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Ukrainian Operating Environment

The License Area is located on the Crimean Peninsula of Ukraine which occupies a strategic position at the crossroads between Europe and Asia and in land area is the second-largest country in Europe. The Tarkhankut Peninsula is located on the northwest reaches of the greater Crimea Peninsula.

The Directors and Proposed Directors believe that there are several benefits to the location of the License Area:

• The geography is flat with excellent access. Most of Ukraine consists of fertile plains (steppes) and plateaus, mountains being found only in the west (the Carpathians), and in the Crimean Peninsula in the extreme south;


• the producing horizon depths lie at between 1,700 and 2,800 metres;


• climate is favourable being temperate continental with climate being Mediterranean-like only on the southern Crimean coast;


• the quality of the extracted oil is 48 degrees API;


• infrastructure is extensive and reliable across the whole country. Nearby infrastructure extends to road and rail access as well as deep water ports with storage and load out facilities. Refineries, gas storage facilities and national pipelines are also available;


• the oil can be shipped from Chernomorskoe or sent by rail to the refinery in Odessa; and


• it is approximately 10 km to the Ukrainian gas pipeline network.

Business Strategy of the Enlarged Group

NTOL's strategy has always been to become one of the leading independent oil and gas exploration and production companies operating in Ukrain and with potential to operate in other strategic locations in the future. It is the intention of the Enlarged Group to apply the same strategy to its operations.

Opportunities for the Enlarged Group

Initially, the Enlarged Group will focus on developing the Wells in the License Area and improving its seismic information so as to be able to upgrade its Reserves as well as to take advantage of "in-fill drilling" opportunities.

The Directors and the Proposed Directors believe that NTOL has developed a strong working relationship with Krymgeologia. As the Enlarged Group invests in the reopening of Wells, the Directors and the Proposed Directors believe that the Enlarged Group will be in a good position to apply for further license opportunities in the Crimea as well as within the rest of Ukraine.