ex10-2.htm


    EXHIBIT 10.2


    


    


    DATED 
NOVEMBER 5,
2008

    


    


    


    


    


    


    


    


    


    


    


    (1) LIMITED LIABILITY COMPANY
NEFTEBITUM

    


    and

    


    (2)  SIBERIAN ENERGY GROUP
INC.

    


    and

    


    (3)  LIMITED LIABILITY COMPANY
KONDANEFTEGAZ

    


    


    


    


    


    


    OPERATING
AGREEMENT

    


    


    


    


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    THIS AGREEMENT is made on
November 5, 2008.

     

    BETWEEN:

     

    
      	
              (1)

            	
              LIMITED LIABILITY COMPANY
      NEFTEBITUM, a company incorporated in Russian Federation and
      registered by the Federal tax inspectionunder primary state registration
      number 1077203022160 and whose registered office is at 625049, Russian
      Federation, Tuimen City, 133 Moskovsky Trakt St.  (“Neftebitum”)

            


    

     

    
      	
              (2)

            	
              SIBERIAN ENERGY GROUP
      INC., a corporation incorporated under the laws of the State of
      Nevada, United States and whose principal place of business is at 275
      Madison Avenue, 6th
      Floor, New York, NY 10016, United States (“SEG”);
    and

            


    

     

    
      	
              (3)

            	
              LIMITED LIABILITY COMPANY
      KONDANEFTEGAZ, a company registered in Russia under primary state
      registration number 1048600002901 and whose registered office is at
      628011, Russian Federation, 63 Komsomolskaya St., Khanty-Mansiysk,
      Khanty-Mansi Autonomous Area (the “Company”, “KNG”), together “Parties”.

            


    

     

     

    RECITALS

     

    
      	
              (A)

            	
              The
      Parties enter into this agreement in connection with item 7 of the
      Agreement of Purchase and Sale of a share in the registered capital of LLC
      Kondaneftegaz between SEG, Neftebitum, Prokopiev S.V and Shelepov O.G.
      (“Purchase
      Agreement”)and with the purpose to specify the methods of
      day-to-day operation of
Kondaneftegaz.

            


    

     

    
      	
              (B)

            	
              The
      Purchase agreement mentioned in (A) transfers the controlling stake of 51%
      of KNG to Neftebitum, and charges Neftebitum with certain responsibilities
      in respect of management and providing financing to
  KNG.

            


    

     

    IT IS AGREED as
follows:

     

    
      	
              1.

            	
              OPERATOR CONDITIONS
      

            


    

     

    
      	
              1.1

            	
              Designation of
      Operator

            


    

     

    Neftebitum
is hereby designated as and accepts to act as an exclusive Operator for KNG and
in relation to the blocks contained in all its current and potential future
Licence Areas under the terms hereof.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    
      	
              2.2

            	
              Senior Management of
      KNG

            


    

     

    
      	
               
      

            	
              Neftebitum
      shall at all times under the terms of this agreement be entitled to
      appoint persons to the following positions or roles within
      KNG:

            


    

     

    
      	
               
      

            	
              (a)

            	
              the
      General Director

            


    

     

    
      	
               
      

            	
              (b)

            	
              the
      Finance Controller;

            


    

     

    
      	
               
      

            	
              (c)

            	
              the
      Reservoir Engineer;

            


    

     

    
      	
               
      

            	
              (d)

            	
              the
      Drilling Supervisor; and

            


    

     

    
      	
               
      

            	
              (e)

            	
              the
      Logistic and Procurement
Supervisor.

            


    

     

    
      	
              1.3

            	
              Commencement Date and
      Term

            


    

     

    The
agreement hereunder shall commence upon the execution hereof and shall continue
until Neftebitum, SEG and KNG enter into a full form operating agreement upon
the discovery of any Proven Reserves of hydrocarbons at the KNG’s licence
areas.

     

    
      	
              2.

            	
              OPERATOR
      ROLE

            


    

    
       

      
        	
                2.1

              	Role and
      Functions of the Operator


      

       

    

    
      	
              2.1.1

            	
              The
      Operator shall have the exclusive discretionary charge of and management
      and conduct of all technical, management and operational and all
      associated matters involving KNG and the Karabashski-61, Karabashski-67
      and potential hydrocarbon exploration and production licences (“Operations”).  The
      Operator shall manage and conduct Operations on behalf of the parties by
      itself, its agents, independent contractors and/or servants in accordance
      with the provisions of this Agreement in general accordance with standard
      oil and gas field practices.

            


    

    


    In particular, but without prejudice to
the generality of the foregoing, the Operatorshall use all reasonable endeavours
to:

    


    (a)  prepare annual programmes and budgets
pursuant to the provisions of thisAgreement and in accordance with the
requirements of the KNG’s licensingagreements for Karabashsky 61 and
Karabashsky 67 parcels, which as a minimum will include (unless the
updated license agreements say differently): 

     

    
      	
               
      

            	
              -

            	
              prepare
      and coordinate, and get approval of the “Program of exploration works on
      the Karabashsky-61 and Karabashsky-67 license areas” within 12 months from
      the date of the state registration of the license on October 22,
      2007;

            
	 	 	 


    

    
      	
               
      

            	
              -

            	
              begin
      2D seismic works during the 2008-2010 fieldwork season and to perform not
      less than 176.26 linear kilometres of seismic profiles on Karabashky-61
      and 158 linear kilometres on Karabashky-67 (minimal density of the profile
      not less than 1 linear kilometre per 1 square kilometre of license area);
      and

            
	 	 	 


    

    
      	
               
      

            	
              -

            	
              No
      later than 2011, to start drilling an exploratory well and to complete not
      less than 2 exploratory wells by April 1,
  2012.

            


    

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    (b) 
provide financing to the Company via loans and advances or by employing its own
resources and equipment, which will enable KNG to carry out the planned
activities;

     

    
      (c) 
Supervise
implementation all programmes and budgets and provide written progress reports
for the Parties on a quarterly basis;

    

    
    

     

    
      	
              2.1.2

            	
              The
      Operator is authorised to enter on behalf of the Parties and KNG into such
      contracts as may be required for the implementation of the Operations, to
      supervise the implementation of such contracts and to make all payments
      thereunder on behalf of the Parties and KNG (and upon the receiving the
      same from KNG so that the Operator has no obligation to make any payment
      itself).

            
	 	 


    

    
      	
              2.1.3

            	
              The
      Operator will oversee KNG in the process of negotiating of service
      contracts to ensure that the contracts are signed in the best interests of
      KNG. When the sum of such contract is over $300,000 the Operator must
      search for the best possible contractor and get price quotes from at least
      two potential contractors and should be able to provide the backup for the
      chosen variant. If in the process of the annual review the parties
      discover that KNG and the Operator were not acting in good faith, then the
      party at loss may request compensation of undergone
    profits.

            
	 	 


    

    
      	
              2.1.4

            	
              Operator
      oversees that KNG establishes price policy on its hydrocarbon products
      with the view of the best available market prices for similar products in
      the region at the current time.

            
	 	 


    

    
      	
              2.1.5

            	
              The
      Operator shall use all reasonable endeavours
to:

            


    

    


    


    
      	
               
      

            	
              (a)

            	
              provide
      each Party with copies of all engineering, geographical, geophysical,
      technical data, information and interpretations relating to the Operations
      as the Operator shall reasonably
decide;

            


    

    


    
      	
               
      

            	
              (b)

            	
              permit
      the authorised representatives of any of the Parties at such Party’s sole
      risk and expense to have access to the area where the Operations are being
      carried out  at all reasonable times and upon giving 48 hours
      notice;

            


    

    


    (c)           arrange
payment of all costs, expenses and other liabilities incurred inconnection with
the Operations by the Operator hereunder;

    


    
      	
               
      

            	
              (d)

            	
              represent
      the Parties in all dealings with the relevant authorities
      and   regulatory bodies, file all necessary reports and
      furnish copies of such reports to the Parties upon
  request;

            


    

    
      


      
        	
                 
      

              	
                (e)

              	Provide annual audited reports and quarterly unaudited
      financialreports for theCompany and updates on contracts entered into by
      theCompany during the term of this
Agreement.


      

       

    

    
      	
              2.1.6

            	
              The
      Operator may employ its own tools and equipment in drilling wells and in
      performing any other work within the scope of this Agreement or purchase
      it from third parties

            


    

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    
       

      
        	
                2.1.7

              	The Operator shall be in exclusive charge of
      obtaining and selection of all manpower and materials used in the
      Operations by KNG and all statistical, accounting, technical, data and
      other functions.


      

       

    

    
      	
              2.2

            	
              Costs
      reimbursement

            


    

    


    
      	
              2.2.1

            	
              The
      Operator, being the major participant of KNG controls financial position
      of KNG while signing contracts, including compensation of employees and
      amounts that would be payable to subcontractors of KNG. In this relation
      the Operator will guarantee payment under such contracts in case KNG
      becomes insolvent. Other participants of KNG are not financially
      responsible for the contract liabilities entered into by KNG under control
      of the Operator.

            
	 	 


    

    
      	
              2.2.2

            	
              Expenses
      incurred by the Operator itself in the process of executing of its
      functions as an Operator may be summarized and billed to KNG for
      reimbursement. At the discretion of the Operator, if part of such expenses
      relating to execution of operator’s function was not charged to KNG due to
      its poor financial condition, then those expenses can accounted for at the
      time of distribution of profits between participants
      of  KNG.

            
	 	 


    

    
      	
              2.2.3

            	
              The
      parties acknowledge that Neftebitum possesses adequate professional
      resources with extensive experience in oil and gas industry, which it will
      utilize as the operator. However Neftebitum hereby agrees not to charge
      operator’s management fees in connection with its role of the Operator
      until such time as the parties further agree.

            
	 	 


    

    
      	
              2.2.4

            	
              The
      parties acknowledge the initial contribution by SEG by the way of
      providing to the Operator and KNG the geological information on
      Karabashski zone of Khanty-Mansi  Autonomous area (Tuymen region
      of Russian Federation) (“Geological Data”), which will be used in KNG’s
      research activities. However SEG agrees not to charge fees for the use of
      Geological Data until such time as the parties further
    agree.

            


    

     

    
      	
              3.

            	
              PUBLIC
      ANNOUNCEMENTS

            


    

     

    
      	
              3.1

            	
              Parties  approval

            


    

     

    None of
the parties shall make any public announcement or issue any circular relating to
this Agreement or any matters or information provided pursuant hereto without
the prior approval of the other Parties. This does not affect any announcement
or circular required by law or any regulatory body or the rules of any
recognised stock exchange), but the Party with an obligation to make an
announcement or issue a circular shall consult with the other Party/Parties so
far as is reasonably practicable before complying with such
obligation.

     

    
      	
              3.2

            	
              Oral
      statements

            


    

     

    The
Parties intend that any oral statements made or replies to questions given by
either Parties relating to the Group shall be consistent with any such public
announcements or circulars.

     

    
      	
              4.

            	
              INFORMATION AND
      INSURANCE

            


    

     

    
      	
              4.1

            	
              Insurance

            


    

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              The
      Operator shall use their reasonable endeavours to procure that KNG
      maintains with a well established insurer prudent insurance in accordance
      with current industry practice from time to time (subject to the same
      being available on reasonable commercial terms) against all risks usually
      insured against by companies carrying on the same or similar
      business.

            


    

     

    
      	
              4.2

            	
              Confidential
      Information

            


    

     

    The
parties shall use all reasonable endeavours to keep confidential and to ensure
that their respective associated companies and their respective officers,
employees, agents and professional and other advisers keep confidential any
information relating to the customers, business, assets or affairs of the
Company or its associated companies.

     

    Each
party shall inform any shareholder, officer, employee or agent or any
professional or other adviser consulting it in relation to matters relating to
this agreement, or to whom it provides confidential information, that such
information is confidential and should be kept confidential and not be disclosed
to any third party (other than those persons to whom it has already been or may
be disclosed in accordance with the terms of this clause).

     

    
      	
              5.

            	
              NOTICES

            


    

     

    
      	
              5.1

            	
              Addresses

            


    

     

    Any
notice, claim or demand in connection with this Agreement shall be in writing in
English or Russian and shall be sufficiently given if delivered or sent to the
recipient at its fax number, telex number or address set out in the Schedule or
any other fax number, telex number or address notified to the sender by the
recipient for the purposes of this Agreement.

     

    
      	
              5.2

            	
              Form

            


    

     

    Any
Notice shall be in writing in English or Russian and may be sent by courier,
telegram, telex, fax or prepaid first class mail. Any Notice shall be deemed to
have been received on the next working day in the place to which it is sent, if
sent by telegram, telex or fax, or 60 hours from the time of posting, if sent by
post.

     

    
      	
              6.

            	
              WHOLE AGREEMENT
      

            


    

     

    This
Agreement contains the entire agreement of the parties and there are no other
promises or conditions in any other agreement whether oral or
written.  This Agreement supersedes any prior written or oral
arrangements between the parties. Remedies

     

    
      	
              7.

            	
              INDEMNIFICATION.

            


    

     

    Each
party (‘first party”) agrees to indemnify and hold harmless the other party from
all claims, losses, expenses, fees including attorney fees, costs, and judgments
that may be asserted against the other party that result from the acts or
omissions of the First party.

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    
       

      
        	
                8.

              	AMENDMENT.


      

       

    

    This
Agreement may be modified or amended if the amendment is made in writing and is
signed by both parties.

    


    
      	
              9.

            	
              SEVERABILITY.

            


    

     

    If any
provision of this Agreement shall be held to be invalid or unenforceable for any
reason, the remaining provisions shall continue to be valid and
enforceable.  If a court finds that any provision of this Agreement is
invalid or unenforceable, but that by limiting such provision it would become
valid and enforceable, then such provision shall be deemed to be written,
construed, and enforced as so limited.

     

    
      	
              10.

            	
              ASSIGNMENT.

            


    

     

    The
Operators 's responsibilities under this Agreement may not be assigned or
transferred to any other person, firm, or corporation without the prior written
consent of all the parties.

    


    
      	
              11.

            	
              APPLICABLE LAW
      AND JURISDICTION.

            


    

     

    This
Agreement shall be governed by the laws of the State of New York. All the
parties irrevocably agree that the courts of the State of New York are to have
exclusive jurisdiction to settle any dispute which may arise out of or in
connection with this agreement.

    


     

    
      	
              12.

            	
              COUNTERPARTS

            


    

     

    This
Agreement may be entered into in any number of counterparts, all of which taken
together shall constitute one and the same instrument. Any party may enter into
this Agreement by executing any such counterpart.

     

    
      	
              13.

            	
              LANGUAGE

            


    

     

    This deed
may be executed in English and in Russian.  In case of any conflict
between the English and Russian versions, the terms of the English version shall
prevail

     

    
 

     

    IN
WITNESS WHEREOF, the parties have executed this Agreement to be effective as of
the date first written above.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

       SCHEDULE
1

     

    Parties’
details

     

    


     

    
      	
              Neftebitum

              address:
      625049, Russian Federation, Tuimen City, 133 Moskovsky Trakt
      St.

            	
               

              Attn:
      Shadrin Nikolai Nelmanovich

            	
              Fax:

              +____________

            
	
              SEG

              275
      Madison Avenue

              6th
      floor

              New
      York, NY 10016

              USA

            	
               

              Attn:David
      Zaikin

            	
              Fax:

              +1
      (905) 771-9198

            
	
              The
      Company

              628011,
      Russian Federation, 63 Komsomolskaya St., Khanty-Mansiysk, Khanty-Mansi
      Autonomous Area.

               

            	
               

              Attn:
      Company Secretary

            	
              Fax:

              +______________

            


    

    


     

    


    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    
      	
              EXECUTED as a DEED by

            	
              )

            
	
              Limited Liability
      Company Neftebitum

            	
              )

            
	
              Director

            	
              )

            
	
              Gainulin
      Rinat Gadulzhanovich

            	)
	 
      	
              /s/ Gainulin
      Rinat
      Gadulzhanovich

            
	 
      	
              Signature

            


    

     

    
      	
              EXECUTED as a DEED by

            	
              )

            
	
              Siberian
      Energy Group Inc.

            	
              )

            
	
              Chairman
      and CEO

            	
              )

            
	
              David
      Zaikin

            	
              )

            
	 
      	
              /s/
      David
    Zaikin

            
	 
      	
              Signature

            


    

     

    
      	
              EXECUTED on behalf
      of

            	
              )

            
	
              LLC
      Kondaneftegaz

            	
              )

            
	
              Director

            	
              )

            
	
              Gainulin
      Rinat Gadulzhanovich

            	
              )

            
	 
      	
              /s/ Gainulin Rinat
      Gadulzhanovich

            
	 
      	
              Signature

            


    

    


     

    
      
        
        

      

      
        -9-