NATIONAL ENERGY MOVING FORWARD IN AZERBAIJAN

NATIONAL ENERGY, an independent oil company established in 1996 with headquarters in Calgary, Canada is mainly concentrated in the Caspian region. In April 1997 Nations Energy gained the right for development of the Karazhanbas field in Kazakhstan and within a short period of time increased the field production in more that 10 times. In the year 2003 the Company gained the right for exploration and development of the Mishovdag and Kelameddin oil fields and the block including the Padar field in the Azerbaijan Republic. For a little more than one year time Nations Energy succeeded to winnow the existing opinion about these oil fields by increasing the daily production from 2800 barrels in 2003 up to 4150 barrels in August 2004. Nations Energy believes that Azerbaijani projects have a great potential and the company shall do its best to ensure their further development. Nations Energy is bound to the idea of economic development of the independent Azerbaijan Republic and shall cooperate actively for the good and prosperity of the Azerbaijani nation.

Karasu Operating Company is an Operating Company dealing with exploration and development of the Mishovdag and Kelameddin oil fields onshore Azerbaijan. From the beginning of the year 2003, when Nations Energy took over the operations, KAOC managed to significantly change the situation in the field. Thus, having stabilized the production at the end of 2003 KAOC ensured its gradual growth bringing it to 4150 barrels of oil per day in August of the current year. Today KAOC counts over 900 local national specialists, 80 of which have been recruited this last year.

Having received positive results from the pilot waterflood project at the Mishovdag field in the year 2003, KAOC commenced the construction of facilities for a full field water flood program.

The project is carried out on a highly technological level pursuing the latest international standards practiced in the oil and gas industry. Till today the company almost finished the construction of a tank farm, pump station, electricity and water distribution network and is proceeding with installation of filters and other corresponding facilities. The total estimated value of the project is approximately 9 million US dollars. It is the biggest capital investment onshore Azerbaijan made during the past years.

In 2004 KAOC began drilling exploration and development wells and by the month of August drilling of 4 development wells were completed. Another 10 wells are in plan till the year end.

KAOC pays a peculiar attention to the environmental protection. In 2004 the company completed the implementation of a project on oiled soil clean up in Mishovdag. Another project on well sites development is in progress at present.