UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark  One)

[X]  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT
     OF  1934

                  For the quarterly period ended June 30, 2006

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT

                  For the transition period from            to
                                                 -----------   ------------

                        Commission file number 333-118902

                           SIBERIAN ENERGY GROUP INC.
                           --------------------------
        (Exact name of small business issuer as specified in its charter)

             NEVADA                                        52-2207080
   (State or other jurisdiction of            (IRS Employer Identification No.)
   incorporation or organization)

               275 Madison Ave, 6th Floor, New York, NY 10016, USA
               ---------------------------------------------------
                    (Address of principal executive offices)

                                 (212) 828-3011
                                 --------------
                         (Registrant's telephone number)


     Check whether the registrant (1) has filed all reports required to be filed
by  Section  13  or  15(d) of the Exchange Act during the past 12 months (or for
such  shorter period that the registrant was required to file such reports), and
(2)  has  been subject to such filing requirements for the past 90 days. Yes [X]
No  [ ]

     As  of August 9, 2006, 11,584,497 shares of Common Stock of the issuer were
outstanding  ("Common  Stock").

     Indicate  by  check  mark  whether  the  registrant  is a shell company (as
defined  in  Rule  12b-2  of  the  Exchange  Act).  Yes  [ ]  No  [X].


                          PART I. FINANCIAL INFORMATION

ITEM  1.  FINANCIAL  STATEMENTS


<PAGE>

                           SIBERIAN ENERGY GROUP INC.
                          (A  DEVELOPMENT  STAGE  COMPANY)

                             CONDENSED  CONSOLIDATED
                               FINANCIAL  STATEMENTS

                                  JUNE  30,  2006


<PAGE>

REPORT  OF  INDEPENDENT  REGISTERED  PUBLIC  ACCOUNTING  FIRM


The  Board  of  Directors  and  Stockholders
Siberian  Energy  Group  Inc.


We  have  reviewed  the  accompanying  condensed  consolidated  balance sheet of
Siberian  Energy  Group  Inc. (a development stage company) as of June 30, 2006,
and  the  related condensed consolidated statements of operations, stockholders'
equity,  and  cash  flows  for  the three and six months ended June 30, 2006 and
2005,  and  the cumulative period of development stage activity (January 1, 2003
through  June  30, 2006).   These financial statements are the responsibility of
the  Company's  management.

We  conducted  our  review  in  accordance  with standards of the Public Company
Accounting  Oversight  Board  (United  States).  A  review  of interim financial
information  consists principally of applying analytical procedures to financial
data  and  making  inquiries of persons responsible for financial and accounting
matters.  It  is  substantially  less  in  scope  than  an  audit  conducted  in
accordance  with  the  auditing  standards  of  the  Public  Company  Accounting
Oversight  Board,  the  objective  of  which  is  the  expression  of an opinion
regarding  the  financial  statements  taken as a whole.  Accordingly, we do not
express  such  an  opinion.

Based  on our review, we are not aware of any material modifications that should
be  made  to the accompanying interim financial statements referred to above for
them  to  be  in conformity with accounting principles generally accepted in the
United  States  of  America.

We  have previously audited, in accordance with auditing standards of the Public
Company  Accounting  Oversight  Board,  the  consolidated  balance  sheet  as of
December  31,  2005,  and  the  related  consolidated  statements of operations,
stockholders'  equity  and  cash  flows  for  the year then ended (not presented
herein);  and  in  our  report  dated March 27, 2006, we included an explanatory
paragraph  describing  conditions  that  raised  substantial  doubt  about  the
Company's  ability  to  continue  as  a  going  concern.  In  our  opinion,  the
information  set  forth in the accompanying condensed consolidated balance sheet
as  of December 31, 2005 is fairly stated, in all material respects, in relation
to  the  balance  sheet  from  which  it  has  been  derived.


Lumsden  &  McCormick,  LLP
Buffalo,  New  York
July  31,  2006

<PAGE>

<TABLE>
<CAPTION>

SIBERIAN ENERGY GROUP INC. (A Development Stage Company)
--------------------------------------------------------

CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                   (UNAUDITED)
                                                                      JUNE 30,   December 31,
                                                                       2006          2005
                                                                   ------------  ------------
<S>                                                                     <C>           <C>
ASSETS
CURRENT ASSETS:
  Cash                                                             $     46,281  $     11,551
  Management fee receivable                                              25,000        50,000
  Prepaid expenses and other                                                270           270
                                                                   ------------  ------------
                                                                         71,551        61,821
                                                                   ------------  ------------

Investment in joint venture                                                   -             -

Property and equipment, net                                               1,386         1,539
                                                                   ------------  ------------

                                                                   $     72,937  $     63,360
                                                                   ------------  ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Demand loan from individual, interest at 6.5%                    $     64,548  $     62,500
  Accounts payable:
    Related party - stockholders                                        421,343       328,376
    Related party - Baltic Petroleum                                     47,551        43,664
    Others                                                              839,944       117,230
  Accrued payroll                                                       328,738       304,341
                                                                      1,702,124       856,111
                                                                   ------------  ------------

STOCKHOLDERS' EQUITY:
  Common stock - authorized 100,000,000 shares, $.001 par value,
    11,560,962 and 11,487,886 issued and outstanding                     11,561        11,488
  Additional paid-in capital                                          2,840,193     1,786,286
  Accumulated deficit
    Pre-development stage                                              (449,785)     (449,785)
    Development stage                                                (4,025,336)   (2,138,234)
  Accumulated other comprehensive income (loss)                          (5,820)       (2,506)
                                                                   ------------  ------------
                                                                     (1,629,187)     (792,751)
                                                                   ------------  ------------

                                                                   $     72,937  $     63,360
                                                                   ------------  ------------
</TABLE>

See accompanying notes.

<PAGE>

<TABLE>
<CAPTION>

SIBERIAN ENERGY GROUP INC. (A Development Stage Company)
--------------------------------------------------------
                                                                                                    For the
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                    cumlative
                                                                                                   period of
                                                For the three            For the six              Development
                                                 months ended            months ended           Stage Activity-
                                                 ------------            ------------           January 1, 2003
                                             JUNE 30,     June 30,     JUNE 30,     June 30,        through
                                              2006         2005          2006         2005       June 30, 2006
                                          ------------  -----------  ------------  -----------  ---------------
<S>                                            <C>          <C>          <C>           <C>            <C>
Revenues and other income:
  Management fees from joint venture      $     75,000  $         -  $    150,000  $         -  $       225,000
  Gain from entrance into joint venture              -            -             -            -          364,479
  Other                                              -            -             -            -            6,382
                                          ------------  -----------  ------------  -----------  ---------------
    Total revenues and other income             75,000            -       150,000            -          595,861
                                          ------------  -----------  ------------  -----------  ---------------

Expenses:
  Salaries                                      35,251      126,806        68,562      248,724        1,143,109
  Professional and consulting fees           1,433,429       42,497     1,589,145       80,845        2,294,073
  Rent and occupancy                            10,009       18,499        19,746       42,630          156,291
  Depreciation and amortization                     81        9,384           167       18,768          102,547
  Finance charges and interest                   2,416       16,093         6,264       16,093           53,871
  Marketing and other                          161,727      106,728       353,218      136,481          871,306
                                          ------------  -----------  ------------  -----------  ---------------
    Total expenses                           1,642,913      320,007     2,037,102      543,541        4,621,197
                                          ------------  -----------  ------------  -----------  ---------------

    Loss before income taxes                 1,567,913      320,007     1,887,102      543,541        4,025,336

Provision for income taxes (benefit)                 -            -             -            -                -
                                          ------------  -----------  ------------  -----------  ---------------

    Net loss (development stage)          $  1,567,913  $   320,007  $  1,887,102   $  543,541  $     4,025,336
----------------------------------------  ------------  -----------  ------------  -----------  ---------------

Basic and diluted loss per common share   $      (0.14) $     (0.03) $      (0.16)  $    (0.06) $         (0.49)
                                          ------------  -----------  ------------  -----------  ---------------

Weighted average number of basic and
  diluted common shares outstanding         11,453,792    9,402,886    11,487,319    9,402,886        8,255,970
----------------------------------------  ------------  -----------  ------------  -----------  ---------------
</TABLE>

See accompanying notes.

<PAGE>

<TABLE>
<CAPTION>

SIBERIAN ENERGY GROUP INC. (A Development Stage Company)
--------------------------------------------------------

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the cumulative period of Development Stage Activity - January 1, 2003 through June 30, 2006
-----------------------------------------------------------------------------------------------

                                                                 Common Stock
                                                                 -------------               Accumulated
                                                                   Additional                   Other
                                         Number of                  Paid-In    Accumulated   Comprehensive             Comprehensive
                                          Shares      Par Value     Capital      Deficit     Income (Loss)     Total        Loss
                                          -------     ----------    --------   -----------   -------------     -----        ----
<S>                                         <C>          <C>          <C>          <C>            <C>           <C>          <C>
Balance, January 1, 2003
  (pre-development stage)                 4,902,886   $    4,903    $430,195   $  (449,785)  $           -    $(14,687)

Loss for the year - 2003                          -            -           -      (422,516)              -    (422,516)  $ (422,516)
                                                                                ---------------------------------------------------
Shares issued in acquisition              1,000,000        1,000      (1,000)            -               -           -
                                          ----------------------------------------------------------------------------
   Balance, December 31, 2003             5,902,886        5,903     429,195      (872,301)              -    (437,203)
                                          ----------------------------------------------------------------------------
Loss for the year - 2004                          -            -           -      (833,567)              -    (833,567)

Foreign currency translation adjustment                        -           -             -         (53,120)    (53,120)  $ (886,687)
Shares issued in acquisition                                                    -------------------------------------
                                          3,450,000        3,450     746,550             -               -     750,000
Shares issued for professional services      50,000           50       9,950             -               -      10,000
Other                                             -            -      34,426             -               -      34,426
                                           ---------------------------------------------------------------------------
   Balance, December 31, 2004             9,402,886        9,403   1,220,121    (1,705,868)        (53,120)   (529,464)
                                           ---------------------------------------------------------------------------
Loss for the year - 2005                          -            -           -      (882,151)                   (882,151)
Foreign currency translation adjustment           -            -           -             -          50,614      50,614   $ (831,537)
                                                                                --------------------------------------
Shares issued for professional services     385,000          385     138,365             -               -     138,750
Shares issued for accrued salaries        1,700,000        1,700     210,800             -               -     212,500
  Warrants granted for professional               -           -      217,000             -               -     217,000
     services                            -----------------------------------------------------------------------------

  Balance, December 31, 2005             11,487,886       11,488   1,786,286    (2,588,019)         (2,506)   (792,751)
                                         -----------------------------------------------------------------------------
  Loss for six months - 2006                      -            -           -    (1,887,102)              -  (1,887,102)
Foreign currency translation adjustment           -            -           -             -          (3,314)     (3,314) $(1,890,416)
                                                                                ---------------------------------------------------
Shares issued for employee stock            142,500          143      13,857             -               -      14,000
     option plan
Shares issued for professional services     540,000          540     635,440             -               -     635,980
Warrants granted for professional                 -            -     404,000             -               -     404,000

Shares cancelled                           (609,424)        (610)        610             -               -           -
                                         -------------------------------------------------------------------------------
                                         11,560,962   $   11,561  $2,840,193   $(4,475,121)  $      (5,820)  $(1,629,187)
                                         ===============================================================================
</TABLE>

See accompanying notes.

<PAGE>

<TABLE>
<CAPTION>

SIBERIAN ENERGY GROUP INC. (A Development Stage Company)
--------------------------------------------------------

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                       For the
                                                                                     cumulative
                                                                                     period of
                                                                                    Development
                                                                                  Stage Activity-
                                                                                  January 1, 2003
                                                                                      through
                                                                                     June 30,
   For the six months ended June 30,                                                   2006
   ---------------------------------                                                   ----
<S>                                                          <C>           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss (development stage)                           $ (1,887,102) $ (543,541)  $(4,025,336)
  Depreciation and amortization                                   167      18,768       102,547
  Common stock and warrants issued
    for professional services and salaries                  1,039,980           -     1,618,230
  Gain from entrance into joint venture                             -           -      (364,479)
  Changes in other current assets and
    current liabilities:
      Prepaid expenses and other assets                        25,000     (19,892)     (178,662)
      Accounts payable and accrued expenses                   845,999    (163,282)    3,916,448
                                                         ------------  ----------
        NET CASH FLOWS FROM (FOR) OPERATING ACTIVITIES         24,044    (707,947)    1,068,748
                                                         ------------  ----------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Expenditures for licenses and related                             -    (248,032)     (528,961)
  Expenditures for oil and gas properties                           -     (36,456)     (770,750)
  Expenditures for property and equipment                           -      (1,710)       (2,868)
  Cash received in acquisition                                      -           -             6
  Cash received from entrance into joint venture                    -           -       175,000
                                                         ------------  ----------
        NET CASH FLOWS FOR INVESTING ACTIVITIES                     -    (286,198)   (1,127,573)
                                                         ------------  ----------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from loans                                           -     982,191        62,500
  Common stock issued for employee stock option plan           14,000           -        14,000
  Additional paid-in capital                                        -       1,631        34,426
                                                         ------------  ----------  ------------
        NET CASH FLOWS FROM FINANCING ACTIVITIES               14,000     983,822       110,926
                                                         ------------  ----------  ------------

Effect of exchange rates on cash                               (3,314)     32,037        (5,820)
                                                         ------------  ----------  ------------

    Net increase in cash                                       34,730      21,714        46,281

Cash - beginning                                               11,551           -             -
                                                         ------------  ----------  ------------

    Cash - ending                                        $     46,281  $   21,714   $    46,281
-------------------------------------------------------  ------------  ----------  ------------
</TABLE>

See accompanying notes.

<PAGE>

SIBERIAN  ENERGY  GROUP  INC.  (A  Development  Stage  Company)

NOTES  TO  CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS
----------------------------------------------------

1.  BASIS  OF  PRESENTATION:

The  accompanying unaudited consolidated financial statements of Siberian Energy
Group  Inc. (the Company) include the accounts of the Company and its 100% owned
subsidiaries.  These  financial  statements  have  been prepared pursuant to the
rules  of the Securities and Exchange Commission (SEC) interim reporting, and do
not  include  all  of the information and note disclosures required by generally
accepted  accounting  principles.  These  consolidated  financial statements and
notes  herein  are  unaudited, but in the opinion of management, include all the
adjustments  (consisting  of  only normal recurring adjustments) necessary for a
fair  presentation  of the Company's financial positions, results of operations,
and  cash  flows  for the periods presented.  Accounting policies used in fiscal
2006  are  consistent  with  those  used in the cumulative period of Development
Stage  Activity  -  January  1, 2003 through December 31, 2005.  These financial
statements should be read in conjunction with the Company's audited consolidated
financial  statements  and  notes  thereto.  Interim  operating  results are not
necessarily indicative of operating results for any future interim period or the
full  year.

2.  THE  COMPANY  AND  DESCRIPTION  OF  BUSINESS:

Through  October  14,  2005,  the  Company  operated  through  its  wholly owned
subsidiary, Zaural Neftegaz (ZNG).  ZNG is engaged in the business of exploiting
and  developing certain oil and gas and other petroleum products licenses issued
by  the  Russia's  Kurgan  Provincial  Government for the Eastern part of Kurgan
Province.  ZNG  has  its  principal  place  of  business  in Kurgan City, Kurgan
Province,  Russia,  and  is  the  sole  and  exclusive  owner of the exploration
licenses.

On  October  14, 2005, the Company entered into a joint venture agreement with a
third  party, Baltic Petroleum Limited (BP). The Company transferred 100% of its
ownership  interest in ZNG to the Joint Venture and transferred 50% of the Joint
Venture  interest  to  BP for $175,000 and the agreement by BP to provide future
funding  to  the  Joint  Venture  as  detailed  in a Joint Venture Shareholder's
Agreement.  Joint  Venture  will be engaged in the exploration for, development,
production  and sale of oil and gas assets in the Western Siberian region of the
Russian  Federation  and the former Soviet Union. Effective April 27, 2006, BP's
parent  holding  company,  Baltic Oil Terminals, PLC, was admitted to trading on
AIM, a market operated and regulated by London Stock Exchange, PLC.

Upon  signing  of  the Joint Venture agreement, BP, ZNG, and a financing company
wholly  owned  by  BP, entered into a deed of novation regarding a previous loan
made  to ZNG by BP and immediately thereafter the financing company entered into
a  loan  agreement  with  ZNG.  Under  the  loan agreement, the lender agreed to
provide  a  loan  of  $6,874,325  for  the purpose of research activities in the
Kurgan  region.

BP  released  the  Company  from  its obligations under a guarantee and security
interest  given  by  the  Company  to  BP  regarding  an  initial  loan  to ZNG.

Additional  details  surrounding  the Company's involvement in the Joint Venture
follow:

     -    During  the  arrangement,  the  Company  will  receive  a  monthly
          management  fee  of  $25,000  from  ZNG;
     -    Profits  from  the  Joint  Venture  are  allocated  50% to the Company
          only after all financing of ZNG are settled with BP and BP's financing
          subsidiaries;
     -    Although  the  Company  and  BP  each  own  50% of the Joint Venture's
          shares  and each appoint 50% of the Directors to the Joint Venture, BP
          always  has  an  additional  casting vote on Board of Director related
          issues;
     -    The Company  has  essentially  no  liability  to  guarantee  the debts
          of  the  Joint  Venture;
     -    The Company  recognized  a  settlement  gain  of  $364,479 as a result
          of  the  initial joint venture transaction. This resulted primarily to
          adjust  the  Company's negative investment to zero as of the agreement
          date.  All  activity  of  ZNG  before  the agreement date is otherwise
          included  in  these  financial  statements.

<PAGE>

Effective  October  14,  2005,  the  Company's  investment  in  Joint Venture is
recorded  on  the equity method of accounting.  Since cumulative losses of Joint
Venture exceed the Company's investment, the investment asset is carried at zero
value  as  of  June  30,  2006  and  December 31, 2005.  Loan financing balances
outstanding  of  Joint Venture to BP and BP's financing subsidiaries at June 30,
2006  totals  approximately  $5,300,000.  Activities of ZNG prior to October 14,
2005  are  otherwise included in the consolidated accounts of the Company in the
accompanying  financial  statements.

In June 2006, ZNG won auctions and was awarded three new oil and gas exploration
and  production licenses, bringing the total number of licenses to seven and the
total  area  covered by the licenses to 1 million acres.  In connection with the
license  acquisitions,  the  Company  committed  to  issue  600,000  shares to a
consulting  company  in  consideration  for  its  assistance  in the application
process  as  well  as  obtaining  existing  geological  information  (seismic,
gravimetric)  relevant  to  potential licensed areas.  The value of these shares
totaled  $1,113,000  and are included in professional and consulting fees in the
accompanying  condensed  consolidated  statements of operations.  200,000 shares
were  issued during the period ended June 30, 2006; the value of unissued shares
totaling  $742,000  is  recorded  as  a  liability  at  June  30,  2006.

On  a  moving forward basis, the Company anticipates further business expansion.
It  is  constantly  evaluating  new  mineral  resource assets, both explored and
unexplored,  as  part  of  its  growth  strategy.

The  Company  was  incorporated  in  the State of Nevada on August 13, 1997, and
previously provided comprehensive outpatient rehabilitation services to patients
suffering  from  work,  sports  and  accident  related  injuries. All activities
related  to  the  Company's  previous  business  ventures  were  essentially
discontinued  prior  to  January 1, 2000. Predecessor names of the Company since
its  inception  include Trans Energy Group Inc., 17388 Corporation Inc., Talking
Cards  Inc., Oyster King Incorporated and Advanced Rehab Technology Corporation.

3.  INCOME  TAXES:

At  June  30,  2006,  the  Company  has  estimated  U.S.  tax net operating loss
carryforwards totaling approximately $3,668,000. These carryforwards may be used
to  offset future taxable income, and expire in varying amounts through 2006. No
tax  benefit has been reported in the financial statements, however, because the
Company  believes  there  is  at  least a 50% chance that the carryforwards will
expire unused. Accordingly, the $734,000 estimated cumulative tax benefit of the
loss  carryforward  has been offset by a valuation allowance of the same amount.

4.  LOSS  PER  COMMON  SHARE:

Basic  and  diluted loss per common share is computed using the weighted average
number  of  common  shares  outstanding  during the period.  Shares issuable for
common  stock  options  may have had a dilutive effect on earnings per share had
the  Company  generated  income  during  the  periods  through  June  30,  2006.

5.  GOING  CONCERN:

These financial statements have been prepared assuming the Company will continue
as  a gong concern, however, since inception of its current endeavor in 2003, it
has  not  earned substantial revenues and is considered to be in the development
stage,  which  raises substantial doubt about its ability to continue as a going
concern.

Management  is  of the opinion that the Joint Venture arrangement established in
2005  will  successfully  generate  allocable profits to the Company in the near
term.

For  the  cumulative  period  ended June 30, 2006, the Company has obtained cash
financing  from  organizing  stockholders  and  employees  in the form of loans,
advances,  and  deferred  salaries.  However,  there  can  be no certainty as to
availability of continued financing in the future.  Failure to obtain sufficient
financing may require the Company to reduce its operating activities.  A failure
to  continue  as a going concern would then require stated amounts of assets and
liabilities  be  reflected  on  a  liquidation basis which could differ form the
going  concern  basis.

<PAGE>

ITEM  2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERATION

CERTAIN STATEMENTS IN THIS QUARTERLY REPORT ON FORM 10-QSB (THIS "FORM 10-QSB"),
CONSTITUTE "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM
ACT  OF 1995 (COLLECTIVELY, THE "REFORM ACT"). CERTAIN, BUT NOT NECESSARILY ALL,
OF  SUCH  FORWARD-LOOKING  STATEMENTS  CAN  BE  IDENTIFIED  BY  THE  USE  OF
FORWARD-LOOKING  TERMINOLOGY  SUCH AS "BELIEVES", "EXPECTS", "MAY", "SHOULD", OR
"ANTICIPATES", OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE
TERMINOLOGY, OR BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES.
SUCH  FORWARD-LOOKING  STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES
AND  OTHER  FACTORS  WHICH  MAY  CAUSE  THE  ACTUAL  RESULTS,  PERFORMANCE  OR
ACHIEVEMENTS  OF  SIBERIAN  ENERGY  GROUP INC. ("SIBERIAN", THE "COMPANY", "WE",
"US"  OR  "OUR") TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE
OR  ACHIEVEMENTS  EXPRESSED  OR  IMPLIED  BY  SUCH  FORWARD-LOOKING  STATEMENTS.
REFERENCES  IN  THIS FORM 10-QSB, UNLESS ANOTHER DATE IS STATED, ARE TO JUNE 30,
2006.

Investors  should  also  take  note  of the fact that some of the more technical
terms  relating  to the Company's operations as described below are explained in
greater  detail  under  exhibit  99.1,  incorporated  by  reference  hereto.

BUSINESS  DEVELOPMENT

Siberian  Energy  Group  Inc.  was  formed as a Nevada corporation on August 13,
1997,  as Advanced Rehab Technology Corporation. Subsequently, on March 9, 2001,
the  Company  changed its name to Talking Cards, Inc.; on February 12, 2002, the
Company  changed  its  name to Oysterking Incorporated; on December 3, 2002, the
Company  changed  its  name  to  17388  Corporation  Inc.,  at  which  point the
controlling  interest  of  the Company was sold and a new board of directors was
appointed;  on  May  5, 2003, the Company changed its name to Trans Energy Group
Inc.;  and  on December 3, 2003, the Company changed its name to Siberian Energy
Group  Inc.

On  September  17,  1999, the Company affected a 1-for-30 reverse stock split. A
subsequent  3-for-1  forward split was consummated on October 2, 2000. All share
amounts  subsequently  listed  are retroactively adjusted to reflect these stock
splits  unless  otherwise  provided.  All  activities  related  to the Company's
business  were  discontinued  prior  to  January  1,  2000 and the Company began
looking  for  opportunities  to  acquire  an  operating  business.

<PAGE>

In  the spring of 2003, the balance of the Company's shares was purchased by new
shareholders  who stepped into the management of the Company and defined its new
business  direction  as  an oil and gas exploration company. In contemplation of
the  Company's  acquisition  of  a  Russian oil and gas exploration company, the
Company  changed  its  name  to  Trans  Energy  Group,  Inc.

On  May  9,  2003,  the  Company  entered  into  an  Acquisition  Agreement (the
"Acquisition  Agreement")  by  and among the Company, Zaural Neftegaz, a Russian
corporation  ("ZNG"),  the  shareholders of ZNG and Oleg Zhuravlev, President of
ZNG.  Pursuant to the Acquisition Agreement, the Company acquired a 51% interest
in ZNG by issuing to ZNG 2,000,000 shares of the Company's Common Stock. In June
2004,  the  Company purchased the remaining 49% of ZNG in exchange for 6,900,000
shares  of  the  Company's Common Stock, making ZNG a wholly owned subsidiary of
the  Company. ZNG holds seven (7) oil and gas licenses (see "Patents, Trademarks
and  Licenses"  below) for the rights to prospect, explore, drill and remove oil
and  gas  (the  "Exploration Rights") in the eastern parts of Kurgan Province in
Russia.  The Company had no affiliation with ZNG prior to the acquisition in May
2003.

On  May  2,  2005,  the Company affected a 1:2 reverse stock split and all share
amounts  listed  throughout this report on Form 10-QSB reflect such split unless
otherwise  stated.

All  dollar  amounts  used  throughout this Report are in United States dollars,
unless  otherwise  stated.  All amounts in Canadian dollars used throughout this
Report are proceeded by CDN, for example CDN $500, is referring to $500 Canadian
dollars.

BUSINESS  OPERATIONS

We  are  a  development  stage  company,  which  is  seeking  opportunities  for
investment  in  and/or  acquisition  of  small  to  medium  companies in Russia,
specifically in the oil and gas industry. We are currently evaluating investment
and  joint  venture  opportunities  throughout  Russia.

Until  October  14, 2005, the Company's operations were conducted solely through
its wholly owned subsidiary, Zaural Neftegaz ("ZNG") a development stage oil and
gas  exploration  company  located  in  the  Western  Siberian Region of Russia.
However,  on  October  14,  2005,  the  Company  entered  into  a  Joint Venture
agreement,  whereby  the  Company  transferred 100% of the ownership of ZNG to a
newly  formed  Joint  Venture  company, Zauralneftegaz Limited ("ZNG, Ltd."), of
which  the  Company  owns 50% of pursuant to the Joint Venture agreement entered
into  on  October  14,  2005  (as  described in greater detail below under Joint
Venture Agreement). As a result of the Joint Venture and the transfer of 100% of
ZNG to the Joint Venture, the Company anticipates targeting other potential long
term  investments  in Russia, and working with its partner in the Joint Venture,
Baltic  Petroleum  (E&P) Limited ("BP"), to continue the oil and gas exploration
activities  through  their  co-ownership  of  the  Joint  Venture  and  ZNG.

<PAGE>

DESCRIPTION  OF  ZNG

ZNG  was  created  to explore and develop new hydrocarbon fields and oil and gas
properties  in the Kurgan region of South-West Siberia, Russia. ZNG has compiled
data  in  the  Eastern  part of the Kurgan region by analyzing prior geological,
geophysical  and  lithographic  exploration works in the region, data, maps, and
reports  from  12  test  wells  drilled  between  1979-1986,  profile  sections,
correlation  schemes,  and  geographic maps of the region. ZNG has also obtained
core  samples from parametric wells drilled in prior years on the licensed areas
and adjacent territories in the Eastern part of Kurgan region during the initial
search  for  oil  and  gas  in  the  region,  and performed analysis of the data
provided  by  the  samples.

In  March  2003,  ZNG  acquired  four  5-year  exploration  licenses  through  a
government  tender,  which licenses expire in March 2008, and which licenses are
for  concessions covering a total territory of 643,000 acres. Upon expiration of
the  licenses, ZNG will have, subject to the signing of the Subsoil Legislation,
preferential  right  to apply for the full production license for the term of 25
years.

The  Mokrousovsky  license  is  the  largest  license which ZNG currently holds,
encompassing  a  total  of  240,000  acres,  followed by the West Suersky, which
covers  230,000  acres,  the  Privolny,  which  covers  123,000  acres,  and the
Orlovo-Pashkovsky  license,  which  covers  50,000  acres.

In  June  2006  through participation in governmental auctions, ZNG successfully
obtained  three  more  oil  and  gas  licenses  in the Kurgan region of Siberia,
Russia:  the  Yuzno-Voskresenski,  Petuhovski, and Lebyashevsky parcels. The new
licenses  are  for  the  period  of  25  years  and  allow  both exploration and
production  on  the  licensed areas. The total cost paid at the auctions for the
three  new  licenses  by  ZNG  was  approximately  $425,000.

Brief  characteristics  of  the  three  new  blocks  are  given  below:

YUZHNO-VOSKRESENSKI  BLOCK
Total  area  approximately  130,000  acres  (520  square  kilometers)

          The  Yuzhno-Voskrenski  block  is  located  in  the  Kurgan  region of
          Russia,  10-40  km  to  the  west  of the center of the administrative
          region  Chastoozerye.

          The  territory  of  the  block  has  significant  prior  exploration
          data.  The area is covered by a geological survey (1:200,000 scale), a
          gravimetric  survey  (1:100,000  scale),  and  an  aeromagnetic survey
          (1:50,000  scale). From 1979 to 1980, seismic surveys were carried out
          on  the  block  implementing  refraction  sounding  and  deep  seismic
          sounding  methods,  which  partially  covered the block area. Regional
          seismic profiling and 2D seismic surveys and seismic reflection method
          were  also  performed here. Additionally, three parametric wells along
          the  Kurgan  regional  geological  and  geophysical  profile have been
          drilled  during  the prior initial exploration works. ZNG has obtained
          the  source  geological  data  from  these  wells.

<PAGE>

          Through  these  studies,  two  structures  were  identified  and  the
          placement  of wildcat wells with the purpose of uncovering and testing
          of  oil-source  rocks  was  determined.

          The  tectonic  framework  of  the  block is determined by its location
          in the central part of Vagay-Ishimskaya depression, where sediments of
          terrigenous-carbonate  formation  of  Middle  Paleozoic  are  well
          developed.

PETUKHOVSKY  BLOCK
Total  area  approximately  208,000  acres  (840  square  kilometers)

          The  Petukhovsky  block  is  located  between  the  towns of Makushino
          and  Petukhovo,  Russia,  further  to  the  south of the Kurgan Region
          boundary.

          Prior  exploration  works  on  the  block are represented by a general
          geological  survey  (1:200,000  scale).  From  1979  to  1980, seismic
          surveys  were  carried  out  by  refraction  sounding and deep seismic
          sounding  methods,  which partially covered the block area. The Kurgan
          regional  seismic  profile  crosses the block and to the South-West of
          the  block  is Sukhmensky regional seismic profile acquired by seismic
          reflection  and  correlation  refraction  methods.

          Four  deep  cored  wells  drilled  both  in the territory of the block
          and  in the adjacent areas provide an idea of the geological structure
          of  the  block.  The  block  is  situated  within the Vagay-Ishimskaya
          depression  of  the Tobol-Ishimsky Paleozoic basin. The geological and
          tectonic  structure  of  the block is complex. The western part of the
          block  is  formed  by  basalt  liparite  formations  and
          terrigenous-carbonate  formations  of  Middle  Paleozoic;  the
          south-eastern  part - by Lower Paleozoic rocks. Per drilling data, the
          thickness  of  Mesozoic-Cenozoic  sediments  is  more  than 750 meters
          thick,  with  lower formations of crust of weathering up to 100 meters
          thick;  and  even  lower  Paleozoic  sediments.  During the previously
          conducted  drilling  works  an  ingress  of gas was marked (mixture of
          nitrogen  and  methane)  in  the  area  close  to  block.

LEBYAZHEVSKY  BLOCK
Total  area  42,000  acres  (170  square  kilometers)

          The  Lebyazhevsky  block,  with  a  total  area  of  170  square
          kilometers  (approximately  43,990  acres),  is  located in the Kurgan
          Region,  of  Siberia, Russia, 13-22 km to the South-East of the center
          of  administrative  region  of  Lebyazhye.

          The  block  is  covered  by  a  general  geological  survey (1:200,000
          scale),  gravimetric  survey  (1:100,000  scale),  aeromagnetic survey
          (1:50,000  scale)  and partially by seismic surveys by common-midpoint
          (CMP)  and  seismic  reflection  method.

<PAGE>

          The  main  horizons  (complexes)  of  potential oil and gas content in
          the  block  are  Paleozoic  (Devonian)  and  Triassic  sediments.

                ------------------------------------------------

The  acquisition  of  the three new licenses increased the total area covered by
the  licenses  held by ZNG from 643,000 acres to over 1 million acres. All seven
licensed  areas  are  located  in  the  Eastern  part  of  Kurgan  region,  have
well-developed  infrastructure,  including  close  proximity  to  the  major oil
pipeline,  and  have  available  existing  prior  geological  data.

ZNG  also  has  outstanding applications for two more parcels in the same area -
Zapadno-Petukhovski  and  Orlovo-Pashkovsky-2.  Auctions  for these licenses are
expected  to  take  place in the fourth quarter of 2006; however there can be no
assurance  that  ZNG  will  be  awarded  the licenses to the parcels at auction.

At  the ZNG, Ltd. Board of Directors meeting held in July 2006, the Directors of
ZNG,  Ltd., reviewed the progress of ZNG's geological program and concluded that
sufficient information was obtained through seismotography studies to allow ZNG,
Ltd.,  to  move  forward  with  its  work  program.

Following  detailed data collection, survey and seismic testing ZNG will proceed
with  development of the most prospective licenses first. The West-Suersky block
was  chosen by ZNG as the most promising block of the first group of blocks, and
ZNG  has started studies on this area. ZNG has performed gravimetric surveys and
the  2-dimensional seismic studies through experienced and reputable oil and gas
service  organizations  in  Russia,  "Bazhenov  Geophysical  Expedition" and JSC
"Bashneftegeofizika",  which have been fully completed and reported in May 2006.

Scientific  and technical analysis is being performed by the team of geologists,
which  includes  experts from Exploration Consultants Limited ("ECL"), a leading
international  oil and gas consulting firm (part of RPS Group). Initial analysis
was  completed  by June 30, 2006 and such data will be combined with the results
of  seismic  studies,  which  has  started  on  the  other  licensed  areas.

In  accordance  with  the  work  program,  ZNG has been running an extensive Gas
Seismic  Program  on  two  blocks  (Privolny  and Mokrousovsky). We commissioned
Exotrad  to  carry  out  the  work,  as  they are recognized as one of the world
leaders  in this type of research and survey work. We believe the results of the
program have been encouraging, potentially indicating significant resources , of
which  there  is  no  assurance,  and  ECL  has  recently confirmed that we have
identified  well  defined  geochemical  leads  in  these  two  blocks.

Our next move will be to carry out high definition 2D seismic surveys across the
grids  made  by  the Gas Seismic Program. ZNG plans to commence work in Privolny
and  Mokrousovsky  imminently  using  Bashneftegeofizika.  The  results  of  the
seismic, following processing and interpretation to be carried out in the United

<PAGE>

Kingdom  by ECL, and are expected to be available by the end of October 2006 for
the  Privolny  block  and  by  the  end  of the year for the Mokrousovsky block.
Subject  to  ECL's  recommendations,  drilling  activities are being tentatively
planned  to  commence  in  December  2006.

In  order  to  obtain  the  best  price/quality combination, ZNG has started the
tender  process to appoint a drilling contractor. As of the date of this report,
four  companies have responded to ZNG's invitation to participate in the tender,
however  no  final  decision  has  been  made.

JOINT  VENTURE
--------------

On  October  14,  2005,  the  Company entered into a Joint Venture Shareholders'
Agreement  ("Joint  Venture")  with  Baltic  Petroleum  (E&P) Limited ("BP") and
Zauralneftegaz Limited, the joint venture company ("ZNG, Ltd."), as contemplated
by the Option Agreement, as amended (the "Option"), The Company closed the Joint
Venture  and  transferred  100%  of the outstanding stock of ZNG to ZNG, Ltd. in
connection  with  the  terms and conditions of the Joint Venture. As a result of
such  transfer,  the  Company  holds  50% of the outstanding stock of ZNG, Ltd.,
which  holds  100% of the outstanding stock of the Company's former wholly owned
subsidiary,  ZNG.  ZNG,  Ltd.,  will,  operate through ZNG and be engaged in the
exploration  and  development  of, production and sale of, oil and gas assets in
the  Western  Siberian  region  of  the Russian Federation and the former Soviet
Union  and  as a result of such transfer, the Company no longer has any separate
oil  and  gas  exploration  activities in Kurgan, Russia, other than through its
ownership  of  ZNG,  Ltd.

On  November 9, 2005, ZNG entered into a New Loan with Caspian (the "New Loan").
Under  the loan agreement, Caspian Finance Limited ("Caspian") agreed to provide
a  loan  of  up  to approximately $6,874,325 representing the assumed commitment
under  a prior loan equal to $1,739,658, of which ZNG had received $1,110,654 as
of  November  9,  2005, and a new commitment of up to $5,134,667, to be used for
operations  in the Kurgan region in 2005 and through the first half of 2006. The
New  Loan is available to ZNG until the sixth anniversary of the date of the New
Loan,  or  November  9, 2011 (the "Term").  The New Loan had a total outstanding
balance,  including principal and accrued interest of $3,652,674 as of August 1,
2006.

Interest on any amounts loaned under the New Loan bear interest at the following
rates,  calculated  and accrued on a daily basis, 14% per annum during the first
two  years of the Term, 13% per annum during the third year of the Term; and 12%
thereafter  until  the  end  of  the  Term.

In  the event that ZNG does not make the Interest Payments when due, interest on
the  unpaid  amounts  shall be payable from the due date to the date paid at the
rate  of  6%  per  annum,  calculated  and  accrued  on  a  daily  basis.

<PAGE>

The  New  Loan  is  unsecured  by ZNG, but Caspian reserved the right to request
security  over  all  or some of the assets and/or undertaking of ZNG at any time
prior  to  any drawdown of the New Loan, or while any money is outstanding under
the  New  Loan.

Pursuant  to the New Loan, ZNG is responsible for satisfying all requirements of
Russian  Federation  law  and  regulations  in connection with each advance made
under  the  New  Loan, and ZNG shall indemnify Caspian for any loss or damage it
may  suffer  as  a  result  of  the New Loan. Additionally, ZNG agreed to make a
payment  of  2%  of  any advance to a special deposit account to satisfy Russian
banking  and  currency  control  regulations.

The  New  Loan  provided  for  the  payment  of certain debts of ZNG, which were
incurred  before the Joint Venture. Payments under the New Loan will be executed
in  two  steps,  the  first  of  which  ZNG  has  received,  which  included:

1) $352,665 was paid upon the Company signing the loan agreement, which was used
for:

     o    payment  of  salaries  of  ZNG  for  August  and  September ($32,000);
     o    payment  of  50%  of  the  amount  of  director's  and  shareholder's
          loans  ($170,000);
     o    50%  of  outstanding  rent  payments  ($44,000);
     o    mineral  tax  for  the  second  quarter  of  2005  ($3,865);  and
     o    $102,800  for  gathering  and  coordination  of data in respect to the
          new  licenses ZNG  has  recently  applied  for.

2)  Up  to  $882,699  will  be paid after ZNG submits a letter from the relevant
license authority of the Ministry of Natural resources of the Russian Federation
confirming that the two new licenses which ZNG has applied for, but for which no
auction  has  been conducted in connection with to date, were awarded to ZNG, of
which  there  can  be  no  assurance.  It is anticipated that if received, these
payments  will  be  used  for:

     o    further  payment  for  gathering  and  coordination  of  data  in
          connection  with  the  new  licenses  (up  to  $340,000);
     o    final payments  for  seismic  and  gravimetric  works performed on the
          West-Suerski  field  (up  to  $324,834);
     o    to repay  the  remaining  amounts  owed  by  ZNG  to  directors  and
          shareholders  ($170,000);
     o    to  pay  the  remaining amount of outstanding rent payments ($44,000);
          and
     o    to  pay  mineral  tax  for  the  third  quarter  of  2005  ($3,865).

In  addition  to  the  amounts agreed to be loaned pursuant to the New Loan, ZNG
Ltd.  agreed  to  lend  $78,000  to  the Company to pay for legal and consulting
services  in  connection  with  establishing  of  the Joint Venture. The Company
received  $29,000  of  this  amount in November 2005; and the additional $49,000
will  be  paid after ZNG submits a letter from the relevant license authority of
the Ministry of Natural resources of the Russian Federation confirming that five

<PAGE>

new  licenses  were  awarded  to  ZNG, of which three have been awarded to date.
There  is  no  assurance  the  additional  two  licenses will be awarded to ZNG.

On  November  9,  2005,  ZNG, Ltd. and Caspian entered into a Debenture, whereby
ZNG,  Ltd.  granted  Caspian  a  security  interest  in substantially all of its
assets,  including its 100% ownership of ZNG, to secure the repayment of the New
Loan  Agreement.  Pursuant  to  the  Debenture,  ZNG,  Ltd.  granted  Caspian  a
continuing  security  interest for the payment, performance and discharge of all
the  liabilities  owing  to  Caspian by ZNG, Ltd., in the following assets, both
present  and  future,  from time to time to the extent owned by ZNG, Ltd., or to
the  extent  in  which  it  has  an  interest.

Additionally,  on  November  9,  2005,  ZNG,  Ltd.  and  Caspian entered into an
"Agreement  for  the Pledge of the Participatory Interest in OOO Zauralneftegaz"
(the  "Pledge  Agreement"). Pursuant to the Pledge Agreement, ZNG, Ltd., pledged
its  100%  ownership  interest  in  ZNG to Caspian, which included any proceeds,
dividends,  distributions  or  income  deriving  from  ZNG and any compensation,
whether  monetary or in-kind, deriving from ZNG, received due to the liquidation
or  reorganization of ZNG. The Pledge Agreement shall remain in effect until all
amounts  owed  to  Caspian  by  ZNG,  Ltd.  are  repaid.  Pursuant to the Pledge
Agreement,  ZNG,  Ltd.,  agreed to hold all dividends, interest and other income
deriving  from  and  by  it  for  the account of Caspian, and agreed to pay such
dividends,  interest  and  other  income  to  Caspian  upon  Caspian's  request.

If  ZNG,  Ltd., fails to pay the amounts owed to Caspian, pursuant to the Pledge
Agreement,  Caspian  can sell the 100% interest in ZNG at public auction, in one
or several sales, with an opening bid price of seventy-five percent (75%) of the
value set forth for the value of ZNG in the Pledge Agreement ($7,705,079) at the
first  public  auction  and  fifty  percent  (50%) of the value set forth in the
Pledge Agreement at the second public auction. If the opening bid for ZNG is not
met  at  either the first or second public auction, Caspian shall have the right
to  retain  ZNG,  with  its  value  equal  to 90% of the value set at the second
auction,  and  set-off  its claims secured by ZNG, Ltd. by such value. If ZNG is
sold  at public auction, any and all proceeds from such sale received by Caspian
shall  be  applied  towards  the  discharge  of the amounts owed by ZNG, Ltd. to
Caspian.

AGREEMENT  WITH  ALTERNATIVE  ENERGY  FINANCE,  LTD.

We  previously agreed to issue Alternative Energy Finance Ltd. ("AEF"), of which
Tim Peara is the Managing Director as well as a Director of the Company, certain
warrants  in  connection  with  Mr. Peara introducing the parties who formed the
joint  venture.  Pursuant  to an agreement between AEF and the Company, AEF will
receive compensation based on the total investment made by Baltic Petroleum Ltd.
in  the  Joint Venture. This compensation included a commission of approximately
$18,024 (1% of Baltic's first $1,802,441 investment in the Joint Venture), which
amount  has  not  been paid as of the date of this filing, and 50,068 options to
purchase shares of our common stock at $0.63 per share which were granted to Mr.

<PAGE>

Peara  on  March  6,  2006  and  a commission of $6,673 (1% of Baltic's $667,313
investment in the Joint Venture in the first quarter 2006), which amount has not
been  paid  to  AEF  to date and 17,561 options to purchase shares of our common
stock  at  $0.67  per share for the first quarter of 2006, which were granted to
Mr.  Peara  on  March  31,  2006,  which  options  contain  a  cashless exercise
provision.

On  June 30, 2006, in connection with our agreement with AEF, we agreed to grant
AEF a warrant to purchase 20,412 shares of our common stock at an exercise price
of  $2.02,  which  warrants  contained a cashless exercise feature. The warrants
expire  three  years  from  the  grant  date.  We were also obligated to pay AEF
$23,562  during  the  quarter  ended  June  30,  2006  (equal  to 1% of Baltic's
$2,356,153  investment  in  the Joint Venture in the second quarter 2006), which
amount  has  not  been  paid  to  AEF  to  date.

As  of  August  1, 2006, we owed approximately $47,969 to AEF in connection with
AEF's  introduction  of  the  parties  of the Joint Venture, as described above.

ESTIMATE  OF  AMOUNT  OF  TIME  SPENT  ON  RESEARCH  AND  DEVELOPMENT

Initial  business  plan  was  developed over the course of three months in 2003.
During that time period, market research was conducted. Research and development
activities  on  the  licensed blocks in the Kurgan Region were directly borne by
the  Company  up  to the time the Joint Venture was closed in October 2005. As a
result of the closing of the Joint Venture, these research and development costs
are  now  borne  both  by  ZNG,  Ltd.  (as  described  above)  and ZNG. Research
activities  include  gravimetric,  seismic works and seismotomography studies on
the  licensed  areas. Costs incurred by ZNG and ZNG.Ltd in connection with these
studies  as  of  June  30,  2006  totaled  $2,105,493.

EMPLOYEES

Siberian  Energy  Group  Inc.  ("SEG"),  currently  employs two (2) employees in
management.  Zaural  Neftegaz ("ZNG"), which is 50% owned by the Company through
its  joint  venture  ZNG, Ltd., employs six (6) employees in management and five
(5)  employees  in  support  and  technical  functions.

                               PLAN OF OPERATIONS

As  a result of the Joint Venture, the Company will work with its partner in the
Joint Venture, Baltic Petroleum (E&P) Limited ("BP") to continue the oil and gas
exploration  activities  through  their  co-ownership of the Joint Venture, ZNG,
Ltd.,  which  in  turn  owns  ZNG.  The Company believes that ZNG has adopted an
aggressive  but  sensible work program. In connection with the Joint Venture, BP
will  supply  ZNG with both the technical and financial support that is required
to  fulfill  the  work  program.  If  circumstances  permit  and  ZNG is awarded
additional  blocks  in  the  Kurgan  Region,  we believe that BP will be able to
ensure  that adequate funding is available to support the Work Programs on these
blocks.

<PAGE>

Moving forward, we anticipate targeting other potential long term investments in
Russia,  separate  from  our  involvement in the Joint Venture. Currently we are
evaluating  different  business  opportunities  in  the  oil  and  gas industry,
including  both  development  stage and revenue-producing enterprises. As of the
filing  of  this  report on Form 10-QSB, the Company is researching two projects
which  involve  the  potential  purchase  of  oil  and  gas interests in Western
Siberia,  Russia.  No formal agreements or understandings have been entered into
regarding  these  projects  as  of  the  filing  date  of  this  report.

Historically,  we  have  obtained cash financing from organizing stockholders in
the form of loans and advances. Additionally, during the fourth quarter of 2005,
we restructured much of our debt through the issuance of shares to our creditors
and  obtained  waiver  letters, postponing certain of our liabilities until such
time  as  we  have  generated sufficient profits to pay such debts. These waiver
letters  related  to  the  payment of certain trade debts as well as shareholder
loans  and  accrued  salaries.

In connection with the Joint Venture (described under "Joint Venture Agreement,"
above),  the  Company  will  receive  $25,000  per  month  in management fees in
connection  with  the Joint Venture. The Company, however, can make no assurance
that  $25,000  per  month  will  be  adequate  to  pay its upcoming expenses and
liabilities,  in  which  case the Company plans that its organizing stockholders
will  continue  to  provide  financing for the Company, of which there can be no
assurance.

In the past, we have obtained cash financing from organizing stockholders in the
form  of loans and advances, as a result, amounts totaling $421,343 and $328,376
were  payable  to  the  stockholders  as of June 30, 2006 and December 31, 2005,
respectively.  However,  there  can  be  no  certainty as to the availability of
continued  financing  in  the future. Failure to obtain sufficient financing may
require  us to reduce our operating activities. A failure to continue as a going
concern  would  then  require  stated  amounts  of  assets and liabilities to be
reflected  on  a  liquidation  basis  which  could differ from the going concern
basis.

RESULTS  OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2006, COMPARED TO THE
THREE  MONTHS  ENDED  JUNE  30,  2005

We  had revenues and other income of $75,000 for the three months ended June 30,
2006,  which  was solely due to $25,000 of monthly management fees received from
ZNG,  Ltd.  We  had  $-0- of revenue and other income for the three months ended
June  30,  2005.  We have not generated any revenues to date through the sale of
oil  and/or  gas.

We  had  total  expenses of $1,642,913 for the three months ended June 30, 2006,
compared  to  total  expenses  for  the  three  months  ended  June 30, 2005, of
$320,007,  which represented an increase in total expenses from the prior period
of  $1,322,906  or  413%.

Total  expenses  for  the  three months ended June 30, 2006, included $35,251 of
salaries,  which included $20,272 which was paid to our Chief Financial Officer,
Elena  Pochapski;  $1,433,429  of  professional  and  consulting fees, including
amounts  paid  to  our  legal  counsel  and  accountant  in  connection with the
preparation  and filing of our annual report on Form 10-KSB and quarterly report

<PAGE>

on  Form  10-QSB, and shares of common stock and warrants granted for consulting
services  rendered  during  the  three  months ended June 30, 2006, as described
herein;  $10,009  in  rent  and occupancy; $81 of depreciation and amortization;
$2,416  of  finance  charges  and interest, attributable to interest paid on the
advances  we  received from BP; and $161,727 of marketing and other expenses, in
connection with marketing and advertising in connection with road shows, various
general  and  administration  expenses  relating  to the Company, and travel and
hotel  expenses  in  connection  with  the  research  on  potential  business
acquisitions.  Our Chief Executive Officer, David Zaikin has agreed to waive his
salary and any accrual of his salary until such time as we have sufficient funds
to  pay  such  salary  to  Mr.  Zaikin.

The  main  items  leading to the increase in total expenses for the three months
ended  June  30, 2006, compared to the three months ended June 30, 2005, were an
increase  of  $1,390,932  or  3,273%  in  professional  and  consulting fees, to
$1,,433,429  for  the  three months ended June 30, 2006, compared to $42,497 for
the  three  months  ended  June 30, 2005, and an increase in marketing and other
expenses of $55,634 or 52% to $161,727 for the three months ended June 30, 2006,
compared  to  $106,728 for the three months ended June 30, 2005. The increase in
professional  and  consulting  fees during the three months ended June 30, 2006,
compared  to  the  three  months ended June 30, 2005, is largely attributable to
600,000  shares  of common stock which we agreed to issue to a  consulting firm,
of  which  200,000  shares  were  issued  in  June  2006,  which  had a value of
$1,113,000  in  connection with the acquisition of 3 additional licenses by ZNG,
$18,750  of  advisory  services in connection of company's business development,
$25,678  of  legal  and  accounting  fees   and  the grant of warrants valued at
$276,000  for professional services during the three months ended June 30, 2006,
as  described herein Other expenses were less during the three months ended June
30,  2006, compared to the three months ended June 30, 2005, including salaries,
which  declined  by  $91,555  or  72%, and rent and occupancy, which declined by
$8,490  or  45%,  which decreases were due to the fact that the expenses of ZNG,
our  former  wholly  owned  subsidiary,  which is currently solely owned by ZNG,
Ltd.,  which we own 50% of, are no longer included in our consolidated statement
of operations due to the fact that ZNG is no longer our wholly owned subsidiary,
but  which  expenses  were  included in our consolidated statement of operations
during  the  three  months  ended  June  30,  2005.

We  had  a  net  loss  of  $1,567,913  for the three months ended June 30, 2006,
compared  to a net loss of $320,007 for the three months ended June 30, 2005, an
increase  in  net loss of $1,247,906 or 390% from the prior period. The increase
in  net  loss was mainly attributable to increases in total expenses, namely the
increases  in professional and consulting fees, described above, which increases
were  mainly  due  to  shares  of  common  stock  issued for consulting services
rendered,  which were not sufficiently offset by the $75,000 increase in revenue
for  the  three  months ended June 30, 2006, compared to $-0- of revenue for the
three  months  ended  June  30,  2005.

RESULTS  OF  OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2006, COMPARED TO THE
SIX  MONTHS  ENDED  JUNE  30,  2005

<PAGE>

We  had  revenues and other income of $150,000 for the six months ended June 30,
2006,  which  was solely due to $25,000 of monthly management fees received from
ZNG,  Ltd. We had $-0- of revenue and other income for the six months ended June
30,  2005.  We  have  not generated any revenues to date through the sale of oil
and/or  gas.

We  had  total  expenses  of  $2,037,102 for the six months ended June 30, 2006,
compared  to total expenses for the six months ended June 30, 2005, of $543,541,
which  represented  an  increase  in  total  expenses  from  the prior period of
$1,493,561  or  275%.

Total  expenses  for  the  six  months  ended June 30, 2006, included $68,562 of
salaries,  of which $5,480 was accrued to the Company's Chief Financial Officer,
Elena  Pochapski,  and  another  $29,500  was  accrued  to  other  employees and
consultants;  $1,589,145  of professional and consulting fees, including amounts
paid  to our legal counsel and accountant in connection with the preparation and
filing  of  our annual report on Form 10-KSB and 10-QSB, and warrants and shares
granted  for professional services during the six months ended June 30, 2006, as
described  herein;  $19,746  in  rent  and  occupancy;  $167 of depreciation and
amortization;  $6,264  of finance charges and interest, attributable to interest
paid  on  the  advances we received from BP; and $353,218 of marketing and other
expenses,  in  connection with marketing and advertising in connection with road
shows,  various general and administration expenses relating to the Company, and
travel  and hotel expenses in connection with the research on potential business
acquisitions.  Our Chief Executive Officer, David Zaikin has agreed to waive his
salary and any accrual of his salary until such time as we have sufficient funds
to  pay  such  salary  to  Mr.  Zaikin.

The  main  items  leading  to  the increase in total expenses for the six months
ended  June  30,  2006,  compared to the six months ended June 30, 2005, were an
increase  of  $1,508,300  or  1,866%  in professional and consulting fees, which
increase was mainly due to shares of common stock issued for consulting services
rendered  valued  at $1,113,000, to $1,589,145 for the six months ended June 30,
2006,  compared  to  $80,845  for  the  six  months  ended June 30, 2005, and an
increase  in  marketing and other expenses of $216,737 or 1,588% to $353,218 for
the  six  months  ended  June  30, 2006, compared to $136,481 for the six months
ended June 30, 2005. The increase in professional and consulting fees during the
six  months ended June 30, 2006, compared to the six months ended June 30, 2005,
is  largely attributable to the options and shares issued to certain consultants
for  consulting  services  rendered  during  the six months ended June 30, 2006.
Other  expenses were less during the six months ended June 30, 2006, compared to
the  six  months  ended  June  30,  2005,  including salaries, which declined by
$180,162  or  72.4%, and rent and occupancy, which declined by $22,884 or 53.4%,
which decreases were due to the fact that the expenses of ZNG, our former wholly
owned subsidiary, which is currently solely owned by ZNG, Ltd., which we own 50%
of,  are  no  longer included in our consolidated statement of operations due to
the  fact  that ZNG is no longer our wholly owned subsidiary, but which expenses
were  included in our consolidated statement of operations during the six months
ended  June  30,  2005.

<PAGE>

We had a net loss of $1,887,102 for the six months ended June 30, 2006, compared
to a net loss of $543,541 for the six months ended June 30, 2005, an increase in
net loss of $1,343,561 or 2,472% from the prior period. The increase in net loss
was  mainly attributable to increases in total expenses, namely the increases in
professional and consulting fees and other expenses, described above, which were
not  sufficiently  offset by the $150,000 increase in revenue for the six months
ended  June  30, 2006, compared to $-0- of revenue for the six months ended June
30,  2005.

LIQUIDITY  AND  CAPITAL  RESOURCES

We  had  current  assets  of $71,551 as of June 30, 2006, which included cash of
$46,281; management fee receivable of $25,000; and prepaid expenses and other of
$270.  This  represented  an increase in current assets of $9,730 or 15.7%, from
$61,821  of  current  assets as of December 31, 2005, which was mainly due to an
increase  of  $34,730  in  cash,  which  cash  was  received  from ZNG, Ltd., in
connection with $25,000 monthly management fees, which ZNG, Ltd. is obligated to
pay  us.

We  had  total  assets  of  $72,937  as of June 30, 2006, which included current
assets  of $71,551 and non-current assets of $1,386 relating to net property and
equipment.  This represented an increase of $9,577 or 15.1% from total assets of
$63,360  as  of December 31, 2005, which increase was mainly attributable to the
increase  in  cash caused by the $25,000 monthly management fee which we receive
from  ZNG,  Ltd.

We  had  total  liabilities of $1,702,124 as of June 30, 2006, which were solely
current  liabilities  and  which  included  $64,548  of  demand  loan  from  an
individual,  which  bears  interest  at  6.5%  per  annum,  which  is payable to
Alexander  Kogan,  in  connection  with  a  $62,500  loan made to the Company on
December  27,  2005, which loan is payable on demand within 10 days of notice of
such  demand  by  Mr.  Kogan;  $421,343  of  accounts  payable  to related party
stockholders  in  connection  with  those  shareholders  paying  certain  of our
expenses  from  the  period between January 1, 2003 to June 30, 2006; $47,551 of
accounts  payable  to Baltic in connection with the $29,000 loan advanced to the
Company  from  Baltic,  as  described  above under "Description of Business" and
certain  other  travel  expenses owed to Baltic; $839,944 of accounts payable to
others,  of  which  $763,875 was payable to Business Standard in connection with
consulting  services rendered in connection with the application and auction for
ZNG's  licensed  blocks and various other consulting services rendered to us and
ZNG  in  connection  with  the  blocks;  and  $328,738 of accrued payroll, which
included  $112,500  payable  to  our Chief Executive Officer, David Zaikin which
amount  was  owed to Mr. Zaikin prior to September 2005, at which time he agreed
to stop accruing salary until such time as we have sufficient monies to pay such
salary,  $90,287  payable  to  our Chief Financial Officer, Elena Pochapski, and
$69,241.97  of  accrued  salary  payable  to our former Chief Executive Officer,
Shakeel Adam. Current liabilities of $1,702,124 as of June 30, 2006, represented
an  increase  in  current  liabilities  of  $846,013  or  98% from total current
liabilities  of  $856,111  as  of  December  31, 2005. The main reasons for this
increase  were  an  increase  of $772,714 or 616% in accounts payable to others,

<PAGE>

during the three months ended June 30, 2006, and an increase of $92,967 or 28.3%
in amounts owed to related party stockholders, which was due to certain expenses
paid  on  the  Company's  behalf by the Company's Chief Executive Officer, David
Zaikin.

$763,875  of  accounts  payable  owed  to Business Standard as of June 30, 2006,
include  $21,875  for  business  development  consulting  services  rendered and
$742,000  representing the value of 400,000 shares of common stock that have not
been  issued  to date in connection with an agreement to issue Business Standard
600,000 shares of common stock upon acquisition of three new licenses by ZNG, of
which  200,000  shares  of  common  stock  were  issued  in  June  2006.

Because our cumulative losses associated with the operations of ZNG exceeded our
investment  as  of  the date of the Joint Venture, ZNG is carried on our balance
sheet  at  $-0-  as  of June 30, 2006. Our investment in ZNG will exceed $-0- at
such time as ZNG has cumulative earnings sufficient to repay all loans to Baltic
as  provided  in  the  Joint  Venture.

We  had  negative  net  working capital of $1,630,573 as of June 30, 2006, and a
total  accumulated  deficit of $4,475,121 representing our pre-development stage
and  development  stage  deficit  as  of  June  30,  2006.

We  had  $24,044  of net cash flows from operating activities for the six months
ended  June  30,  2006,  which  included $1,039,980 of common stock and warrants
issued  for professional services and salaries, $845,999 of accounts payable and
accrued  expenses,  $25,00  of  prepaid  expenses  and  other assets and $167 of
depreciation  and  amortization,  which  was  offset  by $1,887,102 of net loss.

We  had $-0- of net cash flows for investing activities for the six months ended
June  30,  2006.

We  had  $14,000  of net cash flows from financing activities for the six months
ended June 30, 2006, which was solely due to $14,000 of net proceeds from common
stock  issued  to  an employee, which was in connection with the exercise of all
100,000 of our Chief Financial Officer Elena Pochapski's, 2003 stock options, at
an  exercise  price  of  $0.14  per  share  in  February  2006.

As  of  August  1,  2006,  ZNG had received $3,394,141 pursuant to the New Loan,
which  amount  includes  $1,110,624 assumed by ZNG in connection with a previous
loan  made to ZNG, and $172,987 of interest on such previous loan.  The New Loan
had  accrued  $85,546  in  interest  as of August 1, 2006, not including accrued
interest  on  the  previous  loan  made  to  ZNG.

Under  the  Joint Venture, we will receive $25,000 per month as a management fee
from  ZNG,  Ltd.  In  addition to the monthly management fee, ZNG Ltd. agreed to
lend  $78,000  to us to pay for legal and consulting services in connection with
establishing  the  Joint Venture. We received $29,000 of this amount in November
2005;  and  will  receive the additional $49,000 if all five of the new licenses

<PAGE>

are  awarded to ZNG, of which three have been awarded to date, and ZNG submits a
letter  from the relevant license authority of the Ministry of Natural resources
of  the  Russian  Federation  confirming  such  awards, of which there can be no
assurance.

Since  our  transfer  of  ZNG  to  the  Joint  Venture,  we  have no oil and gas
operations separate from the Joint Venture, which has not started production and
is  not  currently generating any cash from production, which makes it difficult
for us to pay our maturing obligations. However, we believe that in the long run
a number of trends will favorably affect our liquidity. These trends include the
steady trend of economic growth in Russia in the recent years which is improving
the  liquidity  of  our  potential  customers, and may favorably impact our debt
management  and  the  increasing  overall credit rating in Russia, which we hope
will  lead  to  increased foreign investment in Russian companies and which will
benefit  us  as  well.

We  are  taking  steps  in  an  attempt to raise equity capital and/or to borrow
additional  funds.  There  can  be  no  assurance  that  any new capital will be
available  to  us  or  that  adequate funds for our operations, whether from our
financial  markets,  or  other  arrangements will be available when needed or on
terms  satisfactory  to  us,  if  at  all. We have no commitments from officers,
directors  or  affiliates  to  provide  funding.  Our failure to obtain adequate
financing  may  require  us  to  delay, curtail or scale back some or all of our
operations.  Additionally,  any additional financing may involve dilution to our
then-existing  shareholders.

                                  RISK FACTORS

Our  securities  are  highly speculative and should only be purchased by persons
who  can  afford  to  lose their entire investment in our Company. If any of the
following  risks  actually  occur,  our  business and financial results could be
negatively  affected  to a significant extent. The Company's business is subject
to  many  risk  factors,  including  the  following:


RISK  OF  CONTINUING  OUR  BUSINESS  PLAN  WITHOUT  ADDITIONAL  FINANCING.

We  depend  to  a  great  degree on the ability to attract external financing in
order  to  conduct  future  exploratory  and development activities. The Company
believes  it  can  satisfy  its  cash requirements during the next twelve months
through funding provided by existing stockholders and with amounts received from
the Joint Venture (described above), including $25,000 a month which the Company
is  to  receive from ZNG, Ltd., pursuant to the Joint Venture. Additionally, ZNG
has  received  approximately  $1,110,654  from  BP  pursuant to a prior loan and
another  $2,283,517  pursuant  to  the  New  Loan, which had a total outstanding
balance,  including the assumed balance of the prior loan and accrued and unpaid
interest  on  the  New  Loan as of August 1, 2006, of $3,652,674, which has been
spent  on  various purposes, including paying consultants for services performed

<PAGE>

in  connection  with  surveys  previously performed on the licensed area. As the
Joint  Venture  is  now responsible for the funding of the operations of ZNG, we
believe  our  expenditures  in connection with ZNG will decrease in the upcoming
periods. If we are unable to raise the additional funds required for the planned
activities of the Joint Venture and for additional activities, separate than the
Joint  Venture,  our Company may be forced to abandon its current business plan.
If you invest in our Company and we are unable to raise the required funds, your
investment  could  become  worthless.

ADDITIONAL  LOANS UNDER THE NEW LOAN ARE CONTINGENT UPON ZNG OBTAINING RIGHTS TO
TWO  ADDITIONAL  LICENSES  IN THE KURGAN REGION, WHICH ZNG APPLIED FOR IN AUGUST
AND  SEPTEMBER  2005.

Approximately $654,000 in loans, which ZNG is to receive in connection with the
New  Loan  are  contingent  upon  ZNG  obtaining  rights to the two new licenses
applied for in August and September 2005. The Russian government and Ministry of
Natural  Resources  together  with Rosnedra Federal Agency set the dates for the
auctions  on  the  two  blocks,  the  Pichuginski and Mihailovski parcels, which
auctions  we  anticipate  occurring in the fourth quarter of 2006.  The licenses
may  be  bid  on  by  companies  with  resources much greater than ZNG, and as a
result,  ZNG may not win the rights to the licenses applied for. If this were to
happen,  the  approximately  $654,000  in  loans  which  are contingent upon ZNG
obtaining  such  licenses  may not be granted. As a result, ZNG may be forced to
curtail  or  abandon its business operations and consequently, our investment in
ZNG  and  the  value  of  our  securities  may  become  worthless.

WE  WILL  NEED  SUBSTANTIAL  FINANCING AND SUBSTANTIAL TIME BEFORE WE ANTICIPATE
GENERATING  REVENUES,  IF  ANY.

The  Company  anticipates  the need for approximately $15,000,000 prior to ZNG's
expected generation of any revenues. Currently the Company has not raised any of
this  financing  and the Company can make no assurances that this financing will
ever  be  raised.  The  Company  also  does  not expect to generate any revenues
through  the  operations  of  ZNG,  other  than the $25,000 a month that it will
receive  from  ZNG,  Ltd.,  until  2007,  of  which  there  can be no assurance.
Therefore,  investors  should keep in mind that even if ZNG is able to raise the
substantial  amounts  of additional financing it requires for its operations, it
could  still be years before ZNG generates any revenue, if ever. If ZNG does not
raise  the $15,000,000 which it anticipates needing to generate revenues, which,
even if generated, will likely not be great enough to sustain ZNG if no revenues
are generated and hydrocarbon reserves are located, ZNG may be forced to abandon
or  curtail  its current business plan. As the Company's only current operations
are  through  its 50% ownership of ZNG, Ltd., which in turn owns 100% of ZNG, if
ZNG  were  forced  to  abandon its business plan, the Company could be forced to
abandon or curtail its business plan as well, which could cause the value of the
Company's  common  stock  to  become  worthless.

<PAGE>

WE  WILL  NEED SUBSTANTIAL FINANCING PRIOR TO ENTERING INTO ANY ADDITIONAL JOINT
VENTURES  OR  ACQUISITIONS.

The Company anticipates the need for approximately $10,000,000 to $25,000,000 to
enter  into  additional  joint  ventures  and/or  acquisitions  in  the  future.
Currently  the  Company has not raised any of this financing and the Company can
make  no assurances that this financing will ever be raised. Even if the Company
does raise this money and enter into other joint ventures or acquisitions in the
future,  it  could  still  be years before the Company generates any revenue, if
ever.  If  the  Company  does  not raise the $10,000,000 to $25,000,000 which it
anticipates needing to enter into additional joint ventures or acquisitions, the
Company  may  be  forced  to  abandon  or  curtail  its  current  business plan.
Additionally,  the  raising  of  this  money may include issuing securities with
greater  rights  than  our  common  stock  shareholders  and/or  may  result  in
substantial  dilution  to  our  existing  shareholders.

OUR  AUDITORS  HAVE  EXPRESSED  SUBSTANTIAL  DOUBT AS TO WHETHER OUR COMPANY CAN
CONTINUE  AS  A  GOING  CONCERN.

Our  Company  is in its early development stage, as planned principal activities
have  not  begun.  We  have  not generated any revenues since inception and have
incurred  substantial  losses  including  a net loss of $1,567,913 for the three
months  ended  June  30, 2006, a net loss of $1,887,102 for the six months ended
June 30, 2006 and a total accumulated deficit of $4,475,121 as of June 30, 2006.
These  factors  among others indicate that the Company may be unable to continue
as a going concern, particularly in the event that it cannot generate sufficient
cash  flow to conduct its operations and/or obtain additional sources of capital
and  financing.

WE  LACK  AN  OPERATING  HISTORY  WHICH  YOU  CAN USE TO EVALUATE US, MAKING ANY
INVESTMENT  IN  OUR  COMPANY  RISKY.

Our  Company  lacks a long standing operating history which investors can use to
evaluate  our  Company's  previous  earnings.  Therefore,  an  investment in our
Company  is  risky because we have no business history and it is hard to predict
what  the  outcome  of  our  business  operations  will  be  in  the  future.

WE  MAY CONTINUE TO BE UNPROFITABLE AND MAY NOT GENERATE PROFITS TO CONTINUE OUR
BUSINESS  PLAN.

As  a  development stage company, we have no revenues or profits to date and our
net  cumulative  deficit  attributable  to  our development stage as of June 30,
2006,  was  $4,025,336,  and  our total cumulative deficit was $4,475,121, which
included  $449,785  of pre-development stage deficit. We had $328,738 in accrued
and  unpaid  salaries and a working capital deficit of $1,630,573 as of June 30,
2006.  The  Company  is  currently being funded by existing shareholders and the
$25,000  monthly  payments, which the Company receives from the Joint Venture in
connection  with management fees, but there can be no assurance this amount will
be  sufficient  to  continue  our planned operations or that we will have enough

<PAGE>

money  to repay our outstanding debts. There is a risk that ZNG will never begin
production  and  our  Company  will  never  generate  any  revenues  through our
ownership  of  ZNG, Ltd. If throughout ZNG's oil exploration, it finds no viable
wells, and consequently, we generate only minimal revenues through ZNG, Ltd., we
will  likely be forced to curtail or abandon our business plan. If this happens,
you  could  lose  your  investment  in our Company. If we are unable to generate
profits,  we  will be forced to rely on external financing, of which there is no
guarantee,  to  continue  with  our  business  plan.

WE  HAVE A POOR FINANCIAL POSITION AND IF WE DO NOT GENERATE REVENUES, WE MAY BE
FORCED  TO  ABANDON  OUR  BUSINESS  PLAN.

Our  Company  currently has a poor financial position. We have not generated any
revenues,  discovered any hydrocarbon reserves or begun production on any wells.
There is a risk that we will not find enough, or even any, viable wells which we
require  to  generate  enough  profits  for  your  investment  in our Company to
appreciate.  If  we  never  generate  any revenues, our Company may be forced to
curtail  or  abandon  its  business  plan  and your shares may become worthless.

OUR  BUSINESS  IS  SPECULATIVE  AND  RISKY  AND IF ZNG DOES NOT FIND HYDROCARBON
RESERVES,  WE  MAY  BE  FORCED  TO  CURTAIL  OUR  BUSINESS  PLAN.

There  is a risk that ZNG will not find any hydrocarbon reserves and the cost of
exploration  will become too high for ZNG, Ltd. to continue ZNG's business plan.
As our only current operations are through our 50% ownership of ZNG, Ltd., which
in  turn  owns  100%  of ZNG, if ZNG or ZNG, Ltd. were to cease operations, your
investment  in  our  Company  could  become  devalued or could become worthless.

OUR  INDUSTRY  IS COMPETITIVE AND AS SUCH COMPETITIVE PRESSURES COULD PREVENT US
FROM  OBTAINING  PROFITS.

The  main  factor  determining  success  in  the  oil exploration and extraction
industry  is  finding  viable  wells. If our Company, through ZNG, Ltd. or other
joint  ventures  we  may  enter into in the future, are unable to find producing
wells  and  our competition is, it is likely that our Company will be driven out
of  business.  Additionally,  our  industry  is  subject  to significant capital
requirements  and  as  such,  larger  companies  such  as  LUKoil,  BP-TNK,
Surgutneftegaz and Sibneft may have an advantage should they compete with us for
exploration licenses, because they may have resources substantially greater than
ours.  Investors  should take into account the above factors and understand that
if  we  are  unable  to  raise  additional  capital or generate the profits, the
Company  may  be forced to liquidate its assets and an investment in our Company
could  become  worthless.

OUR  GROWTH  WILL  PLACE  SIGNIFICANT  STRAINS  ON  OUR  RESOURCES.

The  Company's growth is expected to place a significant strain on the Company's
managerial,  operational  and  financial  resources. Furthermore, as the Company
receives  contracts,  the  Company  will  be  required  to  manage  multiple
relationships with various customers and other third parties. These requirements

<PAGE>

will  be  exacerbated  in  the  event of further growth of the Company or in the
number  of  its contracts. There can be no assurance that the Company's systems,
procedures  or  controls will be adequate to support the Company's operations or
that  the  Company  will  be  able  to  achieve the rapid execution necessary to
succeed  and implement its business plan. The Company's future operating results
will  also  depend  on its ability to add additional personnel commensurate with
the  growth  of  its  business.  If  the  Company  is  unable  to  manage growth
effectively,  the  Company's  business,  results  of  operations  and  financial
condition  will  be  adversely  affected.

WE  RELY  ON KEY PERSONNEL AND IF THEY LEAVE OUR COMPANY OUR BUSINESS PLAN COULD
BE  ADVERSELY  AFFECTED.

We  rely  on  the Company's Chief Executive Officer and Chief Financial Officer,
David  Zaikin  and Elena Pochapski, for the success of our Company, both of whom
are  employed  under contracts. Their experience and input create the foundation
for  our business and they are responsible for the directorship and control over
the  Company's  development  activities.  The  Company  does  not hold "key man"
insurance  on  either  member of management. Moving forward, should they be lost
for  any  reason,  the  Company  will  incur  costs  associated  with recruiting
replacement  personnel  and any potential delays in operations. If we are unable
to  replace  Mr. Zaikin and/or Ms. Pochapski, the Company may be forced to scale
back  or curtail its business plan. As a result of this, any securities you hold
in  our  Company  could  become  devalued.

ZNG  PROJECTIONS,  ESTIMATES  AND  STATISTICAL  ANALYSIS  MAY  BE  INACCURATE OR
SUBSTANTIALLY  WRONG,  WHICH  MAY  PREVENT ZNG FROM EXECUTING ITS BUSINESS PLAN.

Risks  from  these factors are intertwined with the risky nature inherent in the
oil  and  gas  industry.  Projections  on  future  revenues as well as costs and
required  capital  expenditures  are  based  on  estimates. Business statistical
analysis  is  used  in projection of drilling success ratios, average production
costs, world oil price fluctuations and their correspondence to Russian domestic
market,  etc.  If  ZNG  projections  or  estimates  are wrong or our statistical
analysis  faulty,  ZNG's revenues may be adversely affected which could ZNG from
executing its business strategy. As an investor, if this happens your securities
in our Company could be adversely affected and you could lose your investment in
our  Company  due  to  the fact that our only current oil and gas operations are
through  our  50%  ownership  of  ZNG,  Ltd.,  which  in  turn owns 100% of ZNG.

IF WE ARE LATE IN FILING OUR QUARTERLY OR ANNUAL REPORTS WITH THE SEC, WE MAY BE
DE-LISTED  FROM  THE  OVER-THE-COUNTER  BULLETIN  BOARD.

Under new Over-The-Counter Bulletin Board ("OTCBB") rules relating to the timely
filing  of  periodic  reports with the SEC, any OTCBB issuer who fails to file a
periodic  report (Form 10-QSB's or 10-KSB's) by the due date of such report (not
withstanding  any  extension  granted  to  the  issuer  by  the filing of a Form
12b-25),  three (3) times during any twenty-four (24) month period are de-listed

<PAGE>

from the OTCBB. Such removed issuer would not be re-eligible to be listed on the
OTCBB  for  a  period  of one-year, during which time any subsequent late filing
would  reset  the  one-year  period  of de-listing. Therefore, if we are late in
filing  a  periodic  report three times in any twenty-four (24) month period and
are  de-listed from the OTCBB, our securities may become worthless and we may be
forced  to  curtail  or  abandon  our  business  plan.

IF  THERE  IS  A  MARKET  FOR OUR COMMON STOCK, OUR STOCK PRICE MAY BE VOLATILE.

If  there  is a market for our common stock, we anticipate that such market will
be  subject  to wide fluctuations in response to several factors, including, but
not  limited  to:


     (1)  actual  or  anticipated  variations  in  our  results  of  operations;
     (2)  our  ability  or  inability  to  generate  new  revenues;
     (3)  the  number  of  shares  in  our  public  float;
     (4)  increased  competition;  and
     (5)  conditions  and  trends  in  the  oil,  gas,  and energy industries in
          general.

Furthermore,  because  our  Common  Stock is traded on the NASD over the counter
bulletin board, our stock price may be impacted by factors that are unrelated or
disproportionate  to  our  operating  performance. These market fluctuations, as
well  as  general economic, political and market conditions, such as recessions,
interest  rates  or international currency fluctuations may adversely affect the
market  price  of  our common stock. Additionally, at present, we have a limited
number  of  shares  in our public float, and as a result, there could be extreme
fluctuations  in  the  price  of  our  common stock. Further, due to the limited
volume  of  our shares which trade and our limited public float, we believe that
our stock prices (bid, asked and closing prices) are entirely arbitrary, are not
related  to the actual value of the Company, and do not reflect the actual value
of  our  common  stock (and in fact reflect a value that is much higher than the
actual  value  of our Common Stock). Shareholders and potential investors in our
Common Stock should exercise caution before making an investment in the Company,
and should not rely on the publicly quoted or traded stock prices in determining
our  Common  Stock value, but should instead determine value of our Common Stock
based  on  the  information  contained in the Company's public reports, industry
information, and those business valuation methods commonly used to value private
companies.

INVESTORS  MAY  FACE  SIGNIFICANT RESTRICTIONS ON THE RESALE OF OUR COMMON STOCK
DUE  TO  FEDERAL  REGULATIONS  OF  PENNY  STOCKS.

Our Common Stock will be subject to the requirements of Rule 15(g)9, promulgated
under  the  Securities  Exchange Act as long as the price of our Common Stock is
below  $4.00 per share. Under such rule, broker-dealers who recommend low-priced
securities  to persons other than established customers and accredited investors
must  satisfy  special sales practice requirements, including a requirement that
they  make an individualized written suitability determination for the purchaser
and  receive  the  purchaser's  consent prior to the transaction. The Securities

<PAGE>

Enforcement  Remedies  and  Penny  Stock  Reform  Act  of  1990,  also  requires
additional disclosure in connection with any trades involving a stock defined as
a  penny  stock.  Generally,  the Commission defines a penny stock as any equity
security  not  traded on an exchange or quoted on NASDAQ that has a market price
of  less  than $4.00 per share. The required penny stock disclosures include the
delivery,  prior  to  any  transaction,  of a disclosure schedule explaining the
penny  stock  market  and  the risks associated with it. Such requirements could
severely  limit  the  market  liquidity  of  the  securities  and the ability of
purchasers  to  sell  their  securities  in  the  secondary  market.

In  addition,  various state securities laws impose restrictions on transferring
"penny  stocks"  and  as  a result, investors in the Common Stock may have their
ability  to  sell  their  shares  of  the  Common  Stock  impaired.

CRITICAL  ACCOUNTING  POLICIES

Our discussion and analysis of our financial condition and results of Operations
is  based  upon  our  audited  financial statements, which have been prepared in
accordance  with  accounting principals generally accepted in the United States.
The  preparation of these financial statements requires us to make estimates and
judgments  that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of any contingent assets and liabilities. On an
on-going  basis,  we  evaluate  our  estimates,  including  those  related  to
uncollectible  receivable, investment values, income taxes, the recapitalization
and  contingencies. We base our estimates on various assumptions that we believe
to  be  reasonable  under the circumstances, the results of which form the basis
for  making  judgments  about carrying values of assets and liabilities that are
not  readily  apparent  from other sources. Actual results may differ from these
estimates  under  different  assumptions  or  conditions.

ITEM  3.  CONTROLS  AND  PROCEDURES

(a)  Evaluation  of  disclosure  controls  and  procedures.  Our Chief Executive
     Officer and Principal Financial Officer, after evaluating the effectiveness
     of  our  "disclosure controls and procedures" (as defined in the Securities
     Exchange  Act  of  1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the
     period  covered  by  this  Quarterly Report on Form 10-QSB (the "Evaluation
     Date"),  have  concluded  that  as  of  the Evaluation Date, our disclosure
     controls  and procedures are effective to provide reasonable assurance that
     information  we  are required to disclose in reports that we file or submit
     under  the  Exchange  Act  is  recorded, processed, summarized and reported
     within the time periods specified in the Securities and Exchange Commission
     rules  and forms, and that such information is accumulated and communicated
     to  our  management,  including  our  Chief Executive Officer and Principal
     Financial  Officer,  as  appropriate,  to  allow timely decisions regarding
     required  disclosure.

(b)  Changes  in  internal  control  over  financial  reporting.  There  were no
     significant changes in our internal control over financial reporting during

<PAGE>

     our most recent fiscal quarter that materially affected, or were reasonably
     likely to materially affect, our internal control over financial reporting.

                           PART II - OTHER INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS

From  time to time, we may become party to litigation or other legal proceedings
that we consider to be a part of the ordinary course of our business. We are not
currently  involved  in  legal  proceedings that could reasonably be expected to
have  a  material adverse effect on our business, prospects, financial condition
or  results  of operations. We may become involved in material legal proceedings
in  the  future.

ITEM  2.  UNREGISTERED SALES OF EQUITY SECURITIES

In  April  2006,  the  Company's  Board  of  Directors, with the approval of the
individual  shareholders,  approved  the cancellation of an aggregate of 609,424
shares  of  the  Company's  common  stock,  which  were held by three (3) of the
Company's  shareholders.  The  cancelled  shares  were  issued in February 1998,
December  2000,  and  June  2003. The shareholders surrendered the shares to the
Company  for  cancellation  in  connection with and pursuant to the terms of the
Company's  change  in  control  during  the  second  quarter  of  2003.

In April 2006, with the approval of ZNG, the Company cancelled 2,000,000 pre 1:2
reverse  split  shares  of  the  Company's  common  stock  in  connection with a
Restitution  Agreement,  which  provided  for  the  unwinding  of  the Company's
previous  agreement  to  issue  2,000,000 pre 1:2 reverse split shares of common
stock  which  were  issued  to  ZNG  and  to  be transferred to Victor Repin, in
connection  with the Company's 2004 purchase of 51% of the outstanding shares of
ZNG.  Additionally,  in  April  2006,  pursuant  to a clarified contract for the
purchase  of  the  51%  interest  in ZNG for 50,000 rubles, Mr. Repin was issued
1,000,000  shares  of  the Company's post 1:2 reverse split shares in connection
with  such  purchase  of  the 51% interest of ZNG in 2004. The Company claims an
exemption  from  registration  afforded  by  Section  4(2)  of the Act since the
foregoing  issuance  did  not  involve a public offering, the recipient took the
shares  for  investment and not resale and the Company took appropriate measures
to  restrict  transfer. No underwriters or agents were involved in the foregoing
issuance  and no underwriting discounts or commissions were paid by the Company.

On  April 27, 2006, with an effective date of April 1, 2006, the Company's Board
of  Directors approved the award of 400,000 options to Victor Repin ("Repin"), a
greater  than 5% shareholder of the Company, to purchase restricted common stock
of the Company in consideration for his services to the Company throughout 2006.
Repin  will  receive  400,000 options at the exercise price of $1.05, which will
vest  in  equal  portions  of  100,000  shares  on April 1, 2006, June 30, 2006,
September  30,  2006  and  December  31,  2006. Repin is serving on the board of
directors  of  the  Company's  50%  owned  subsidiary,  ZNG,  Ltd.,  and plays a

<PAGE>

significant role in liaising between ZNG, Ltd. and its operating subsidiary ZNG,
additionally,  he  assists  ZNG  in  communication  with  local  governmental
authorities  and  negotiations  with  subcontractors performing major geological
works. Repin receives no other consideration from the Company, ZNG, Ltd. or ZNG.
The  Company  claims  an exemption from registration afforded by Section 4(2) of
the  Act  since  the  foregoing  issuance did not involve a public offering, the
recipient  took  the  shares  for investment and not resale and the Company took
appropriate  measures  to  restrict  transfer.  No  underwriters  or agents were
involved  in the foregoing issuance and no underwriting discounts or commissions
were  paid  by  the  Company.

On  May  1,  2006,  our Director, Timothy Peara exercised his option to purchase
50,000  shares  of  our  common stock in accordance with the terms of his Option
agreement  entered  into  in  consideration  for consulting services rendered in
2005. Mr. Peara elected a cashless exercise of the options and he will therefore
receive  the full number of shares exercised (50,000), less the number of shares
that  totaled  the  aggregate  exercise price of the 50,000 shares ($15,000 with
each  option  exercisable at $0.30 per share), based on the average market value
of  the  common stock on the five (5) trading days prior to Mr. Peara's exercise
($2.00),  which  is  equal  to  7,500  shares. As a result, Mr. Peara was issued
42,500  shares  in  connection  with  the  exercise  of  his  options.

On  May 3, 2006, the Company issued 170,000 shares of restricted common stock to
the  Investor  Relations  Group,  Inc.  ("IRG"),  in  accordance with a contract
entered  into on March 16, 2006. Pursuant to the contract (the "IRG Agreement"),
IRG  agreed  to  perform  investor  relations  and  public  relations  services,
including  the overall management of a corporate communications program, as well
as  agreeing to design a corporate fact sheet, and organizing road shows for the
Company.  The  Company's  Board  of  Directors  approved the issuance of 150,000
restricted  shares  of  the  Company upon signing of the agreement and agreed to
issue  IRG  10,000 restricted shares per month for the six (6) month duration of
the  contract,  of  which  20,000 shares were issued on May 3, 2006. The Company
claims  an exemption from registration afforded by Section 4(2) of the Act since
the foregoing issuance did not involve a public offering, the recipient took the
shares  for  investment and not resale and the Company took appropriate measures
to  restrict  transfer. No underwriters or agents were involved in the foregoing
issuance  and no underwriting discounts or commissions were paid by the Company.

On  May  3, 2006, the Company issued 50,000 restricted shares of common stock to
the Ann L. Stephenson Group, Inc. in consideration for public relations services
rendered  to  the  Company  in  March 2006. The Company claims an exemption from
registration  afforded  by  Section 4(2) of the Act since the foregoing issuance
did  not involve a public offering, the recipient took the shares for investment
and  not  resale and the Company took appropriate measures to restrict transfer.
No  underwriters  or  agents  were  involved  in  the  foregoing issuance and no
underwriting  discounts  or  commissions  were  paid  by  the  Company.

On June 15, 2006, the Company issued 20,000 shares of restricted common stock to
IRG  in  connection  with  the  IRG  Agreement,  for investor relations services
rendered  to  the  Company  for the months ended May and June 2006.  The Company
claims  an exemption from registration afforded by Section 4(2) of the Act since

<PAGE>

the foregoing issuance did not involve a public offering, the recipient took the
shares  for  investment and not resale and the Company took appropriate measures
to  restrict  transfer. No underwriters or agents were involved in the foregoing
issuance  and no underwriting discounts or commissions were paid by the Company.

In  June  2006,  the Company issued 200,000 restricted shares of common stock to
Business Standard in connection with consulting services rendered to the Company
in connection with assistance provided to the Company in the application process
as  well  as  obtaining  existing  geological information (seismic, gravimetric)
relevant  to  potential  licensed areas.  We still owe Business Standard 400,000
shares  of  common  stock, which we have committed to issuing Business Standard,
which shares have not been issued to date.  The Company claims an exemption from
registration  afforded  by  Section 4(2) of the Act since the foregoing issuance
did  not involve a public offering, the recipient took the shares for investment
and  not  resale and the Company took appropriate measures to restrict transfer.
No  underwriters  or  agents  were  involved  in  the  foregoing issuance and no
underwriting  discounts  or  commissions  were  paid  by  the  Company.

In July 2006, the Company issued 10,000 shares of restricted common stock to IRG
in  connection  with the IRG Agreement, for investor relations services rendered
to  the  Company for the month ended July 2006.  The Company claims an exemption
from  registration  afforded  by  Section  4(2)  of  the Act since the foregoing
issuance  did  not  involve a public offering, the recipient took the shares for
investment  and not resale and the Company took appropriate measures to restrict
transfer.  No underwriters or agents were involved in the foregoing issuance and
no  underwriting  discounts  or  commissions  were  paid  by  the  Company.

We  previously agreed to issue Alternative Energy Finance Ltd. ("AEF"), of which
Tim Peara is the Managing Director as well as a Director of the Company, certain
warrants  in  connection  with  Mr. Peara introducing the parties who formed the
joint  venture.  Pursuant  to an agreement between AEF and the Company, AEF will
receive compensation based on the total investment made by Baltic Petroleum Ltd.
in  the  Joint Venture. This compensation included a commission of approximately
$18,024 (1% of Baltic's first $1,802,441 investment in the Joint Venture), which
amount  has  not  been paid as of the date of this filing, and 50,068 options to
purchase  shares  of  our  common  stock  at $0.63 per share and a commission of
$6,673  (1%  of  Baltic's  $667,313 investment in the Joint Venture in the first
quarter  2006), which amount has not been paid to AEF to date and 17,561 options
to  purchase shares of our common stock at $0.67 per share for the first quarter
of  2006,  which  were granted to Mr. Peara on March 6, 2006, and March 31, 2006
respectively,  which  options  contain  a  cashless  exercise  provision.

On  June 30, 2006, in connection with our agreement with AEF, we agreed to grant
AEF a warrant to purchase 20,412 shares of our common stock at an exercise price
of  $2.02,  which  warrants  contained a cashless exercise feature. The warrants
expire  three  years  from  the  grant  date.  We were also obligated to pay AEF
$23,562  during  the  quarter  ended  June  30,  2006  (equal  to 1% of Baltic's

<PAGE>

$2,356,153  investment  in  the Joint Venture in the second quarter 2006), which
amount  has  not been paid to AEF to date.  The Company claims an exemption from
registration  afforded  by  Section  4(2) of the Act since the foregoing did not
involve  a public offering, the recipient took the securities for investment and
not  resale  and  the Company took appropriate measures to restrict transfer. No
underwriters  or  agents  were  involved  in  the  foregoing and no underwriting
discounts  or  commissions  were  paid  by  the  Company.

In  July  2006,  the  Company issued 13,500 shares of restricted common stock to
Harbinger  Research,  LLC  ("Harbinger"), in connection with the Company's entry
into  an  Investment  Report  Services  Agreement with Harbinger (the "Harbinger
Agreement"),  whereby  Harbinger  agreed to prepare and distribute an investment
report  for  the  Company  to approximately 1,500,000 individual investors.  The
consideration for the entry into the Harbinger Agreement and the preparation and
dissemination  of  the report was 13,500 restricted shares of common stock.  The
Company  claims  an  exemption from registration afforded by Section 4(2) of the
Act  since  the  foregoing  issuance  did  not  involve  a  public offering, the
recipient  took  the  shares  for investment and not resale and the Company took
appropriate  measures  to  restrict  transfer.  No  underwriters  or agents were
involved  in the foregoing issuance and no underwriting discounts or commissions
were  paid  by  the  Company.

ITEM  3.  DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

     None.

ITEM  5.  OTHER  INFORMATION

     None.

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

  a)  Exhibits

Exhibit  No.         Description
---------------     -----------------

10.1(1)             Option  Agreement with Baltic Petroleum Limited dated
                    April 28, 2005

10.2(1)             License  Agreement  between  OOO Zauralneftegaz and Baltic
                    Petroleum Limited  dated  April  28,  2005

10.3(1)             Loan  Agreement  between  OOO  Zauralneftegaz  and  Baltic
                    Petroleum Limited  dated  April  28,  2005

10.4(1)             Guarantee  by  Siberian  Energy  Group,  Inc.  dated
                    April 28, 2005

<PAGE>

10.5(1)             Pledge  and  Security  Agreement between Siberian Energy
                    Group, Inc. and  Baltic  Petroleum  Limited  dated
                    April  28,  2005

10.6(2)             Option  Agreement with Baltic Petroleum Limited dated
                    April 28, 2005

10.7(2)             License  Agreement  between  OOO Zauralneftegaz and Baltic
                    Petroleum Limited  dated  April  28,  2005

10.8(2)             Loan  Agreement  between  OOO  Zauralneftegaz  and
                    Baltic Petroleum Limited  dated  April  28,  2005

10.9(2)             Guarantee  by  Siberian  Energy  Group,  Inc.  dated
                    April 28, 2005

10.10(2)            Pledge  and  Security Agreement between Siberian Energy
                    Group, Inc. and  Baltic  Petroleum  Limited  dated
                    April  28,  2005

10.11(3)            Clarification  to the Contract of Purchase and Sale of the
                    Share in Charter  Capital  of  LLC  "Zauralneftegaz"  dated
                    May  14,  2004

10.12(3)            Agreement  with  Business  -  Standard  (translated  from
                    Russian version)

10.13(3)            Supplementary  Agreement to Business  -  Standard  Agreement
                    (translated  from  Russian  version)

10.14(3)            Supplementary  Agreement  No.  2  to  Business - Standard
                    Agreement (translated  from  Russian  version)

10.15(3)            Deed  of  Amendment  between  ZNG  and  BP

10.16(3)            Deed  of  Amendment  between  the  Company  and  BP

10.17(4)            Joint Venture Shareholders' Agreement  with Baltic Petroleum
                    (E&P)Limited  and  Zauralneftegaz  Limited  dated
                    October  14,  2005

10.18(5)            Loan  Agreement  between  OOO  Zauralneftegaz  and  Caspian
                    Finance Limited

10.19(5)            Deed  of  Novation  between  Baltic  Petroleum  Limited,
                    Caspian Finance  Limited  and  OOO  Zauralneftegaz

10.20(5)            Deed  of  Release

10.21(5)            Release  of  Pledge

10.22(5)            Guarantee

<PAGE>

10.23(5)            Debenture

10.24(5)            Agreement  for  the  Pledge  of  the  Participatory
                    Interest in OOO Zauralneftegaz  (Russian  translation
                    removed)

10.25(5)            Sale  and  Purchase  Agreement

31.1*               Certificate  of  the  Chief  Executive Officer pursuant
                    Section 302 of the  Sarbanes-Oxley  Act  of  2002

31.2*               Certificate  of  the  Chief  Financial Officer pursuant
                    Section 302 of the  Sarbanes-Oxley  Act  of  2002

32.1*               Certificate  of  the  Chief  Executive Officer pursuant to
                    Section 906 of  the  Sarbanes-Oxley  Act  of  2002

32.2*               Certificate  of  the  Chief  Financial Officer pursuant to
                    Section 906 of  the  Sarbanes-Oxley  Act  of  2002

99.1(6)             Glossary

*  Filed  Herein.

(1)  Filed  as Exhibit 10.1, 10.2, 10.3, 10.4 and 10.5 to the Company's Form 8-K
to  be  filed  with  the  Commission.

(2) Filed as Exhibits to the Company's Form 8-K filed with the Commission on May
20,  2005,  and  incorporated  herein  by  reference.

(3)  Filed  as  Exhibits  to the Company's Report on Form 10-QSB, filed with the
Commission  on  August  22,  2005,  and  incorporated  herein  by  reference.

(4)  Filed  as  Exhibits  to  the  Company's  Report on Form 8-K, filed with the
Commission  on  October  28,  2005,  and  incorporated  herein  by  reference.

(5)  Filed  as  Exhibits to our Report on Form 8-K, filed with the Commission on
December  2,  2005,  an  incorporated  herein  by  reference.

(6)  Filed  as  Exhibit  99.1  to  our  Report on Form 10-KSB for the year ended
December  31,  2005,  and  incorporated  herein  by  reference.

<PAGE>

 b)  REPORTS  ON  FORM  8-K

     We  filed the following reports on form 8-K during the three months covered
by  this  report:

     o    On June  1,  2006,  we  filed  a report on form 8-K to report that ZNG
          was  awarded  licenses  for two oil and gas exploration and production
          blocks located in the Kurgan Region of Siberia, Russia at auction; and

     o    On June  15,  2006,  we  filed  a  report  on  Form 8-K to report that
          ZNG  was  awarded  a  third  license  in the Kurgan Region of Siberia,
          Russia  at  auction.

<PAGE>

                                   SIGNATURES

     In  accordance  with  the  requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        SIBERIAN  ENERGY  GROUP  INC.

DATED: August 11,  2006               By:  /s/  David  Zaikin
                                           ------------------------
                                           David  Zaikin
                                           Chief  Executive  Officer

<PAGE>