The Peschanoozerskoye field was developed with traditional Russian drilling pads from which deviated wells were drilled. The oil is produced and transported by infield pipeline to the field processing facilities located in the centre of the field approximately three to five kilometres from the producing well pads. Following processing, the crude is either stored in the export tank farm or sent to one of two Crude Oil Topping Units (‘‘COTU’’) and refined into oil products. The export storage tank farm has a capacity of approximately 470,000 barrels. The COTUs and the tank farm are located approximately 12 kilometres North of the centre of the field.

Arcticneft’s COTUs have a combined maximum capacity of approximately 1,200 BOPD and produces gasoline, diesel and fuel oil. Diesel is generally used for electrical generation. During 200, Arcticneft refined approximately 80,000 barrels of oil, of which approximately 42,000 barrels were used for the generation of heat and electricity.  In 2006 the Company installed an additional 2MW gas-fired electrical generator, which reduced volumes of diesel consumption and increased crude oil sales volumes.

Other Arcticneft infrastructure includes a 200-man work camp, operations office with satellite communications, warehouses, fire station, repair shop and garage, heating units, and one diesel-fired power station and two gas-fired turbine electrical generating units.

Crude exports are facilitated by Arcticneft’s marine loading terminal located directly off the coast and adjacent to the field’s tank farm and COTUs. Tankers are moored to buoys and a rubber loading pipeline is used to pump crude from the shore. Following loading, tankers transit to the port of Murmansk to clear customs prior to onward transportation to Rotterdam. Crude oil exports are limited by a navigation season from approximately June to November each year due to pack-ice that typically surrounds Kolguyev Island. Ice conditions are highly variable and may lengthen or shorten the navigation season by one or two months.