theminority shareholders of 14 large operating subsidiaries.After the first consolidation phase and the voluntary swapoffer are completed, the second consolidation phase willcommence, during which key operating subsidiaries (boththose that are 100%�owned and those with minority share�holders) will merge with TNK�BP Holding. Non�core busi�ness subsidiaries will be divested over time.

For a number of legal and logistical reasons, TNK�BP'srestructuring process will take several years. When it iscompleted, all stakeholders will benefit from economies ofscale and a better�managed portfolio of more diversifiedassets.

We have repeatedly said that corporate restructuring is apriority for the new company and we effectively have beenworking on it since the BP�AAR transaction closed in2003. Given the significant number of consultations andapprovals required, this is the earliest we could announceour plans.

Q: Why is the existing corporate structure so complicated?

In a way, this is typical of the Russian oil industry, where com�panies were built over time from smaller component partsthrough privatization and M&A activity. Our situation is nodifferent and it reflects, among other things, the legacy of pri�vatization, active inorganic growth of heritage companies andthe BP�AAR transaction itself, which brought TNK�BP intoexistence.

Q: Is TNK�BP following any established procedures or inter�

national norms or precedents as to how it plans to treat itsminority shareholders as part of the proposed restructuring?

TNK�BP seeks to act responsibly towards all its shareholders,minority and majority alike. We realize that our corporate rep�utation represents a great value, and we will do everything pos�sible to increase that value. Key principles of the restructuringinclude the fair treatment of all shareholders as well as broadconsultations with all stakeholders, including government,majority and minority shareholders, lenders and rating agen�cies. We are committed to doing this at a level of transparencythat goes beyond what is required by law. And our internation�al advisors are playing a key role throughout this process.

We have received and continue to receive feedback from theinvestment community ever since we announced the beginningof restructuring on January 14. That feedback indicates thatpeople understand what we are doing and appreciate our efforts.

Q: Why are some assets not being brought into TNK�BPHolding?

As a general principle, TNK�BP intends for all Russian assetsto be directly or indirectly owned by TNK�BP Holding.However, there will be a few exceptions, at least at this stage.These exceptions include RUSIA Petroleum, the license hold�er for the Kovykta field in East Siberia. This is because we arestill in the process of finalizing the terms for the JV that willoperate that field's development. Slavneft, in which TNK�BPshareholders own approximately 50%, will remain outsideTNK�BP Holding pending the resolution of the asset splitwith Sibneft, which owns the other 50%. Finally, STBP, the JVthat owns the BP�branded retail stations in Moscow and inwhich TNK�BP owns 75%, will not be included in the holdingcompany, pending further discussions with our partner in thisparticular venture.

Q: You mentioned the three holding companies and about 14material subsidiaries – what about all the other companiesin the group?

These 17 companies (plus a very few other 100%�owned com�panies) represent the vast majority of TNK�BP's oil� and gas�related activities in Russia. Thus this program addresses all ofthe material oil and gas companies with minority interests.Once these steps have been implemented, we'll evaluate fur�ther steps as appropriate.

Q: Can you detail the role of external advisors in this project?

Morgan Stanley, White & Case and PwC have been workingon the project for almost a year. White & Case provided legalsupport. PwC provided tax advice. Morgan Stanley providedfinancial advice to TNK�BP including advice with respect tothe independent valuation prepared by Deloitte. On a regularbasis, we seek feedback on our restructuring plans from theauditors – PwC (auditors of the Group's US GAAP consoli�dated financial statements) and BDO Unicon (statutory audi�tors of the Russian subsidiaries). Deloitte undertook the valu�ation, for which DeGolyer and MacNaughton provided pro�duction and cost profiles based on the end�2003 TNK�BPreserve audit.

Q: Looking at the restructuring plan, one gets the impres�sion that some minority shareholders (namely those in theholding companies TNK, ONACO and Sidanco) are beinggiven more options than those in the 14 subsidiary compa�nies. Why is that?

For the three holding companies, the Boards of Directors haverecommended that shareholders approve the proposed acces�

4

KKeenntt PPootttteerr, originally fromCalifornia, received hisBachelor’s Degree in engineeringfrom the University of California,Berkeley, in 1969. After spendingthree years as an officer in the USArmy (with service in Okinawaand Vietnam), he returned toBerkeley for his MBA.

He joined Chevron Corp. in 1974.In his 27 years with Chevron, Mr.Potter lived in Belgium, Englandand Kazakhstan and held financialmanagement positions in all areasof Chevron's operations. Theseincluded Finance Director forChevron's North Sea operations,CFO of Chevron's mining compa�ny, CFO of Tengizchevroil in

Kazakhstan and CFO of ChevronOverseas Petroleum, Chevron'sinternational exploration and pro�duction company.

Following his last Chevron assign�ment, Mr. Potter assumed theposition of Senior Vice Presidentand Chief Financial Officer forChevronPhillips ChemicalCompany (CPChem). While alsoserving as a member ofCPChem's Board of Directors, hehelped direct the merger andintegration of Chevron's andPhillips' worldwide chemicaloperations. In this position, Mr.Potter was responsible for allfinance and information technol�ogy activities of CPChem.

Kent Potter

sion to TNK�BP Holding. Under Russian law, shareholdersvoting against the proposed accession are entitled to demandthe buy�out of their shares at a price determined by the Boardof Directors that cannot be lower than the market price deter�mined in an independent valuation. Hence, shareholders in theholding companies have a choice, as required under the law forsuch transactions.

For the 14 subsidiaries, we are making a voluntary offer toswap into shares of TNK�BP Holding. We are not legallyrequired to do so, but we wanted to give them a chance to swapsoon as opposed to waiting for the possible next stage of acces�sion. Minority shareholders in these subsidiaries may have anopportunity to sell at a later stage if decisions to proceed withtheir accession into TNK�BP Holding are adopted by theirrespective shareholders' meetings and the TNK�BP Holdingshareholders' meeting.

Q: How does this process compare with other restructuringprocesses that have been undertaken, whether by BP or byother companies?

It is difficult to make direct comparisons with other Russianand international restructuring programs, as each companythat has undertaken restructuring has had its own objectivesand starting points, which have determined the approachadopted. But, based on my experience, this is certainly themost complex restructuring effort I am aware of. And webelieve our approach best meets the needs of TNK�BP and itsshareholders today.

Q: What international principles and/or standards havebeen followed in the valuation process?

The valuation performed by Deloitte has been completed inaccordance with Russian law, and from our perspective is con�sistent with internationally accepted methodologies, whichincluded both Discounted Cash Flow (DCF) analysis andcomparative multiples.

Q: How much will it cost, if, for instance, all the minorityshareholders opted for cash?

This is not a simple issue. We are committed to act within theRF Joint Stock Company Law, which sets legal restrictions onthe aggregate amount of funds that a company may spend onthe buy�out of shares from its shareholders. The law stipulatesthat it may not exceed 10% of the value of such company's netassets as of the date of adoption of the decision that gave riseto the shareholders' right to require buy�out of their shares bythe company. The sum of 10% of the net asset value of TNK,Sidanco and ONACO is about $100 million. But the exactamount the shareholders will eventually receive will ultimate�ly depend on what they opt to do.

Q: What financial statements will TNK�BP Holding produce?

TNK�BP Holding will produce financial statements in accor�dance with Russian standards as required under law. A deci�sion on whether TNK�BP Holding will produce US GAAPconsolidated financial statements will be made closer to thetime when the accession is completed. TNK�BP and TNKInternational will continue to produce and publish its USGAAP accounts.

Q: Are there plans to list or float part of TNK�BP Holding infuture? What is your estimate of the free float TNK�BPmight have at that time?

We will consider listing options for TNK�BP Holding laterin 2005, upon completion of the accession of TNK, Sidanco

and ONACO and the voluntary offer. There are no plans tofloat an additional stake. If all the shareholders in the threeholding companies and 14 large subsidiaries opt for theshare�exchange offer, we estimate that the restructuring mayeventually result in TNK�BP Holding having a potentialfree float of just under 7%.

Q: What impact will this restructuring have on TNK�BP'stax rate?

The accessions and the voluntary offer we have announcedwill not materially impact TNK�BP's tax position. In 2004,TNK�BP paid more than $6.5 billion in taxes, duties andexcises in the Russian Federation. In 2005, we estimate wewill pay more than $10 billion. We have said before thatTNK�BP is paying income tax at the corporate rate of 24%in Russia. Having registered TNK�BP Holding in theTyumen Region, the company became entitled to a 4%investment incentive in that region. Tyumen is an importantheritage region for the Group and an operation center forupstream; OAO TNK is registered in Tyumen. This incentivereflects the scope of the Company's commitments in thisregion, including development of the Uvat group of fields.Development of this greenfield project, which requires sig�nificant investment in the region's infrastructure, will utilizemany local contractors, and will also have a significant "mul�tiplier effect" on the local economy.

Q: What are the tax implications of restructuring for TNK�BP and for the federal and regional governments?

Once we have undertaken the accession of key subsidiaries toTNK�BP Holding, the allocation of profit tax to each regionwill be based on the share of TNK�BP Holding's fixed assetsand employees located in each region. We believe this to be fairand transparent.

Q: You expect that the completed restructuring will enablebetter management of the Group. Have these benefits beenfactored into the valuation?

We haven't factored them into the valuation. But, clearly,minority shareholders will get access to these potential bene�fits if they swap.

Q: Finally, could you please explain why you believe the val�uations to be fair?

The valuation was conducted by an independent appraiser,as Russian law requires. I already mentioned that in ourcase it was Deloitte. Deloitte identified the informationrequired, made its own assumptions and determined whichmethodologies to apply. In addition to the Group's auditedfinancial statements, Deloitte had full access to updated anddetailed production profiles for our upstream subsidiaries,provided by our independent reserve auditor DeGolyer andMacNaughton.

Morgan Stanley reviewed the Deloitte valuations and has con�firmed that Deloitte's adopted approach is consistent withinternational methodologies. In our view, the resulting valua�tions are fair and reflect a lengthy and diligent processdesigned and implemented by Deloitte to accurately reflectthe value of the Group's future cash flows.

I will also note that if you compare these valuations withthe two largest recent strategic transactions in the Russianoil and gas sector – the BP�AAR transaction and the recentLUKOIL�ConocoPhillips transaction, which was actuallycompleted after the Deloitte valuation – Deloitte's valua�tions appear entirely fair.

5april 2005

Bob Dudley Speaks atthe Russian EconomicForum

TNK�BP CEO Bob Dudley delivered aspeech at the Eighth Russian EconomicForum, an annual London�based confer�ence. The full text of the speech is below.

Good morning ladies and gentlemen. It is good to be here thisyear at the Russian Economic Forum.

I speak to you today representing TNK�BP – the company thatwas created by the largest single foreign investment in Russianhistory. However, I also speak to you representing a companyborn with a long�term commitment to Russia in its blood.Whilst we do employ a small and important cadre of interna�tional oil specialists, we are, and we think of ourselves as, aRussian company; a company which employs 100,000 Russians;a company with a clear Russian heritage whose producing andmain operating assets and investments lie squarely withinRussia. As Russia's second largest oil producer, we contributebillions of dollars in taxes to the Russian state, and our fortunesare inextricably linked to Russia's success as a nation.

And I am happy to say that over the brief period we have beenoperating, our experience has been very positive. Russia hasbeen good for us – and we have been good for Russia. And wetrust this relationship built on mutual advantage will contin�ue. We have been able to make a difference and deliver realsuccess. Last year, we produced an average of 1.44 millionbarrels of oil per day, a 13% increase on 2003. Last year alone,we made capital investments of $1.5 billion and contributedmore than $6.5 billion in taxes, duties and excises to Russianbudgets at all levels. This year's estimates are higher again forboth these numbers.

Over the next decade we will invest more than $15 billion incapital back into our operations – possibly much more. The oilbusiness is a long�term business, and we are working hard tobuild a truly world�class Russian oil and gas company that willconsistently deliver excellent performance and make a real andpositive contribution to Russia – social and otherwise. Fromthe very beginning we have developed a long�term outlookreflected in our strategy and our 20�year plan – both of whichare actively reviewed.

Both these words this morning and – more importantly – ouractions as a company, speak to a real and common interestbetween what is good for Russia and what is also good forTNK�BP. It is from this perspective that I make my remarkstoday. I would like to share a few observations about sometrends in Russia's investment climate, from the standpoint of amajor investor with a genuine stake in the country's progressand ultimate success.

Russia today presents a mixed picture for the investor. On theone hand, the macroeconomic environment is favorable.Economic growth is strong, driven not only by high commodi�ty prices, but also by recovering domestic demand. Foreignreserves are rising; the trade and current account balances arestrongly positive, and the state of government finances couldrightfully make some OECD governments envious.

Nevertheless, despite these impressive macroeconomic indica�tors, foreign investment has not poured into Russia and indeedthere are reliable reports we are again witnessing significantnet capital flight from Russia. And it has long been known thatFDI remains lower per head than in other countries of its peergroup. Investor confidence remains uncertain – and not onlyamong foreign investors.

Russia has consistently professed a desire to attract whatshould be its rightful share of annual global investment. Theagreement between the Russian groups of Alfa, Access andRenova and BP to establish TNK�BP was reached inFebruary 2003 and was immediately heralded by some as a"breakthrough" investment; one which would lead the wayfor many more to come in our sector. In fact, some have fol�lowed but I suggest fewer and smaller than were hoped atthe time.

Given my faith in the ultimate wisdom of the marketplace, Ibelieve there must be some reasons for this. It is certainly notbecause the scale of the opportunity or the resource base havediminished, or that global demand for these resources hasdecreased. For the most part the competing investment oppor�tunities remain unchanged also. So I must look internally,inside Russia's borders to find my answers.

I believe we have seen some changes in Russia's investment cli�mate since February 2003. And I suspect not all these changeshave been positively received by the investment community. Itis my contention that Russia is inadvertently becoming moredifficult to navigate for well�intentioned investors – Russianand foreign alike.

I cannot claim original thought here, or pretend that others,(including senior Russian governmental officials) do not alsoshare a desire for faster progress on certain important fronts.But I do believe it is instructive to keep the following issuesfirmly in our collective sights.

Over the past two years, a new configuration has emerged inthe Russian economy: The state has progressively assertedits influence over the commanding heights of the economy,and state�owned companies have begun to play an increas�ingly prominent role. This trend is particularly evident inthe oil and gas sector.

This in itself is not necessarily a negative development. Thisconfiguration can be effective, and both state�owned andprivate companies can work together to deliver economicgrowth. However, experience shows that for this model to besuccessful, a clear set of fair and transparent rules must beestablished. This common set of rules must apply to bothstate�owned and private�sector players alike – across theboard to enable competition, efficiency gains and growth.Yet it's hard not to agree with many observers who say thatprogress in this area has been difficult.

An abundance of unclear regulation continues to be problem�atic. Most commentators and participants alike believe thisleaves too much room for discretionary decision�making andselective enforcement.

Finally, the industry continues to face an increasing govern�ment take in the form of growing tax pressures.

These are important considerations for all investors and incombination these factors tend to impede investment, bothdomestic and foreign, and slow down economic growth.

There is no question that each government has a sovereignright to regulate its investment climate. To its credit, Russia

6

has consistently professed a desire to attract and encourageinvestment, including foreign investment. And experienceshows that certain international skills, technologies andexpertise, can play a uniquely positive role in stimulatingdevelopment in economies such as Russia's.

Companies with international reach and skills can also bringnew standards of corporate governance, transparency andhealth, safety and environment to change the way the businessoperates in Russia. They can deliver to Russia the internation�al linkages to markets, finance and investors, which are impor�tant in an increasingly global economy.

Just last week, Minister Gref stated that Russia was trying tobuild an economic policy based on:

Competitiveness

Transparency

Openness and

Free markets.

I applaud this approach and believe it will augur well forRussia's future if it can be implemented. It will necessarilyhave to address the issues I noted earlier.

Minister Gref has also underscored the need for improving man�agement skills and increasing the international linkages ofRussia's economy. And these are precisely the areas where compa�nies with international connections can help. Let me tie this backto just four concrete examples from our ongoing work at TNK�BP.

We view technology as a key value driver for our company.We have established an in�house technology stream, whichstewards world�class technology from the BP Group intothe company. This is now successfully driving new levels ofunderstanding and performance in our oilfields andrefineries.

As part of our effort to build a sustainable and long�termbusiness, we have committed to replacing 100% of our annu�al production with new proved reserves – something wehave done again in 2004. Our new focus on reserve replace�ment, backed by robust investment plans, is beneficial notonly to our company but to the sector as a whole.

As part of our long�term vision we are also investing in ourpeople. This includes a variety of training programs that willhelp develop a new generation of Russia's business leaders.These programs will enrich the existing technical expertisewith new skills such as project management, enhanced reser�voir management, capital value analysis and so on. And weare building learning partnerships with key Russian andinternational oil and gas universities.

Much has been said about corporate governance and trans�parency. We are currently implementing a corporate restruc�turing program that will make our company more efficientand more transparent. Upon completion, it will establish aRussian�based holding company that will consolidate themajority of TNK�BP assets in Russia, and ensure fair treat�ment of majority and minority shareholders alike. This is agood thing for Russia.

Our ability to continue making this sort of positive differencewill depend upon the role we and other private investors arepermitted to play in Russia's oil and gas sector and uponRussia's ongoing investment climate. Some of the yardstickswhich will determine the investment climate and define thescope of our role, aside from tax issues, in Russia include:

The draft Subsoil Law, which is soon to be submitted to theDuma. This will be an important indicator of whether Russiaseriously wants to attract private and international invest�ment in the sector. I am happy to say that there are some verypositive elements to this proposed legislation. However,there are also some real concerns. The current drafts all agreethat companies with foreign affiliation will be excluded frombidding for "strategic fields." Yet there is so far, no clear list ordefinition of these strategic fields. This exclusion may affectnot only companies that are equally owned by foreign andRussian entities, but also those with relatively small interna�tional stakes. Again investors are looking for a clearly definedset of rules for everyone to play by. Investors will need theserules to clarify what constitutes "strategic fields" and to alsoclearly spell out just what are the levels of international par�ticipation that Russia is concerned about.

In addition, new regulations on work permits for expatriateshave become progressively more restrictive. At the time whenRussia's economy is in need of knowledge and managementskills, it is becoming increasingly difficult to bring in managersand executives who would not only provide unique experience,but also pass on their skills to a new generation of Russianmanagers and experts.

And overall regulatory and fiscal stability still remains anissue. To sustain Russia's role as a key global oil power,Russian companies will need to increasingly focus on findingand developing new reserves. Most of these reserves lie innew and undeveloped provinces. New projects are by defini�tion capital�intensive, as they entail large development andinfrastructure costs. Such developments will require aninvestment framework that provides greater stability andpredictability. I believe this will be crucial for implementingthe "mega�projects" in Russia's new hydrocarbon provincessuch as East Siberia, the Far East and the Arctic offshore.Given the scale of these projects, any investor, Russian or for�eign, will need a clear and stable set of rules to invest by.

So, the challenges are evident. Yet they are by no means insur�mountable. While I may seem to have focused on those areaswhere we would like to see faster progress, we at TNK�BPremain positive about Russia and we are implementing solid,long�term investment plans.

Our business plan for 2005 foresees total capital investmentof $1.8 billion.

In addition we will spend about $3.5 billion in ongoing oper�ating expenses this year.

We continue to employ and provide training and develop�ment for our 100,000 Russian staff.

We expect to contribute more than $10 billion in taxes,duties and excise this year.

And we will also pay transportation costs of roughly $2.2 bil�lion to the state�owned pipeline and rail companies.

These are significant amounts. They reflect a young anddynamic company doing well in a dynamic country. So, wevery much want Russia to make the right calls on the choicesbefore her; to meet the challenges I have outlined and to helpus sustain such investment. If fair, predictable and transparentrules are in place, Russia and her corporate sector will benefitfrom strong and sustainable economic growth, and will createwealth for her people.

As a long�term investor in Russia, and as someone from a com�pany with a vital stake in the success of her economy, I sin�cerely hope that the current opportunities can be captured.

7april 2005

Sergei BrezitskyAppointed ExecutiveVice President,Oilfield Services for TNK�BP

Sergei Brezitsky has been namedTNK�BP Executive Vice President,Oilfield Services, replacing FelixLyubashevsky.

Mr. Brezitsky, who began his careerin the oil and gas industry in 1984,holds a degree in oil and gas produc�tion technology from the Ivano�Frankovsk Oil and Gas Institute.

Mr. Brezitsky joined TNK in 1999,where he served in a number of sen�ior positions, including Head ofUpstream from July 1999 until June2000. After TNK�BP was established in 2003, he was appoint�ed to head TNK's key production Business Unit, Samotlor. InJanuary 2005, he was appointed Executive Vice President,Oilfield Services.

Mr. Brezitsky has received several government awards, includ�ing "Honorary Oilman of the Tyumen Region," "FECEmployee of Merit," "Subsoil Exploration Expert" and theEnergy Ministry's "Honorary Oilman."

"We look forward to working with Sergei Brezitsky, who brings avast knowledge of the oil industry into TNK�BP's oilfield servic�es businesses," said Chief Operating Officer Larry McVay.

TNK�BP HostsRoundtable Discussion

On March 1, 2005, TNK�BP hosted the first in a planned series ofroundtables dedicated to the discussion of current economic andinvestment issues. The goal of these events is to initiate an infor�mal dialogue and create a network of shared and informed opinionamong think tanks, business groups and government ministries,fostering greater understanding and cooperation in the future.

The first roundtable, co�hosted with The Coordinating Councilof the Entrepreneurs' Union, was titled "Challenges of a HighOil Price Environment." It was designed as an open forum forthe exchange of ideas and viewpoints on Russian economictrends related to, but not dominated by, the energy sector.Approximately 50 participants took part in the first gathering,including government officials, oil industry representatives,financial analysts, industry consultants and academics.

Following opening remarks by Bob Dudley, TNK�BP CEO,and Alexander Shokhin, Chairman of the Coordinating

Council of the Entrepreneurs' Union, the first keynote speechwas made by Professor Peter Davies, BP Group ChiefEconomist. Professor Davies presented a global perspective onenergy markets, outlining his views on why oil prices haverisen so significantly recently and what price trends can beexpected in the medium�term future.

Professor Davies identified the rapid recent growth in worldoil demand, led but not dominated by growth in Chinese con�sumption, as a major factor in the sustained oil price increaseover the past 18 months. This situation was further exacerbat�ed by a reduction in spare OPEC production capacity, saidProfessor Davies. Political instability in key oil producingregions such as the Middle East, speculative buying by com�modity funds and a more aggressive OPEC pricing policy haveunderpinned the move to a new price range above $40 for thepast 12 months. Professor Davies predicted that this newrange would be maintained at least throughout 2005.

In the medium term, fundamentals of supply and demandshould bring prices down to a new lower range of about $30per barrel, said Professor Davies. This belief is based on hisanalysis indicating that world oil consumption growth is like�ly to slow, and will be outpaced by growth in global oil pro�

8

Cumulative growth, 2005�2008

Growth in world oil consumption

SO

UR

CE

: BP

SO

UR

CE

: BP

duction capacity. This will ease the current capacity con�straints and help reduce the risk premium inherent in the cur�rent price levels. Professor Davies emphasized that, for thetime being, we are in an era when OPEC policy is having agreater impact on prices than market forces, and that while thiscontinues, a price at or above $30 per barrel could be expected.

Other key speakers included Stephen O'Sullivan, Head ofResearch at United Financial Group; Al Breach, Head ofResearch at UBS Brunswick; Vladimir Konovalov, Director ofthe Petroleum Advisory Forum; Jean�Louis Lavroff, Counselorof the EU Delegation to Russia; and Neven Mates, head of theIMF office in Russia.

An interesting contribution was made by Oyvind Nordsletten,the Norwegian Ambassador to the Russian Federation, whodiscussed how his country had managed the huge influx ofexport revenues since the discovery of oil and gas in theNorwegian sector of the North Sea. In particular, he empha�sized that the Norwegian oil fund, which now stands at around$150 billion, is used as a cushion against falling oil prices, abuffer against inflation and security for the future when it willbe needed to fund the pensions of an aging population.

The IMF's Mr. Mates then reiterated that windfall profitsneed to be saved in anticipation of a worsening of the externalenvironment, and advised against relaxing fiscal policy as thiscould create problems if budget revenues fall.

Andrei Illarionov, Economic Advisor to the RF President, thendelivered a concluding keynote speech, which brought togeth�er the key themes of the discussion. In particular, he highlight�ed the need for strong institutions to prevent potential misuseof windfall oil revenues.

TNK�BP UkraineLaunches NewWebsite

On March 10, 2005, TNK�BP Ukraine, part of the TNK�BPGroup, launched a new corporate website. The English versionof the site is located at www.tnk�bp.com.ua/en.

TNK�BP Ukraine is the corporate center of the TNK�BPGroup in Ukraine, which manages the Group's substantialbusiness in that country, including sales, refining and invest�

ment activities. The new website provides detailed and regu�larly updated information on TNK�BP Ukraine's assets, oper�ations and plans.

In developing the new site, TNK�BP Ukraine aimed to createan informative and user�friendly resource. "We hope that thiswebsite will serve as a source of objective and topical informa�tion about TNK�BP operations in Ukraine to audiences in thatcountry and beyond," commented Peter Henshaw, TNK�BPVice President, Communications and Public Affairs.

TNK�BP Site Named'Best CorporateWebsite' in InternetVote

A contest held by open direct vote over the Internet named TNK�BP's site "Best Corporate Website" among major companiesactive in Russia. TNK�BP's website overwhelmingly won thepopular vote, surpassing its nearest rival by nearly 200,000 votes.

The competition for the Best Corporate Website is organizedby the daily business Internet publication Moscow BusinessTimes. The contest's goal is to provide insight into public per�ceptions of the effectiveness and development of corporatecommunications via the Internet.

The contest is held annually in March, and rates only companieswhose corporate websites fit criteria stipulated by the publication.To be considered, a site must represent a well�established large ormedium�sized company. It must have an international version inEnglish, and its technical organization scheme (code) must meetthe standards set by the independent international organizationWorld Wide Web Consortium. The site must include regularlyupdated corporate news, and must qualify in a preliminary selec�tion via open vote at the Moscow Business Times server.

The contest rated sites of companies from various sectors,including major oil and gas companies Gazprom, LUKOIL andYUKOS, major aluminum producers SUAL and Rusal, insurerIngosstrakh, retailer IKEA and major Russian telecom opera�tor MTU�Intel, among others. The voting was open to every�one with access to the Moscow Business Times server.

TNK�BP 2005 BusinessPlan

TNK�BP's commitment to long�term investment in Russia andUkraine has been a core element in the Company's planningprocess since 2003. This year we have extended this approachto include a 20�year strategy for the Company as a whole and5�year, as well as annual, plans for each of our business streams.These are designed to help the Company plot a better coursetoward our long�term goal of becoming Russia's premier oil

9april 2005

company while retaining the flexibility needed given theuncertainties of the global oil environment.

TNK�BP's goal of building a successful long�term, sustainablebusiness in Russia is clearly reflected in the capital expenditureplans for 2005. This year will see an overall increase in capitalspending by more than 20% to $1.8 billion. The share of capi�tal expenditure allocated to new projects that will ensure long�term growth is to increase sharply. The plan foresees triplingexpenditure on greenfield projects, exploration and new devel�opments. Spending on gas projects is set to increase by 50%.Base expenditure on integrity programs to maintain theCompany's core asset base is also set to increase and, as thetable above demonstrates, the Company’s commitment tofuture growth is underpinned by increased capital spendingdespite the increasing tax burden on the industry.

These investment levels will allow TNK�BP to continue grow�ing production above the industry average, while maintainingthe size and quality of its asset base. Within that framework, in2005, TNK�BP will aim to increase production by at least 7%,while balancing this growth with a robust reserve replacementprogram that will ensure replacement of no less than 100% ofannual production with new proved reserves.

In order to ensure that growth in spending and productiondoes not undermine efficiency, we have set a target of flat ordeclining unit operating costs. Thus, the plan foresees keepingunit lifting costs flat in ruble terms, with increases in efficien�cy and volume growth offsetting the negative impact of infla�tion. In the downstream business, we will seek to achieve a fur�ther improvement in netbacks (normalized for price and for�eign exchange). Finally, at the corporate level, the Companywill seek to control general and administrative (G&A) costs bymaintaining staff numbers at the approved staff list levels, withthe exception of staff for certain key projects that have beenapproved separately.

These key projects are focused primarily on building the neworganizational capacity required to deliver our growth plans (forexample, in the gas business and other major new projects). Alsoamong these projects are corporate restructuring, designed toimprove TNK�BP's corporate governance and transparency, andthe reengineering of procurement and supply chain management,which will enable the Company to enhance margins, reduce capi�tal costs and improve efficiency in the long term.

The key to achieving these goals is the performance of businessstreams. Their objectives represent the building blocks for reach�ing the Company's overall targets. Specific business stream plansare discussed below. It is important to emphasize, however, that

they are highly interlinked in terms of their impact on the deliv�ery of the corporate business plan and should be consideredtogether. As an example, a number of the Upstream objectives areshared with those for Technology and Oilfield Services (OFS).

Upstream ObjectivesThe Upstream business faces the challenging task of increasing oilproduction by at least 7% in 2005, which should make TNK�BPone of the top performers in the Russian oil industry. This growthwill continue the trend in 2003 and 2004, when output increasedby 14% and 13%, respectively. In addition, Upstream andTechnology will target replacing 100% of oil produced through acombination of exploration success and improved reservoir man�agement, and will be working closely with the Technology andOFS business streams to achieve this goal. Indeed, many of thechallenges confronting the Upstream business will be faced inpartnership with Technology and OFS, and so it is appropriate todiscuss some of their more specific objectives together.

Production: Upstream, Technology and OFS will be workingclosely together to deliver the production challenge of grow�ing crude output by at least 7% this year. In particular, theUpstream business will be working with Technology toensure the appropriate deployment of operating techniquesand investments to areas that will deliver the greatest bene�fit. Both streams will be focusing on optimal reservoir man�agement and development plans to ensure the maximizationof reserves recovery and value over the life of the Company'sfields. In addition, the Upstream business will be workingwith OFS to keep lifting costs at or better than the levels seenin 2004 (normalized for exchange rate and inflation) whilecontinuing to improve the overall quality of service delivery,which will translate into improved production rates.

Major Projects: In line with the Company's increased focuson longer�term growth, Upstream, Technology and OFS willbe making a combined push to deliver major new projectssuch as at Ust�Vakh, Uvat, Kamennoye and Rospan. Wherepossible, activity is being accelerated to help secure the 2005production target as well as achieving longer�term produc�tion growth in order to provide the optimal performancemix. Importantly, Technology's Project Management Groupwill be closely involved in these new projects in order toensure that the appropriate levels of quality and cost effi�ciency are applied during their implementation.

Cost Control: This challenge will be met not only by keepingthe costs of specific operations down but also by deliveringincremental production as efficiently as possible in order tocontrol unit costs. Cooperation with OFS and Technologywill be vital in both respects. OFS will be instrumental inrestraining cost growth caused by Russian oil sector infla�tion and in ensuring the delivery of quality contractor serv�ices. Technology, meanwhile, will be critical for transferringtechnology and experience to improve the planning andimplementation of all investment projects that should leadto higher incremental production.

Technology ObjectivesTechnology has a joint responsibility with Upstream for deliv�ering TNK�BP's challenging production and reserve targets,with a focus on capital efficiency. Key elements of Technology's2005 plan to support these targets include:

A significant program to upgrade and expand waterfloodapplications in our key fields, in order to maintain and

10

TNK�BP capital expenditure

increase production volumes over the next several years.Current workovers, well optimizations and drilling efficien�cy will also receive special focus in 2005.

A major focus on Technical training in 2005 in order to fullycapitalize on the implementation of improved technologies.As a result the Technology plan for this year envisages anincrease in training of more than 50% over 2004.

Building upon the introduction of the Capital ProjectProcess (CPP) in late 2004. The process of communicatingand embedding the practice of project management into theorganization will be accelerated this year.

Continued implementation of a major integrity program,which began in 2004. An increased focus on pipeline corro�sion management, mechanical integrity standards, and thepreparation of five�year Integrity Plans will positivelyimpact both operational excellence and the implementationof the Company's HSE standards.

Expansion of the technical expert networks. Seven technicalexpert networks, implemented jointly with Upstream in2004, continue to provide enabling technologies, share bestpractices and provide for the development of regionalexpertise. The groups span a variety of production technolo�gy disciplines. In 2005, this concept of technical expert net�works is being introduced into downstream, with two newnetworks being introduced there.

In addition, Technology is accountable for implementing anexploration program designed to add reserves from acreageadjacent to producing fields as well as to evaluate the poten�tial for developing new core areas for TNK�BP. In line withthe Company's longer�term goals our exploration programwill be increased significantly over 2004 levels, particularlyin greenfield areas. This will make an important contributiontoward replacing 100% of annual production.

Oilfield Services ObjectivesThe key objectives of the OFS stream are to enhance opera�tional efficiency and to continually identify opportunities thatcan contribute to production growth. A particular focus forOFS is improving the quality of services provided to Upstream.Specific objectives for the OFS business stream in 2005 include:

Decreasing well construction cycle time, reducing non�pro�ductive time in the drilling and workover operations,improving ESP run times, improving transport fleet utiliza�tion and improving the quality of repairs in the productiontubing repair bases.

Undertaking capital investment: In 2005 the Service Streamplans capital investment in the areas of drilling, capital andcurrent workover, and specialized transport. These invest�ments will result in more efficient and safe operations.

Staff training: The stream has the objective of improving thetechnical qualifications of specialists in all areas and to improveHSE performance in all areas, especially in transportation.

Streamlining the management and operating structure of theservice companies, leading to improved responsiveness andreduced cost.

Further development of a contractor performance system.This will enable the Upstream and Technology stream toclosely monitor their contractors' performance, with theultimate goal of establishing a performance database tobenchmark and improve performance parameters.

Downstream ObjectivesDuring 2005, Downstream will deliver an extensive HSE pro�gram, focusing on implementing group standards across thedownstream organization, delivering higher standards of ship�ping safety on the Volga River and further improving its crisismanagement systems.

The key goal of the Downstream business is to enhance the valueof TNK�BP's oil production by maximizing the value of theCompany's crude oil sales, as well as by producing oil productsthat are demanded by the domestic and export markets that thewe aim to supply. Within that framework, Downstream will con�tinue to improve the netback received from our crude and prod�uct oil sales by investing in logistics in order to open new andmore profitable export routes to international markets.

Downstream will continue to invest in upgrading the Company'smajor refineries: Ryazan and Saratov in Russia and LINOS inUkraine. Our aim is to improve their performance to a level com�petitive with global industry benchmarks in terms of operationsand financial performance. A major modernization program atRyazan will be completed in 2005 with the startup of the newVGO unit in Q4, and the mechanical completion of the alkylationisomerization unit by the end of the year.

The Marketing Business Unit will aim to continue to increasemarket share in the Russian and Ukrainian retail markets. Thiswill include the building and acquisition of new retail sites, whilecontinuing to develop strong TNK and BP brands to target themost profitable customer segments. The newly establishedLubricants BU will bring together production and marketingassets to enable an integrated focus on this market. Downstreamwill also work to improve the efficiency of its distribution systemsthrough rationalization of assets and investment in technology.

In addition, Downstream aims to significantly increase the effi�ciency of operations through the development and standardizationof IT systems and business processes. Data capture will be furtherautomated to enable faster, more accurate and more flexible opti�mization and scheduling, while investing in mid� and back�officesystems and processes to increase efficiency and control.

2005 OutlookAchieving all these goals will present a significant challenge tothe business streams. Nevertheless, as the TNK�BP organizationcontinues to develop as an integrated team, management remainsconfident these challenges will be met. The goals set by manage�ment focus on providing incentives for all employees to achievethe highest levels of individual and team performance and on pro�fessional development ofstaff, as well as increasingefficiency and transparen�cy throughout theCompany and improvingHSE performance.

This combination ofstretch operational goalsand integrated teamworkwill enable TNK�BP tocontinue making bothimmediate and long�termprogress toward buildinga world�class Russiancompany – an industryleader eventually to bevalued on a par with glob�al peers.

11april 2005

Russian Oil and GasIndustry News

Russian Production and Export DataRussia's oil and gas condensate production in January�March2005 rose 3.5 percent over the same period last year, totaling114.266 million tons (9.24 million barrels per day).

In the same period, Russia exported 48.91 million tons (3.96million barrels per day) of crude to non�FSU countries, a 13percent increase over the comparable year�earlier period.

Russian oil companies shipped 46.61 million tons of oil to for�eign markets via the Transneft�operated oil pipeline grid; 2.3million tons were delivered bypassing Transneft's network,according to official statistics.

Russia's gas production in January�March 2005 totaled172.656 billion cubic meters (67.2 billion cubic feet per day),representing a 2.7 percent increase from the same period in2004. In March alone, Russia produced 59.98 billion cubicmeters of gas (69.9 billion cubic feet per day).

Oil Export Duty Hits Record HighThe Russian government will introduce a new export duty oncrude oil, effective April 1. The new duty is set at a record$102.6 per ton of crude.

In February�March, Russian oil exporters paid $83 per ton.Earlier, the export duty was set at $101 per ton – that ratewas in effect from December 1, 2004 to February 1, 2005.The average price of Russia's crude on international mar�kets in January�February totaled $40.47 per barrel($295.44 per ton).

RF Government Sets Oil Price Assumption The Russian government's commission on projections for the 2006budget and mid�term development assumed the average price of oilat $34 per barrel when drafting the budget for next year.

The government's press service said that the cut�off price of oilfor the Stabilization Fund has been set at $27 per barrel.

The commission met to discuss scenarios for Russia's socio�eco�nomic development in 2006�2008. The scenarios were presentedby Economic Development and Trade Minister German Gref.

Russian LNG to US in 2010�2011Russia will start deliveries of liquefied natural gas (LNG) tothe American market in 2010�2011, Russian PresidentVladimir Putin told journalists in the Slovak capital ofBratislava after meeting with US President George W. Bush.

Putin emphasized the potential of bilateral cooperation in thearea of LNG supply. "There is a great deal of work to be doneinvolving deliveries of large volumes of Russian LNG to theUS market [starting] in 2010�2011," he said.

The two leaders encouraged their respective administrationsto continue pursuing the energy dialogue and to pay specialattention to the issue of strengthening energy security.

Transneft to Finish BPS Expansion by Q1 2006Throughput capacity of the Baltic Pipeline System (BPS) couldbe expanded to 60 million tons per year as early as the first quar�ter of 2006, said Transneft President Semyon Vainshtok.

Transneft's board of directors had planned to complete con�struction of the third phase of BPS by the end of June 2006,but Transneft now plans to accelerate the project's execution,he added.

Vainshtok said that he expected the BPS to reach its targetthroughput capacity of 60 million tons per year by the firstquarter of 2006, adding that expansion of the pipeline systemwill require up to $500 million.

12

Russian oil and gas production and exports, January�March 2005

Communications and Public AffairsAlexander Mikhailiants

Phone: +7 (095) 363 2757Fax: +7 (095) 787 8837

E-mail: agmikhailiants@tnk-bp.ru

Investor RelationsRuslan Nickolov

Phone: +7 (095) 787 9630Fax: +7 (095) 787 8837

E-mail: rznickolov@tnk-bp.ru

Investor Relations (Fixed Income)Dmitry Logvinenko

Phone: +7 (095) 745 7854Fax: +7 (095) 787 9675

E-mail: ddlogvinenko@tnk-bp.ru

Insight TNK-BP is published by the Communications and Public Affairs Division1 Arbat Street, Moscow, Russia 119019

www.tnk-bp.com

For additional information please contact:

TNK�BP has recently published its first corporate brochure,titled This is TNK�BP. The goal of this publication is to provideinformation on the company’s assets, operations, corporate cul�ture, values and plans. The publication is available online athttp://www.tnk�bp.com/press/publications/brochure/.

All subscribers to Insight TNK�BP will receive a hard copy ofthe brochure. If you do not subscribe to Insight TNK�BP andwould like to receive a hard copy of the new corporatebrochure, please contact Anastasia Rubina at Communicationsand Public Affairs at ASRubina@tnk�bp.com.

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