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

                                  FORM 10-QSB

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

                  For the quarterly period ended September 30, 2005

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

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

                        Commission file number 333-118902

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

              Nevada                                     52-2207080
    ----------------------                   -------------------------------
   (State of incorporation)                 (IRS Employer Identification No.)

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

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

                                      N/A
               ---------------------------------------------------
              (Former name, former address and former fiscal year,
                              if changed since last
                                     report)

                                      NONE

Check  whether  the issuer (1) 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 [ ]

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

     At November 17, 2005, there were outstanding 9,677,921 shares of the
Issuer's common stock, $.001 par value per share.

Transitional Small Business Disclosure Format:  Yes [ ] No [X]

<PAGE>

ITEM 1.     FINANCIAL INFORMATION

                           SIBERIAN ENERGY GROUP INC.
                          (A DEVELOPMENT STAGE COMPANY)

                             CONDENSED CONSOLIDATED
                               FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2005


<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 September 30,
2005,  and  the  related  condensed   consolidated  statements  of   operations,
stockholders'  equity,  and  cash  flows  for  the  three  and nine months ended
September  30,  2005  and  2004,  and the cumulative period of development stage
activity  (January  1,  2003  through  September  30,  2005).  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,  2004,  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 February 25, 2005, 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, 2004 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
November 11, 2005

<PAGE>

<TABLE>
<CAPTION>

SIBERIAN ENERGY GROUP INC. (A Development Stage Company)
--------------------------------------------------------
         CONDENSED CONSOLIDATED BALANCE SHEETS                (UNAUDITED)
                                                              SEPTEMBER 30,     December 31,
                                                                  2005              2004
                                                             -------------------------------
<S>                                                             <C>                  <C>
ASSETS
CURRENT ASSETS:
     Cash                                                    $      1,977       $          -
     Prepaid expenses and other                                   158,966            135,052
                                                             -------------------------------
                                                                  160,943            135,052
                                                             -------------------------------

Geological data, net                                              750,000            750,000

Oil and gas properties, unproved                                  770,750            734,218

Licenses, net                                                      81,375            108,499

License deposit                                                   348,137                  -

Property and equipment, net                                         2,501              1,820
                                                             -------------------------------
                                                             $  2,113,706       $  1,729,589
                                                             ===============================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Loans payable                                           $  1,171,149       $          -
     Accounts payable:
          Related party - stockholders                            625,738            517,191
          Others                                                  609,530            968,338
     Accrued payroll                                              971,048            773,524
     Option deposit                                               100,000                  -
                                                             -------------------------------
                                                                3,477,465          2,259,053
                                                             -------------------------------

STOCKHOLDERS' EQUITY:
     Common stock - authorized 100,000,000 shares, $.001
       par value, 9,552,886 and 9,402,886 issued and
       outstanding                                                  9,553              9,403
     Additional paid-in capital                                 1,236,602          1,220,121
     Accumulated deficit
          Pre-development stage                                  (449,785)          (449,785)
          Development stage                                    (2,136,233)        (1,256,083)
     Accumulated other comprehensive income (loss)                (23,896)           (53,120)
                                                             --------------------------------
                                                               (1,363,759)          (529,464)
                                                             --------------------------------
                                                             $  2,113,706       $  1,729,589
                                                             ================================
</TABLE>

See accompanying notes.

<PAGE>

<TABLE>
<CAPTION>

SIBERIAN ENERGY GROUP INC. (A Development Stage Company)
--------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                                        For the
                                                                                                                      cumulative
                                                                                                                      period of
                                                                                                                      Development
                                                 For the three                         For the nine                 Stage Activity-
                                                  months ended                          months ended                January 1,2003
                                           -------------------------------     ------------------------------           through
                                            SEPTEMBER 30,     September 30,    September 30,      September 30,      September 30,
                                                2005              2004            2005                 2004              2005
----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>               <C>             <C>                  <C>               <C>
Revenues                                   $          -       $          -     $          -       $          -     $             -
Expenses:
     Salaries                                   103,920             82,702          352,644            357,261           1,120,812
     Professional and consulting fees            86,324             33,137          167,169            118,188             385,877
     Rent and occupancy                          28,162             14,374           70,792             38,727             126,806
     Depreciation and amortization                9,385              9,187           28,153             27,922             102,199
     Finance charges and interest                31,514                  -           47,607                  -              47,607
     Other                                       77,304             20,907          213,785             67,527             352,932
                                           ---------------------------------------------------------------------------------------
          Total expenses                        336,609            160,307          880,150            609,625           2,136,233
                                           ---------------------------------------------------------------------------------------

          Loss before income taxes              336,609            160,307          880,150            609,625           2,136,233

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

          Net loss (development stage)     $    336,609       $    160,307     $    880,150       $    609,625     $     2,136,233
                                           =======================================================================================

Basic and diluted loss per common share    $      (0.04)      $      (0.02)    $      (0.09)      $      (0.09)    $         (0.29)
                                           =======================================================================================
Weighted average number of basic and
     diluted common shares outstanding        9,477,886          9,369,190        9,441,008          7,079,346           7,374,749
                                           =======================================================================================
</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 September 30, 2005

                                                                    Common Stock
                                                      --------------------------------------------
                                                                                        Additional
                                                      Number of                           Paid-In
                                                       Shares       Par Value             Capital
                                                      --------------------------------------------
<S>                                                     <C>            <C>                  <C>
Balance, January 1, 2003 (pre-development stage)      4,902,886   $     4,903          $   430,195

Loss for the year - 2003                                      -             -                    -

Shares issued in acquisition                          1,000,000         1,000               (1,000)
                                                      --------------------------------------------

     Balance, December 31, 2003                       5,902,886         5,903              429,195
                                                      --------------------------------------------

Loss for the year - 2004                                      -             -                    -

Foreign currency translation adjustment                       -             -                    -

Shares issued in acquisition                          3,450,000         3,450              746,550

Shares issued for professional services                  50,000            50                9,950

Other                                                         -             -               34,426
                                                      --------------------------------------------

     Balance, December 31, 2004                       9,402,886         9,403            1,220,121

Loss for nine months - 2005                                   -             -                    -

Foreign currency translation adjustment                       -             -                    -

Shares issued for professional services                 150,000           150               14,850

Other                                                         -             -                1,631
                                                      --------------------------------------------

     Balance, September 30, 2005                      9,552,886   $     9,553          $ 1,236,602
                                                      ============================================
</TABLE>

See accompanying notes.

<PAGE>

<TABLE>
<CAPTION>
                                                     Accumulated
                                                       Other
 Accumulated         Comprehensive                 Comprehensive
   Deficit           Income (Loss)      Total           Loss
----------------------------------------------------------------
<S>                      <C>             <C>             <C>

 $  (449,785)        $       -      $ (14,687)

    (422,516)                -       (422,516)       $(422,516)
---------------------------------------------------------------

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

    (872,301)                -       (437,203)
---------------------------------------------

    (833,567)                -       (833,567)

           -           (53,120)       (53,120)       $(886,687)
---------------------------------------------------------------

           -                 -        750,000

           -                 -         10,000

           -                 -         34,426
---------------------------------------------

  (1,705,868)          (53,120)      (529,464)
---------------------------------------------

    (880,150)                        (880,150)

           -            29,224         29,224        $(850,926)
---------------------------------------------------------------

           -                 -         15,000

           -                 -          1,631
---------------------------------------------

 $(2,586,018)        $( 23,896)   $(1,363,759)
=============================================
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

SIBERIAN ENERGY GROUP INC. (A Development Stage Company)
--------------------------------------------------------
                                                                                       For the
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                     cumulative
                                                                                      period of
                                                                                     Development
                                                                                   Stage Activity-
                                                             For the nine          January 1, 2003
                                                              months ended             through
                                                        SEPTEMBER 30, September 30,  September 30,
                                                            2005          2004           2005
                                                         -----------  -----------    ------------
<S>                                                         <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss (development stage)                           $ (880,150)  $ (609,625)    $ (2,136,233)
  Depreciation and amortization                              28,153       27,922          102,199
  Common stock issued for professional services              15,000       10,000           25,000
  Changes in other current assets and
    current liabilities:
      Prepaid expenses and other                            (23,914)    (104,939)        (153,662)
      Accounts payable and accrued expenses                 (52,737)   1,373,128        2,183,936
      Option deposit                                        100,000            -          100,000
                                                         -----------  -----------    ------------
        NET CASH FLOWS FROM (FOR) OPERATING ACTIVITIES     (813,648)     696,486          121,240
                                                         -----------  -----------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Expenditures for licenses and related                    (348,137)           -         (528,961)
  Expenditures for oil and gas properties                   (36,532)    (729,779)        (770,750)
  Expenditures for property and equipment                    (1,710)      (1,158)          (2,868)
  Cash received in acquisition                                    -            -                6
                                                         -----------  -----------    ------------
        NET CASH FLOWS FOR INVESTING ACTIVITIES            (386,379)    (730,937)      (1,302,573)
                                                         -----------  -----------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from loans                                 1,171,149            -        1,171,149
  Additional paid-in capital                                  1,631       34,426           36,057
                                                         -----------  -----------    ------------
        NET CASH FLOWS FROM FINANCING ACTIVITIES          1,172,780       34,426        1,207,206
                                                         -----------  -----------    ------------

Effect of exchange rates on cash                             29,224            -          (23,896)
                                                         -----------  -----------    ------------

    Net increase (decrease) in cash                           1,977          (25)           1,977

Cash - beginning                                                  -           38                -

                                                         -----------  -----------    ------------
    Cash - ending                                        $    1,977   $       13     $      1,977
</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 position, results of operations,
and  cash  flows  for  the periods presented. Accounting policies used in fiscal
2005 are consistent with those used in 2004 and 2003. 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  the period of this report, 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.

     As a result of the joint venture agreement described in Note 7, the Company
effectively  owns  50%  of  ZNG  through  Zauralneftegaz  Ltd. (ZL). 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.

<PAGE>

3.  ACQUISITIONS:

Acquisition  of  ZNG  took  part  in  two steps. In May 2003, the Company issued
1,000,000  shares  of  its common stock for a 51% interest in ZNG. In June 2004,
the Company purchased the remaining 49% of ZNG in exchange for 3,450,000 shares.
The  activities  of ZNG have been included in the financial statements since the
date  of  initial acquisition, and will be the foundation from which the Company
intends to develop its business.

No  accounting  value  was  assigned  to the net assets acquired and liabilities
assumed  as  of  the  date  of  the  initial  purchase  of  51%  of  ZNG:

Cash and other current assets              $      5,310
Property and equipment                            2,383
                                           ------------
Current liabilities                               7,693
  Net assets acquired                            (7,693)
                                           $          -
                                           ============

     The  second  step  of acquisition happened a year later (June 30, 2004) and
reflected  the  increased  value  of  ZNG.  The  following  table summarizes the
estimated fair values of the assets acquired and liabilities assumed at the date
of acquisition. The Company is in process of obtaining third-party valuations of
certain  intangible assets; thus the allocation of the purchase price is subject
to refinement.

Cash and other current assets              $      5,577
Intangible assets (geological data)             750,000
Oil and gas properties                          433,444
Exploration licenses                            126,582
Property and equipment                            1,150
                                           ------------
                                              1,316,753
                                               (972,632)
                                           ------------
                                           $    344,121
                                           ============

<PAGE>

     Acquired  intangible  assets of $750,000 were assigned to a vast collection
of  valuable  Geological  Data that has led to, and thus supports the conclusion
that  hydrocarbon  deposits exist in the Eastern part of the Kurgan region. This
data  has  been  compiled  by  analyzing  and  interpreting prior geological and
lithographic exploration works in the region and is represented by:

-    Data,  maps  and  reports  from  the  12  test  wells  drilled  between
     1979-1986,  including  a  lithologic  description  of  rock,  summaries  of
     geophysical research of well shafts and a laboratory analysis of rock age
-    Profile sections
-    Correlation schemes
-    Geological  maps  of  South-West  ZNGralye  (region east of Urals) and West
     Siberia, pre-Jurassic period
-    Set  of  maps  based  on  distance  methods of research and interpretations
     of cosmic and aerial photographs.
-    Independent  geological  evaluation  of  oil  reserves  on  the  licensed
     areas performed in 2004.

     All  Geological data is transformed into digital format, which enhances its
market potential. Estimated useful life of the Geological Data covers the period
of anticipated oil producing activities on the licensed area of approximately 25
years starting 2006. Therefore, amortization of this asset will commence January
2006 on a straight-line basis over its estimated 25 year useful life. Geological
data  will  be  tested  for impairment based on the results of seismic and other
exploration works, which are currently under way.

     On  June  28,  2004,  the Company also opened a Canadian subsidiary through
acquisition  of  100% of the outstanding common shares of the newly incorporated
Siberian Energy Group (Canada). Purchase price equaled $7, which also represents
the  book  value  of  the capital subsidiary. Siberian Energy Group (Canada) was
purchased for the purpose of opening an office in Toronto, Ontario.

4.  GOING  CONCERN:

These financial statements have been prepared assuming the Company will continue
as a going concern, however, since inception of its current endeavor in 2003, it
has  not  earned  any 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 sufficient financing will be obtained
from  external  sources  to provide the Company with the ability to continue the
process of development to achieve commercial production and sales of products.

<PAGE>

     For  the  cumulative  period  ended  September  30,  2005,  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
from the going concern basis.

5.  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 September 30, 2005.

6.  STOCKHOLDERS'  EQUITY:

     Effective  May  2,  2005,  the  stockholders  approved  an amendment to its
Restated  Articles  of  Incorporation.  The amendment affected a 1 for 2 reverse
stock  split, re-authorized 100,000,000 shares of common stock, par value $0.001
per share, and authorized 10,000,000 shares of preferred stock, par value $0.001
per  share.  Shares of preferred stock may be issued from time to time in one or
more  series,  each  of  which  shall  have  distinctive designation or title as
determined  by  the  Board  of  Directors  prior  to  the issuance of any shares
thereof.

     These  financial  statements have been retroactively adjusted to January 1,
2003 to give effect for the new capital structure.

7.  SUBSEQUENT  EVENT  NOTE:

     As of the date of this report, the Company has entered into a joint venture
agreement  with a third party (Party), with which the Company previously entered
into  an Option Agreement on April 28, 2005. The Company transferred 100% of its
ownership interest in ZNG to the Joint Venture, and transferred 50% of the Joint
Venture  interest  to the Party for a nominal sum and the agreement by the Party
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.

     Upon  signing  of  the  Joint  Venture  agreement,  the  Party,  ZNG, and a
financing  company  wholly  owned  by the Party, entered into a deed of novation
regarding  a  previous  loan made to ZNG by the Party 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 $6,859,396 representing the
assumed  commitment under a previous loan, and the new commitment, which will be
available  for  the  purpose of research activities in the Kurgan region in 2005
through the first half of 2006.

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

<PAGE>

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

All  statements  in  this  discussion  and elsewhere in this report that are not
historical  are  forward-looking statements within the meaning of Section 21E of
the  Securities  Exchange  Act  of  1934,  as  amended.  Statements preceded by,
followed  by  or  that  otherwise  include  the  words  "believes",   "expects",
"anticipates", "intends", "projects", "estimates", "plans", "may increase", "may
fluctuate"  and  similar  expressions  or  future  or  conditional verbs such as
"should", "would", "may" and "could" are generally forward-looking in nature and
not  historical  facts.  These  forward-looking statements were based on various
factors  and  were  derived  utilizing  numerous important assumptions and other
important  factors  that  could  cause  actual results to differ materially from
those  in the forward-looking statements. Forward-looking statements include the
information  concerning  our  future  financial  performance, business strategy,
projected plans and objectives. These factors include, among others, the factors
set  forth  under  the  heading  "Risk  Factors."  Although  we believe that the
expectations  reflected  in  the  forward-looking  statements are reasonable, we
cannot  guarantee  future  results,  levels  of  activity,  performance  or
achievements.  Most of these factors are difficult to predict accurately and are
generally  beyond our control. We are under no obligation to publicly update any
of  the  forward-looking statements to reflect events or circumstances after the
date  hereof  or  to reflect the occurrence of unanticipated events. Readers are
cautioned  not  to  place  undue  reliance  on these forward-looking statements.

OVERVIEW

     Siberian  Energy  Group Inc. (the "Company," "SEG," "us," "we" and words of
similar  meaning)  is a development stage investment and management company that
intends  to  target  high potential long term investments in Russia. The Company
intends  to provide western management experience and ready access to investment
capital for medium and large cap resource companies, specifically in the oil and
gas industry. The Company actively evaluates investment opportunities throughout
Russia.  Pursuant  to its strategy, the Company acquired an emerging Russian oil
and gas exploration company, Zaural Neftegaz ("ZNG"). ZNG is a development stage
oil  and  gas  exploration  company  located  in  the Western Siberian Region of
Russia.  The  majority of the Company's current efforts are focused on operating
and  raising  capital  for  ZNG, of which there can be no assurance. The Company
incorporated  Siberian  Energy  Group (Canada) ("SEG Canada") to help facilitate
business  ventures  with  Canadian  Farm-in partners and to allow the Company to
open  a  Canadian  office  in  Toronto,  Ontario.  SEG Canada is not expected to
perform  any large-scale business operations, but rather to act on behalf of the
Company. Except as expressly indicated or unless the context otherwise requires,
the  "Company,"  "we," "our," "us," or "SEG" means Siberian Energy Group Inc., a
Nevada corporation, and its subsidiaries.

     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.

     During  the  time  period  covered by this Report, the Company's operations
were  conducted  solely  through its wholly owned subsidiary, ZNG. Subsequent to
the  time  period  covered  by  this report, 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).  This  Report  presents  a description of the
operations of ZNG during the period covered by this Report. Moving forward, 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  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 and ZNG.

     ZNG  aims  to  develop  an  oil  and  gas  industry in the Kurgan region of
South-West  Siberia,  Russia  by  discovering  new  hydrocarbon  fields. 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.

<PAGE>

     After  analyzing  the  eight  available blocks suggested by the Ministry of
Natural Resources, ZNG chose to concentrate its activities on four areas located
in the Eastern part of the Kurgan region and applied for licenses covering these
areas.  Currently  ZNG holds four, 5-year exploration licenses expiring in March
2008,  for concessions covering a total territory of 643,000 acres. The licenses
may  be  converted  into  production  licenses  and may be extended beyond their
five-year  terms  subject  to  certain conditions and risks described in greater
detail  below  under the Risk Factor, "Our Drilling Licenses May Not Be Extended
Or  We  May  Not  Gain  The Approval Of Federal And State Government Agencies To
Convert Our Exploration Licenses Into Production Licenses."  Mokrousovsky is the
largest license which ZNG holds, encompassing a total of 240,000 acres, followed
by  West  Suersky,  which  covers  230,000 acres, Privolny, which covers 123,000
acres,  and  Orlovo-Pashkovsky,  which  covers  50,000  acres.

     Following  detailed  data  collection,  survey and seismic testing ZNG will
proceed  with  development  of  one block at a time. The Company feels that this
strategy has numerous benefits including: 1) increasing the speed of development
by  concentrating  ZNG's efforts and resources; 2) potentially reducing the need
for  additional capital if early blocks generate revenue for the Company; and 3)
generating  revenues which may pay for future development costs and provide cash
that  will  help  to  finance  the  development  of  subsequent  blocks.

     The  West-Suersky  block  was  chosen  by the Company as the most promising
block, and the Company has already started studies on this area. The Company has
performed  gravimetric  surveys  and  the  field  part  of 2-dimensional seismic
studies  through  experienced and reputable oil and gas service organizations in
Russia,  "Bazhenov Geophysical Expedition" and JSC "Bashneftegeofizika." ZNG has
not  begun  exploratory  drilling  yet,  as  it  is awaiting the two-dimensional
seismic  study  results.  Currently "Bashneftegeofizika" is processing data they
collected during the summer of 2004 and preparing it for interpretation in order
to identify the most prospective sites for drilling. The Company anticipates the
results of this processing to be completed in the fourth quarter of 2005.

     ZNG has also hired GeoData Consulting, an international geosciences service
company, which provides daily independent supervisions of the exploration works,
helping to add assurance to the accuracy of the forthcoming results.

     The  Company has not started production and is not currently generating any
cash,  which  makes  it difficult for it to pay its maturing obligations, as the
Company's  assets  are  illiquid. However, the Company believes that in the long
run a number of trends will favorably affect its 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 the
Company's  debt  management  and the increasing overall credit rating in Russia,
which  the  Company  hopes  will lead to increased foreign investment in Russian
companies,  like  ZNG.  In  connection with Joint Venture (described below under
"Joint  Venture  Agreement,  the  Company  will  receive  $25,000  per  month in
management  fees  in connection with the Joint Venture; however, the Company can
make  no  assurance  that $25,000 per month will be adequate to pay its upcoming
expenses and liabilities.

     The  Company  effected  a 1:30 reverse stock split on September 17, 1999, a
3:1  forward stock split on October 2, 2000 and a 1:2 reverse stock split on May
2,  2005  (the  "Stock  Splits"),  and  all share amounts listed throughout this
report on Form 10-QSB reflect the Stock Splits, unless otherwise stated.

     In  April  2005,  ZNG  submitted  additional  applications  to the Regional
Subsoil-use  Agency  of  Russian  Federation,  Ural department ("Uralnedra") for

<PAGE>

three  new exploration licenses. The application for the new licenses covers the
following areas of Kurgan oblast, Russia:

     1.   Yuzhno-Voskresenski - total area 520 square kilometers
     2.   Zapadno-Petukhovski - total area 154 square kilometers
     3.   Lebyazhevski - total area 170 square kilometers

In  August  2005,  the  Company submitted an additional application for a fourth
license  in  the  same  region:

     4.   Orlovo-Pashkovsky-2  -  total  area  95 square  kilometers

Additionally, in September 2005, the Company submitted an application for 3 more
licenses:

     5.   Petukhovski - total area 840 square kilometers
     6.   Pichuginski - total area 331 square kilometers
     7.   Mihailovski - total area 726 square kilometers

     ZNG  believes  that  these  seven licenses are attractive for the following
reasons:  they  are located in proximity to ZNG's existing licensed fields, they
have well-developed infrastructure, and there are existing prior geological data
on  all  three  areas.  In the 1980s, Russian State conducted initial geological
works  on the area including the seven areas which ZNG is attempting to license.
If  the  licenses  are  awarded  to  ZNG, the results of prior conducted seismic
surveys  will  be  available  to  the Company through the Geological Fund of the
Ministry  of  Natural  Resources  of  Russian  Federation.

     The  applications  have  been  reviewed;  however  the Russian Governmental
agency  in  charge of such auctions, "Rosnedra" has not set a firm date for such
date  and  place  of an auction covering such licenses. The price per license of
the four licenses may vary significantly, however similar parcels have been sold
in  the  past from between $50,000 and $500,000 per parcel and the licenses will
be  granted  to  the  highest bidder at the auction. If ZNG is successful in the
acquisition of the licenses, of which there can be no assurance, it will pay for
such licenses through the Joint Venture (described below). In the event that ZNG
wins  any or all of the licenses at auction, of which there can be no assurance,
it  will  be  in  the  legal position to start geological works on such licensed
parcels within a few months of the end of the auction.

     On  April  4, 2005, ZNG entered into an agreement effective March 29, 2005,
whereby  ZNG  agreed  to transfer 1,000,000 shares of the Company's common stock
held  by ZNG to an individual for 50,000 Russian rubles (or approximately $1,798
based on the exchange rate on March 29, 2005). The Company originally issued the
shares to ZNG in connection with the Company's acquisition of ZNG which occurred
on  May  29, 2003, with respect to 51% of ZNG, and May 24, 2004, with respect to
the  remaining  49%  of  ZNG,  with  the  intention  that  the  shares  would be
distributed  and  not maintained by ZNG. While this agreement remains in effect,
the  Company  is  has  taken  additional  steps  to  perfect this acquisition as
discussed  below.

OPTION  AGREEMENT  WITH  BALTIC  PETROLEUM

     On  April  28,  2005,  the  Company  entered  into an Option Agreement (the
"Option")  with  Baltic  Petroleum  Limited  ("BP")  which  replaced  an  Option
Agreement and Memorandum of Understanding that the Company had entered into with
BP  on  January  24, 2005. Under the Option, the Company granted BP the right to
participate  with the Company in a joint venture company, Zauralneftegaz Limited
("ZNG,  Ltd.")  for,  among other things, the exploration and development of the
Company's  four  licenses  for  exploration in the Kurgan region of Siberia (the
"Existing  Licenses").  BP  paid  the  Company  $100,000  in  March  2005,  in
consideration  for the granting of the Option, and BP later exercised the Option
and  subsequently  loaned the Company approximately $1,110,654 under the Initial
Loan in May and August, 2005.

     On  April  28,  2005,  in  connection  with  the Option, ZNG entered into a
license  agreement  (the  "License  Agreement")  with  BP.  Under  the  License
Agreement,  ZNG  granted  BP  an  exclusive,  royalty-free, worldwide, perpetual
license to use certain two-dimensional seismic, gravimetric and other geological
data  owned  by or to be acquired by ZNG (the "Data"). BP uses and will continue
to  use the Data to re-process it into amended formats (the "Results"). Pursuant
to  the  License  Agreement,  BP  granted  ZNG  a  non-exclusive,  royalty-free,
worldwide,  perpetual license to use the Results when they become available. ZNG

<PAGE>

and  BP  retain  all  right, title to, and interest in the Data and the Results,
respectively. Neither ZNG nor BP has any right to grant sub-licenses without the
consent in writing of the other. BP undertook to keep the Data confidential with
limited  disclosure  only  when  necessary  to  its officers, employees, agents,
consultants  and  sub-contractors  to  the extent such disclosure is required to
re-process  the  Data  into  amended  formats. ZNG undertook to keep the Results
confidential with similar limited disclosure. In addition, ZNG agreed that while
any  amount  of the loan facility is outstanding, ZNG will not disclose the Data
to  any  third  party  except  with  the  prior  written  consent  of  BP.

     On  April  28,  2005,  also  in  connection  with the Option Agreement, ZNG
entered into the Loan Agreement with BP. Pursuant to the Loan Agreement, BP made
available  to  ZNG  a  loan facility of $1,267,860 (the "Commitment" or "Initial
Loan").  As  of  September  30, 2005, the Company had received $1,110,654 of the
Initial Loan from BP, and the Deed of Amendments (described below under "Deed of
Amendments"),  which  amount  has  been  spent by the Company in connection with
monies  owed,  as described under "Liquidity and Capital Resources," below. Upon
completion of the Joint Venture (described and defined below, "Completion"), BP,
ZNG,  and  a  financing  company,  Caspian  Finance Limited ("Caspian") which is
wholly  owned by BP, entered into a Deed of Novation regarding the Initial Loan,
whereby  Caspian  agreed to assume BP's obligations under the Initial Loan made
to  ZNG  by  BP  and  immediately  thereafter  Caspian  entered  into a new Loan
Agreement with ZNG (the "New Loan Agreement"). Under the New Loan Agreement, the
lender  agreed  to  provide  a loan of up to $6,859,396 representing the assumed
commitment under a previous loan and the new commitment, which will be available
in connection with operations in the Kurgan region in 2005 and through the first
half of 2006.

     For  purposes  of the Loan Agreement, the term "Event of Default" includes,
but  is not limited to, the appointment of a trustee in bankruptcy in respect of
ZNG,  the  Company  or  any  of  their  respective assets, an order or effective
resolution  for  the  winding  up  of ZNG or the Company, a stop payment (or the
announcement  of  an  intention to stop payment) by ZNG or the Company of all or
any  class  of  its  debt,  a  cessation  (or  the threat of a cessation) of the
respective  businesses of ZNG or the Company, a substantial change in the nature
of  their respective businesses, the appointment of a receiver in respect of any
property  of  ZNG  or  the  Company,  a failure to pay any amount under the Loan
Agreement  when the same becomes due, insolvency of either ZNG or the Company, a
failure  to  comply  with  any  of  the  covenants  of  the  Loan Agreement, the
application  of  an  Advance  for  a  purpose other than the applicable purposes
specifically  set  forth  in  the Loan Agreement, the distribution of an Advance
otherwise  than  in  accordance  with the Loan Agreement, the termination of the
Option  Agreement,  the  performance  or  compliance  by  the  Company under the
Security  Agreement  becomes  unlawful,  any  obligations thereunder cease to be
legal, valid, binding or enforceable, the same are required by applicable law or
regulation  to  be  waived,  amended,  modified  or  abandoned,  or the Security
Agreement  does not create the security interest it purports to create. On or at
any  time  after  the  occurrence of an Event of Default, BP may cancel the loan
and/or  declare  that  all  or  part  of the outstanding Advances, together with
accrued interest and all other amounts accrued be immediately due and payable.

     In an Event of Default, any amounts that become immediately due and payable
or  payable upon demand will generally be payable within five (5) days of notice
or  demand,  whichever  is applicable. If an event of default occurs because BP,
acting  reasonably,  forms  an  opinion  that  any event or series of events has
occurred  that  might  have  a  material  and  adverse  effect  on the financial
condition  of  ZNG  or its ability to comply with its obligations under the Loan
Agreement, the amounts will instead be payable within three (3) months notice or
demand.  In  the event that ZNG is required to withhold Russian profits tax from
any  amount  payable under the Loan Agreement by ZNG to BP, ZNG will be required
to  increase  the  payment  that  it is otherwise required to make to BP to such
extent that the net amount received by BP after such withholding is equal to the
gross  amount  required  to be paid under the Loan Agreement. ZNG is responsible
for  satisfying  all  requirements  of  Russian Federation law and regulation in
respect  of  the  loan,  each  Advance  and  any matter contemplated by the Loan
Agreement  including,  but  not  limited  to,  placing  two percent (2%) of each
Advance  in  a  special  deposit account to satisfy Russian banking and currency
control  regulations.  In  addition,  ZNG agreed to indemnify BP for any loss or
damage  (including  legal fees) that BP may suffer as a result of the same being
in contravention of such law or regulation.

<PAGE>

     On  April  28,  2005,  in  connection  with the Loan Agreement, the Company
guaranteed  (the  "Guarantee")  the  obligations  of  ZNG  to  BP under the Loan
Agreement  and granted BP a security interest and continuing lien (the "Security
Agreement") on the Company's right, title and interest in, to the Company's 100%
participatory  interest  in  ZNG  to  secure  ZNG's  obligations  under the Loan
Agreement  and  its own obligations under the Guarantee. The Guarantee provides,
in relevant part, that the Company guarantees punctual performance by ZNG of all
of the obligations under the Loan Agreement, undertakes to immediately on demand
pay  any  amount  whenever  ZNG does not pay such amount when due under the Loan
Agreement, and indemnifies BP against any cost, loss or liability suffered by BP
if  any  obligation  guaranteed  by  it  is or becomes unenforceable, invalid or
illegal.  The  Company  waived  any  right  it may have of first requiring BP to
proceed  against or enforce any other rights, security or claim payment from any
person  before  claiming  any  amounts  from the Company under the Guarantee. In
addition,  until  all  amounts  may  be  or  become  payable by ZNG under, or in
connection  with,  the  Loan  Agreement  have been irrevocably paid in full, the
Company  will  not  seek  recourse  from  ZNG  or  any  other guarantor of ZNG's
obligations under the Loan Agreement and will not take the benefit of any rights
that  Company  may  have  under  the Loan Agreement or of any other guarantee or
security  taken  pursuant  to,  or  in connection with, the Loan Agreement. Upon
Completion  of  the Joint Venture, the Company was released from its obligations
under the Guarantee and Security Agreement.

     BP  has  exercised  its option to participate in ZNG, Ltd. with the Company
(as described below under Joint Venture Agreement). Additionally, at the time BP
exercised  its  options, it required that the Company complete the perfection of
the Company's acquisition of ZNG through the following steps:

     1)     clarifying the contract on the acquisition of 49% of ZNG;
     2)     paying the purchase price for the 51% of ZNG directly to OOO Region
            rather than through netting-off of mutual obligations between
            SEG, ZNG, and Region.

     To  satisfy these requirements, on August 2, 2005, the Company entered into
a  Clarification  To  The  Contract Of Purchase and Sale of the Share In Charter
Capital of LLC "Zauralneftegaz" dated May 25, 2004, which clarified the terms of
the Company's original purchase of 49% of ZNG, for a price of $172 and 6,900,000
pre-reverse  split restricted shares of the Company's common stock. On September
2,  2005, the Company, ZNG and Victor Repin entered into a Restitution agreement
which provided for unwinding of the Company's previous issuance of 2,000,000 pre
1:2  reverse  split shares to ZNG and subsequently to Mr. Repin and annulled the
netting  off of the obligations of 50,000 rubles by SEG to LLC Region, a Russian
limited  liability  company ("Region")(in connection with the purchase of 51% of
ZNG),  by  ZNG  to  SEG  (in  connection  with the purchase of 2,000,000 pre 1:2
reverse  split  shares  of  the Company's common stock). In accordance with this
agreement,  Mr. Repin returned the 2,000,000 pre 1:2 reverse split shares to the
Company, ZNG returned 50,000 rubles to Mr. Repin, and OOO Region returned 50,000
rubles to ZNG.

     On  the  same  date,  September  2,  2005, SEG and Mr. Repin entered into a
sale-purchase  agreement  according  to  which  Mr.  Repin  purchased  1,000,000
post-split shares for 50,000 rubles directly from SEG.

     In October 2005, SEG opened a bank account in Russia and paid 50,000 rubles
directly  to  OOO  Region  thus satisfying the requirements on perfection of 51%
interest in ZNG.

DEED OF AMENDMENTS
-----------------

     On  August 15, 2005, and August 16, 2005, respectively, the Company and ZNG
entered  into  a  Deed of Amendments with BP, whereby BP and the Company changed
the  terms  of the Option Agreement and BP and ZNG changed the terms of the Loan
Agreement,  to  make  available to ZNG an additional loan of up to $173,468, for
the  purpose  of  making  additional payments to Business Standard in connection
with  the  application  for  a  fourth license (as described above). The Company
subsequently  received  approximately  $102,041  in  connection with the Deed of
Amendments in August 2005.

<PAGE>

FORGIVENESS OF MONIES OWED

     As  of August 16, 2005, Vladimir Orlov was owed $167,609 in connection with
services  rendered  to  the Company as a Moscow representative of the Company in
connection  with  the  Company's  licenses,  compliance  with  Russian   banking
regulations,  and  transportation  and  lodging  agreements  for  the  Company's
management in Russia.  Mr. Orlov agreed  to forgive $100,000  of the amount owed
in consideration for  the  issuance of  an  aggregate of  800,000  shares of the
Company's  restricted common stock, 300,000 of which will be issued to Mr. Orlov
and  500,000 of which will be issued to Business Standard, which shares have not
been  issued  or included in the issued and outstanding shares of the Company as
of the filing of this Report.

     On  August  16,  2005, David Zaikin, the Company's Chief Executive Officer,
President  and  a  Director  of  the  Company  agreed  to forgive $62,500, which
represented  a  part  of  his  salary,  which  he  had accrued in return for the
issuance  of  500,000  restricted  shares  of  the Company's common stock, which
shares  have not been issued or included in the issued and outstanding shares of
the Company as of the filing of this Report.

     In October 2005, Friedland Capital Inc., agreed to forgive $60,000 to which
it  was  owed  by us in consideration for services rendered, for the issuance of
50,000 restricted shares of the Company's common stock.

AMENDMENT TO ELENA POCHAPSKI'S EMPLOYMENT AGREEMENT

     On  September  1,  2005,  the  Company  entered  into  an "Amendment to the
Employment Agreement Dated August 1, 2003" ("Amended Employment Agreement") with
its Director and Chief Financial Officer, Elena Pochapski. Pursuant to the terms
of  the Amended Employment Agreement, Ms. Pochapski agreed to forgive $50,000 of
salary  which she was owed for services rendered under her employment agreement,
in return for the Company issuing her 400,000 shares of the Company's restricted
common  stock,  which  shares have not been issued or included in the issued and
outstanding shares of the Company as of the filing of this Report. Additionally,
Ms.  Pochapski agreed to postpone the payment of the remaining $84,707 which she
is  owed in connection with her employment agreement from the period from August
1,  2003  to  August  30,  2005,  until  such time as the Company has sufficient
profits  to  pay  the  amount  in  cash either partially or in full. The Amended
Employment  Agreement also set Ms. Pochapski's annual salary for the period from
September  1,  2005  until August 30, 2006 at CDN $75,000 , after which time her
salary  will  return  to  the  amounts  listed  in her August 1, 2003 employment
agreement,  depending  on  the  financial  condition of the Company. The Amended
Employment  Agreement  also  provided  for  the  Company  to pay Ms. Pochapski a
monthly  allowance  of  CDN  $500  in  consideration  for her using her personal
automobile for Company related services.


         RECENT EVENTS DURING THE THREE MONTHS ENDED SEPTEMBER 30, 2005:
        -----------------------------------------------------------------

SETTLEMENT AGREEMENT AND MUTUAL RELEASE WITH JOEL K. LASKA

     On  October  11,  2005, and effective as of September 13, 2005, the Company
entered  into  a Settlement Agreement and Mutual Release with Joel K. Laska, who
had  previously  obtained  a  default judgment against the Company in connection
with tax consulting services provided to the Company (the "Laska Release").  The
Laska  Release provided for Mr. Laska and the Company, to release each other and
certain  related parties from any and all claims whether in contract or tort, or
under  federal or state securities regulations.  The Company agreed to issue Mr.
Laska  20,000  restricted  shares of the Company's common stock and to grant Mr.
Laska a warrant to purchase up to 15,000 shares of the Company's common stock at
an  exercise  price  of $0.30 per share, in return for him agreeing to the Laska
Release,  which  shares  have  not  been  issued  or  included in the issued and
outstanding  shares  of  the  Company  as  of  the  filing  of  this  Report.

<PAGE>

WAIVER  AGREEMENTS

     From  October through November 2005, a majority of the Company's creditors,
including officers and shareholders who had loaned money to the Company, entered
into  Waiver  Agreements  with the Company in connection with the Joint Venture,
which stated that such creditors agreed not to enforce their rights to repayment
of  monies  owed  by  the Company to the creditors, until the Company shall have
sufficient  profits  available  to  discharge  their  claims  (each  a  "Waiver
Agreement"  and  collectively,  the  "Waiver  Agreements").

JOINT  VENTURE  AGREEMENT
-------------------------

     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"), which the Company previously
entered  into  with  Baltic  Petroleum Limited ("Baltic") on April 28, 2005. The
Company has closed the Joint Venture and has 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 now 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 will
no  longer  have  any  separate  oil  and  gas exploration activities in Kurgan,
Russia, other than through its ownership of ZNG, Ltd.

     As  of  the  date  of  this  report,  the  Company has transferred its 100%
ownership  interest  in  ZNG, the Company anticipates BP's satisfaction that the
Company  has  full  and  unencumbered  title  to  such interest shortly, and the
amendment of organizational documents by ZNG is currently in process.

     The Company and BP each own fifty percent (50%) of ZNG, Ltd., consisting of
one  share  each.  Upon  the  Closing, the  Company  and  BP have signed written
resolutions of ZNG, Ltd. in the agreed terms for the purposes of:

     -    adopting  articles  of  association  of  ZNG, Ltd. in substitution for
          existing articles of association;
     -    re-designating  the  issued  share  in  the  capital  of  ZNG,  Ltd.
          registered  in  the  name  of  BP as an A Share and re-designating the
          issued share in the capital of ZNG, Ltd. registered in the name of the
          Company as a B Share;
     -    re-designating  the  98  unissued  shares  of ZNG, Ltd. as 49 A Shares
          and 49 B Shares; and
     -    authorizing  the  directors  to  issue  and allot 49 A Shares and 49 B
          Shares to BP and the Company as discussed below.

<PAGE>

Once  the  resolutions  have  been  passed,  the Company and BP must satisfy the
following  additional  obligations to establish ZNG, Ltd. in connection with the
Joint  Venture:

     -    BP  shall  subscribe  for  49  A  shares  in consideration for $75,000
          in cash, which ZNG, Ltd. will pay to the Company;
     -    the  Company  shall  subscribe  for  49  B shares in consideration for
          the  transfer  of  100%  of the Company's ownership interest in ZNG to
          ZNG, Ltd.;
     -    BP  and  the  Company  shall  procure  that  a  board  of  directors
          meeting  of  the  ZNG,  Ltd. is convened and resolutions in the agreed
          terms  are  passed  approving  the  shareholders' applications for the
          numbers  of A Shares and B Shares and allotting those shares; adopting
          December  31  as ZNG, Ltd.'s fiscal year end; adopting a business plan
          and a budget; and designating a bank for ZNG, Ltd.;
     -    ZNG,  Ltd.  shall  allot  and  issue 49 A Shares to BP and 49 B Shares
          to the Company;
     -    BP and the Company shall appoint directors of ZNG, Ltd.;
     -    Baltic,  ZNG  and  Caspian  Finance  Limited,  a  wholly-owned
          subsidiary  of  BP  ("Caspian"),  shall  enter into a deed of novation
          regarding  a  previous  loan  made  to  ZNG  by Baltic and immediately
          thereafter  Caspian  shall  enter  into  the  Loan Agreement with ZNG,
          discussed above;
     -    ZNG,  Ltd.  shall  enter  into  Guarantee  and  Security  Documents
          regarding the loan from Caspian to ZNG;
     -    Baltic  shall  release  the  Company  from  its  obligations under the
          guarantee  and  security  interest  given  by  the  Company  to Baltic
          regarding a loan to ZNG;
     -    the  Company  shall  confirm  that  it  has  no  claims against ZNG by
          executing a letter of acknowledgement with agreed upon terms;
     -    the  Company  shall  provide  to  ZNG, Ltd. waiver letters with agreed
          upon terms signed by the shareholders and creditors of the Company;
     -    the  Company  shall  procure  that  the  employment agreements for all
          staff  of  ZNG  and  those  between the Company and Messrs Vladimir V.
          Eret,  Sergey Potapov and Oleg V. Zhuravlev are terminated and provide
          to BP written evidence of the same; and
     -    the  Company  shall  provide  to  ZNG,  Ltd.  and  BP  written
          confirmations  from  its 9 largest shareholders with agreed upon terms
          to  adhere  to  restrictions on their ability to directly compete with
          ZNG  in  the  Kurgan, Tyumen and Khanty-Mansisk regions of the Russian
          Federation.

     Pursuant  to  the  Joint Venture, the Company and BP may each appoint three
directors  of  ZNG,  Ltd.,  who shall have one vote each; however, the directors
appointed  by  BP, at all times together, have an additional casting vote. David
Zaikin,  the  Company's  Chief Executive Officer, shall serve as Chairman of the
board  of  directors of ZNG, Ltd. and Victor Repin, who owns more than 5% of the
Company's  common  stock  shall  also serve as another director appointed by the
Company.  ZNG,  Ltd. will pay a monthly management fee of $25,000 and $35,000 to
the  Company  and  BP,  respectively,  in  consideration  for the directors' and
management services.

     When ZNG, Ltd. begins operations, it will have complete independence in its
operations and any expansion, development or evolution of its business will only
be  affected  through  it  or  its wholly-owned subsidiaries. The Company and BP
will,  however, be entitled to participate in any firm or company formed for the
purpose  of such expansion, development or evolution pro rata to their ownership
interest in ZNG, Ltd., unless otherwise agreed. Prior to production and drilling
of  any  oil  and  gas  reserves  by  ZNG, ZNG will be required to enter into an
operating  agreement  with BP on terms to be agreed to by the board of directors
of  ZNG,  Ltd.  (on  behalf of ZNG) and BP. BP is entitled to appoint persons to
serve  as  Reservoir  Engineer,  Drilling  Supervisor,  Logistic and Procurement
Supervisor  and,  after  consulting with the Company, Finance Controller of ZNG,
Ltd.

<PAGE>

     Moving  forward,  BP  will  be  responsible for the technical and financial
support  of  ZNG, Ltd. For these purposes, an initial "Work Program for ZNG Ltd.
in Kurgan region for the period of 2005 and first half of 2006" and an Operating
Budget  have  been  adopted.  Funding of ZNG will be provided through a new Loan
Agreement  entered  into  between  ZNG  and  Caspian  in October 2005 ("New Loan
Agreement").  Under the New Loan Agreement, Caspian Finance Limited ("Caspian"),
agreed to provide a loan of up to $6,859,396 to ZNG, representing the aggregated
amount  of  the  assumed  commitment  under  the Loan Agreement and the New Loan
Agreement, which will be available for the purpose of research activities in the
Kurgan  region in 2005 through the first half of 2006. The Company will disclose
the  New Loan Agreement, as well as the Deed of Novation between BP, Caspian and
ZNG, in a Report on Form 8-K to be filed subsequent to this Report.

     Caspian  shall  also provide loans to ZNG, Ltd., to enable ZNG, Ltd. to pay
the  management  fees until such time that ZNG, Ltd. has sufficient revenue from
distributions made by ZNG to fund such fees. Other than these loans and the Loan
Agreement,  discussed  above,  neither  BP  nor  the Company shall be obliged to
contribute further funds or participate in any guarantee or similar undertaking.
After  completion  of  a  work  program  (which  will  be  provided for the Loan
Agreement),  BP,  Caspian  and  the  Company may consult with each other whether
further  amounts  should  be  advanced to ZNG under the Loan Agreement, provided
that  neither  BP  nor  Caspian  shall  be  under any obligation to provide such
further funding.

     In  accordance  with  the  Joint  Venture,  ZNG,  Ltd.  cannot  make  any
distributions  during  the  period  of  the  loan  from  Caspian to ZNG, and all
revenues  of  ZNG,  Ltd.  will first be applied towards paying off the principal
advanced under the loan and accrued interest thereunder.

     In  the  event  of  default  under  the  Joint  Venture, the non-defaulting
shareholder  may  give a written default notice within sixty days of the earlier
of  its  receipt  of  notification  of  an  event of default from the defaulting
shareholder  or  its  becoming aware of the event of default. The default notice
may require the defaulting shareholder to sell all of its shares in ZNG, Ltd. to
the  non-defaulting  shareholder  at  a  price per share equal to eighty percent
(80%)  of  the fair value of the shares or to purchase all of the shares held by
the non-defaulting shareholder at a price equal to the fair value of the shares.
Either the Company or BP will be in default under the Joint Venture Agreement in
the following circumstances:

     -    if  they  commit  a  material  breach  of  the Joint Venture Agreement
          which  is  not  capable  of  being  remedied or is not remedied within
          twenty  days of the date the non-defaulting party sends written notice
          requiring a remedy;
     -    if  they  are  unable  or  admit  inability  to  pay  their  debts,
          suspends  making  payments  on  nay  of  their  debts  or  commences
          negotiations  with one or more of their creditors to reschedule any of
          their indebtedness;
     -    if  a  moratorium  is  declared  in  respect  of  any  of  their
          indebtedness;  any  corporate  action,  legal  proceeding  or  other
          procedure  or  step  is taken in relation to suspension of payments, a
          moratorium of any indebtedness, winding-up, dissolution administration
          or  reorganization  other than a solvent liquidation or reorganization
          of  any  of  their  subsidiaries  or holding companies, a composition,
          assignment  or  arrangement  with  any  creditor, the appointment of a
          liquidator (other than in respect of a solvent liquidation), receiver,
          administrator,  administrative  receiver  compulsory  manager or other
          similar  officer  in respect of any of their assets, or enforcement of
          any security over any of their assets; or
     -    they are subject to any change of control.

     The  Company has agreed that it will not directly compete with ZNG, Ltd. in
the  Kurgan,  and  Tyumen regions of the Russian Federation and that it will not
directly  compete  with  ZNG,  Ltd.  in the Khanty-Mansisk region of the Russian
Federation  without  having first offered a right of first refusal in respect of
such  activities  to  ZNG,  Ltd.  The  Company has also agreed to obtain written
confirmations   from   its   nine   largest   shareholders   to  adhere  to  the
non-competition  provisions and this right of first refusal. For the purposes of
offering  a right of refusal, the Company shall give ZNG, Ltd. written notice of
such opportunity together with sufficient supporting documentation for ZNG, Ltd.
to evaluate the opportunity.

     The  Company  and  ZNG Ltd provided customary warranties in connection with
the Joint Venture Agreement.

     Alternative  Energy  Finance  Ltd.,  of  which  Tim  Peara  is the Managing
Director as well as a Director of the Company, introduced the parties who formed
the joint venture. Alternative Energy Finance Ltd is entitled to compensation in
the  amount  of  1.75%  of  total funding provided by BP into the Joint Venture,
which will be payable by a combination of cash, shares and options of SEG.

<PAGE>

SETTLEMENT AGREEMENT AND MUTUAL RELEASE WITH CARMINE J. BUA

     On  October  31,  2005, the Company entered into a Settlement Agreement and
Mutual  Release  with Carmine J. Bua, a former attorney of the Company (the "Bua
Release").  The  Bua  Release  provided  for Mr. Bua and the Company, to release
each  other  and  certain  related  parties  from  any and all claims whether in
contract or tort, or under federal or state securities regulations.  The Company
agreed  to  pay Mr. Bua approximately $6,215 in consideration for legal services
rendered  and  issue  Mr.  Bua  25,000 restricted shares of the Company's common
stock  in  consideration  for him agreeing to the Bua Release, which shares have
not  been issued or included in the issued and outstanding shares of the Company
as  of  the  filing  of  this  Report.  Additionally, in connection with the Bua
Release,  Mr.  Bua  agreed  to a leakout agreement in connection with the 75,000
restricted  shares of the Company's common stock which he held previously to his
entry  into  the  Bua  Release.

PLAN  OF  OPERATIONS  FOR  THE  NEXT  TWELVE  MONTHS

     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,
which  in  turn  owns ZNG. The Company believes that 120084257ZNG has adopted an
aggressive  but  sensible work program, which is presently ongoing in accordance
with  the  technical parameters set forth in the 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  more  blocks  in  the  Kurgan  Region,  BP  will be able to ensure that
adequate funding is available to support the Work Programs on these blocks.

     Moving forward, the Company anticipates targeting other potential long term
investments  in  Russia,  separate  from  its  involvement in the Joint Venture.
Currently  the  Company is evaluating different business opportunities in Russia
in  oil  and  gas  and  other  industries,  including both development stage and
revenue-producing enterprises.

     In  the  past,  the  Company  has  obtained  cash financing from organizing
stockholders in the form of loans and advances. Currently, the Company is in the
process  of  restructuring  its  debt  through  the  issuance  of  shares to its
creditors  and through obtaining Waiver letters (as discussed above), postponing
the  payment  of liabilities until such time as the Company will have sufficient
profits  to pay such debts. This includes 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.


ESTIMATE OF AMOUNT OF TIME SPENT ON RESEARCH AND DEVELOPMENT

     A  business  plan  was  developed  over the course of three months in 2003.
During  that  time  period,  market  research  was  conducted.  These costs were
directly  borne  by  the  Company  and  are  not being transferred to customers.
Research  and  development  activities  in the oil and gas field are the primary
activities  of  the Company at during the period of this Report. The Company has
conducted gravimetric and seismic works on the licensed areas. Costs incurred as
of September 30, 2005 were $705,000.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Our  discussion  and  analysis  of  our  financial condition and results of
operations  is  based  upon  our unaudited 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

<PAGE>

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. 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.

     We  believe  the  following  critical  accounting  policy  affects our more
significant  judgments  and  estimates  used in the preparation of our financial
statements:

Going Concern
--------------

     The  Company's  financial  statements  have been prepared assuming that the
Company  will  continue  as  a  going  concern;  however, since inception of its
current  endeavors  in  2003,  the  Company  has  not earned any revenues and is
considered  to be in the development stage, which raises substantial doubt about
its  ability  to continue as a going concern. The Company is of the opinion that
sufficient  financing  will  be  obtained  from  external sources to provide the
Company  with  the  ability  to  continue  the process of development to achieve
commercial  production  and  sales  of products. For the cumulative period ended
September  30,  2005,  the  Company  has obtained cash financing from organizing
stockholders and employees in the form of loans, advances and deferred salaries,
as  well as through debt financing. 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  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

Three Months ended September 30, 2005 Compared to Three Months Ended September
30, 2004
-----------------------------------------------------------------------------

     The Company had no revenues for either the three months ended September 30,
2005, or the three months ended September 30, 2004.

     Total  expenses increased $176,302 or 110% to $336,609 for the three months
ended  September  30,  2005,  compared  to  $160,307  for the three months ended
September  30,  2004.  This increase was due to an increase in other expenses of
$56,397 or 269.8% to $77,304 for the three months ended September 30, 2005, from
$20,907  for  the three months ended September 30, 2004; an increase in salaries
of  $21,218  or 25.7% to $103,920 for the three months ended September 30, 2005,
from  $82,702  for  the  three  months  ended September 30, 2004; an increase in
professional  and  consulting fees of $53,187 or 160.5% to $86,324 for the three
months  ended September 30, 2005, compared to $33,137 for the three months ended
September  30,  2004;  an  increase in rent and occupancy of $13,788 or 95.9% to
$28,162  for  the three months ended September 30, 2005, compared to $14,374 for
the  three  months  ended  September  30,  2004; an increase in depreciation and
amortization of $198 or 2.2%, to $9,385 for the three months ended September 30,
2005,  compared  to  $9,187  for  the  three months ended September 30, 2004; an
increase  in  finance  charges and interest of $31,514, to $31,514 for the three
months  ended  September  30,  2005, compared to $-0- for the three months ended
September 30, 2004.

     The $77,304 in other expenses for the three months ended September 30, 2005
included  $33,952  in various travel expenses including the cost of hotel stays,
transportation  between  New York, London and Russia, business lunches, and auto
expenses;  $26,238  in  general    and    administrative    expenses,  including
administrative  assistance and translation services, fees in connection with the
Company's  filings  and  transfer  agent  fees,  filings  in Nevada and UCC lien
searches in connection with the Option and Joint Venture; and $17,114 in various
other miscellaneous expenses.

<PAGE>

     Net  loss  for  the  three  months  ended  September  30, 2005 increased by
$176,302  or 110% from $160,307 for the three months ended September 30, 2004 to
$336,609  for  the  three  months  ended  September  30, 2005. Although net loss
increased,  basic  and  diluted  loss  per  common share increased by $0.02 from
$(0.02)  for  the three months ended September 30, 2004 to $(0.04) for the three
months ended September 30, 2004.

Nine Months ended September 30, 2005 Compared to Nine Months Ended September 30,
-------------------------------------------------------------------------------
2004
----

     The Company had no revenues for either the nine months ended September 30,
2005, or the nine months ended September 30, 2004.

     Total  expenses increased $270,525 or 44.4% to $880,150 for the nine months
ended  September  30,  2005, compared to total expenses of $609,625 for the nine
months  ended  September  30,  2004.  The  increase in total expenses was mainly
attributable  to  an  increase in professional and consulting fees of $48,981 or
41.4%,  to  $167,169  for  the nine months ended September 30, 2005, compared to
professional and consulting fees of $118,188 for the nine months ended September
30,  2004;  an  increase  in  rent and occupancy expenses of $32,065 or 82.8% to
$70,792  for  the  nine  months  ended  September 30, 2005, compared to rent and
occupancy  expenses  of  $38,727  for  the nine months ended September 30, 2004;
increases  in  depreciation and amortization expenses of $231 to $28,153 for the
nine  months ended September 30, 2005, compared to depreciation and amortization
expenses  of  $27,922 for the nine months ended September 30, 2004; increases in
finance  charge  and  interest  of $47,607, to $47,607 for the nine months ended
September 30, 2005, compared to finance charge and interest of $-0- for the nine
months  ended  September 30, 2004; offset by a decrease in salaries of $4,617 or
1.3% to $352,633 for the nine months ended September 30, 2005, from $457,261 for
the  nine  months  ended September 30, 2004. Total expenses increased because of
additional  costs  associated  with our status as a public company, the lease of
office  space in Russia and Canada that began in January 2005, and other factors
such as an increase in our efforts to raise capital.

     The $213,785 in other expenses for the nine months ended September 30, 2005
included  $119,679  in  travel  expenses  including  the  cost  of  hotel stays,
transportation  between  New York, London and Russia, business lunches, and auto
expenses;  $25,950  in  marketing  and advertising costs; $29,837 in general and
administrative  expenses,  including  administrative  assistance and translation
services,  Nevada  state fees in connection with the Company's filings and other
fees  associated  with UCC lien searches in connection with the Option and Joint
Venture; as well as $38,319 in other expenses.

     Net loss for the nine months ended September 30, 2005 increased by $270,525
or  44.4%, to $880,150 for the nine months ended September 30, 2005, as compared
to  $609,625  for  the  nine  months ended September 30, 2004. Although net loss
increased,  basic  and  diluted  loss  per  common  share did not change and was
$(0.09) for both periods.

LIQUIDITY AND CAPITAL RESOURCES

     As of September 30, 2005, the Company's total current assets were $160,943,
which  consisted  of  cash of $1,977 and prepaid expenses and other of $158,966.
Total  assets  for  the  Company as of September 30, 2005 were $2,113,706. Total
assets  consisted  of  $750,000 of net geological data, $770,750 of unproved oil
and gas properties, $81,375 of net licenses, $348,137 of license deposit, $2,501
of  net  property and equipment, and $160,943 of current assets. The $750,000 of
geological  data includes, data, maps and reports from the 12 test wells drilled
between  1979-1986,  including  a  lithologic  description of rock, summaries of
geophysical  research  of  well  shafts  and  a laboratory analysis of rock age;
profile  sections;  correlation  schemes;  geological  and  set  maps;  and  an
independent  geological  evaluation  of  oil  reserves  on  the  licensed  areas
performed in 2004.

     As  of  September  30,  2005,  the Company had total current liabilities of
$3,477,465.  This  was  due to $1,171,149 of loans payable, $625,738 of accounts
payable  to related parties, $609,530 of accounts payable to others, $971,048 of

<PAGE>

accrued payroll, and $100,000 of option deposit from BP. The $971,048 of accrued
payroll  included approximately $546,955 of accrued salaries of our officers and
directors. The $625,738 of accounts payable to related parties included $199,482
which  is  payable  to  our  Chief  Executive Officer, David Zaikin and $163,159
payable to our Director, Sergey Potapov, which amounts were previously loaned to
the  Company and bear no interest. Additionally, the $625,738 included $957 owed
to  our  Director  and  Chief  Financial  Officer,  Elena  Pochapski  for office
expenses,  and  $11,500  owed  to  our  Director,  Timothy  Peara for consulting
services  and  travel  expenses.  Mr.  Potapov  has two loan agreements with the
Company,  whereby  he  agreed  to  loan   an  aggregate  of  4   million  rubles
(approximately  $140,746)  to  the Company for an indefinite period of time. The
loan  agreements  also  provide  that  the Company will repay Mr. Potapov within
seven  days of a claim made to the Company to return the monies loaned, however,
Mr.  Potapov  agreed  to waive his rights to repayment under his loan agreements
pursuant  to a Waiver Agreement (described in more detail above). This agreement
bears  no  interest  and  the Company owed Mr. Potapov approximately $163,159 in
connection  with the loan agreements as of September 30, 2005. Additionally, the
Company  has  a loan agreement in place with a shareholder of the Company, which
loan  agreement  provides  for the shareholder to loan an aggregate of 5,152,225
rubles (approximately $181,289) to the Company for an indefinite period of time.
The  loan agreement provides for the Company to repay the shareholder upon seven
days of a claim from the shareholder to return the amounts owed under the loans,
however,  the shareholder agreed to waive his rights to repayment under his loan
agreement,  pursuant to a Waiver Agreement (described in more detail above). The
loaned  amounts  bear  no  interest,  and  the  Company  owed  the  shareholder
approximately $179,032 on September 30, 2005.

     The  $971,048  in  accrued  payroll  decreased  by  $112,500  subsequent to
September  30,  2005  as  a  result  of  its  Chief  Executive Officer and Chief
Financial  Officer  forgiving  an  aggregate of $112,500 which they were owed in
connection with the issuance of an aggregate of 900,000 restricted shares of the
Company's common stock, which shares have not been issued as of the date of this
Report  (as  described  in more detail below under "Unregistered Sales of Equity
Securities").  Additionally,  the  $609,530  of  accounts  payable to others was
decreased  by  $227,609 subsequent to September 30, 2005, in connection with the
forgiveness  of two entities for amounts owed in connection with the issuance of
825,000 shares of the Company's restricted common stock.

     As of September 30, 2005, the Company had negative working capital of
$1,262,759.

     For  the  nine months ended September 30, 2005, the Company had $813,648 in
net  cash  flows  for operating activities. This was attributable to net loss of
$880,150,  depreciation  and  amortization  of  $28,153, common stock issued for
professional  services  of  $15,000,  prepaid  expenses  and other of ($23,914),
accounts  payable  and  accrued  expenses  of  ($52,737)  and  option deposit of
$100,000.

     The  Company  spent $386,379 in net cash flows for investing activities for
the  nine  months  ended  September  30,  2005, which consisted of ($348,137) of
expenditures for licenses and related, ($36,532) of expenditures for oil and gas
properties and ($1,710) of expenditures for property and equipment.

     The  Company had $1,172,780 of net cash flows from financing activities for
the  nine  months ended September 30, 2005, which consisted of $1,171,149 of net
proceeds from loans and $1,631 of additional paid in capital.

     The  Company received $100,000 from Baltic Petroleum Limited ("BP") for the
Option  that  the  Company gave to BP to participate with the Company in a joint
venture  company for, among other things, the exploration and development of the
Company's  four  licenses  for  exploration  in the Kurgan region of Siberia. In
conjunction  with the Option, BP provided ZNG with a loan facility of $1,724,728
for  specific  purposes  which  include  the payment for outstanding amounts for
geological  works, salaries to employees for the period from April to July 2005,
and research work toward potential new fields, of which the Company had received

<PAGE>

and  spent $1,110,654 as of September 30, 2005. The Company spent the $1,110,654
on  amounts  due  to  Basneftegeofizika  and  Bazhenov  Expedition  for services
rendered  in  connection  with  surveys  which  were  performed;  amounts due to
Business  Standard  in  connection with services rendered in connection with the
gathering  of  data  and  information  on  various  new exploration licenses; in
connection  with salaries for certain employees of the Company for the months of
April,  May,  June and July; for amounts owed to Geodata Consulting for services
performed for the Company in its role as supervisor over gravimetric and seismic
surveys  which  were  performed  on  the  Company's  licensed blocks; and to JSC
Central  Geophysical  Expedition  for preparation and estimates of costs for the
Company's  seismic  works.  Additionally,  the  Company placed part of the money
received  in  a  special deposit account to satisfy Russian banking and currency
control regulations.

The  New  Loan Agreement provides for the payment of certain debts of ZNG, which
were  incurred  before  the Joint Venture. Payments under the New Loan Agreement
will  be  executed  in  two  steps,  the  first of which the Company anticipates
receiving shortly after the filing of this Report:

1)   $352,665,  is  to  be  paid  upon  the  Company signing the loan agreement.
     Amounts  will  be  used  for  payment  of  salaries  of  ZNG for August and
     September  ($32,000);  payment  of  50%  of  the  amount  of director's and
     shareholder's loans ($170,000); 50% of outstanding rent payments ($44,000);
     mineral  tax  for  the  second  quarter  of 2005 ($3,865); and $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 seven new licenses (described earlier in
     "Overview"  section)  were  awarded  to  ZNG,  of  which  there  can  be no
     assurance.  These  payments  will be used for further payment for gathering
     and  coordination  of  data  in  connection  with  the  new licenses (up to
     $340,000);  final  payments  for seismic and gravimetric works performed on
     the  Company's  West-Suerski field (up to $324,834); to repay the remaining
     amounts  owed  by  ZNG to directors and shareholders ($170,000); to pay the
     remaining amount of outstanding rent payments ($44,000); and to pay mineral
     tax  for  the third quarter of 2005 ($3,865). In addition to these amounts,
     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 anticipates receiving $29,000 of this amount in November 2005,
     subsequent  to the filing of this Report; and that the $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
     seven new licenses were awarded to ZNG, of which there can be no assurance.

     Moving  forward,  funding  of  ZNG  will  be  provided  through  a new Loan
Agreement  entered  into  between  ZNG  and  Caspian  in October 2005 ("New Loan
Agreement").  Under the New Loan Agreement, Caspian Finance Limited ("Caspian"),
agreed  to provide a loan of up to $6,859,396 to ZNG, representing the aggregate
amount  of  the  assumed  commitment  under  the Loan Agreement and the New Loan
Agreement,  which  will be available for the purpose of operations in the Kurgan
region in 2005 and through the first half of 2006. The Company will disclose the
New Loan Agreement, as well as the Deed of Novation between BP, Caspian and ZNG,
in a Report on Form 8-K to be filed subsequent to this Report.


     Currently  the  Company is in the process of restructuring its debt through
the  issuance  of shares to its creditors, through obtaining Waiver letters, and
postponing  the  payment of liabilities until such time as the Company will have
sufficient  profits to pay. This includes payment of certain trade debts as well
as shareholder loans and accrued salaries (as described above).

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


                                  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 $1,171,149 from BP, which we have since spent on
various  purposes,  including  paying  our consultants for services performed in
connection  with surveys previously performed on our 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  LOAN  AGREEMENT  AND IN CONNECTION WITH THE JOINT
VENTURE ARE CONTINGENT UPON US OBTAINING RIGHTS TO THE SEVEN ADDITIONAL LICENSES
IN THE KURGAN REGION, WHICH WE APPLIED FOR IN APRIL, AUGUST AND SEPTEMBER 2005.

     Approximately $930,000 in loans, which we are to receive in connection with
the  Loan Agreement and Joint Venture are contingent upon us obtaining rights to
the  seven  new  licenses  applied  for in April, August and September 2005. The
Company's  applications  have  been  reviewed;  however the Russian Governmental
agency  in  charge of such auctions, "Rosnedra" has not set a firm date for such
date  and place of an auction covering such licenses. The licenses may be bid on
by  companies with resources much greater than ours, and as a result, we may not
win  the  rights  to  the  licenses  applied  for.  If  this were to happen, the
approximately  $930,000  in  loans  which  are contingent upon us obtaining such
licenses may not be granted. As a result, we may be forced to curtail or abandon
our business operations and any investment in us 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 the
Company'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  until late into 2006, assuming the $15,000,000 can be raised, of which
there can be no assurance. Therefore, investors should keep in mind that even if

<PAGE>

the  Company is able to raise the substantial amounts of additional financing it
requires,  it  could still be years before the Company generates any revenue, if
ever. If the Company 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 the Company if no revenues are generated and hydrocarbon reserves are
located,  the  Company  may be forced to abandon or curtail its current business
plan.

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. 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 December
31, 2004, was $1,256,083, and the total cumulative deficit was $1,705,868, which
included  $449,785  of  pre-development stage deficit. As of September 30, 2005,
our  development  stage  deficit  was  $2,136,233  and our pre-development stage
deficit was $449,785 and we had a total cumulative deficit of $2,586,018. We had
$971,048  in  accrued and unpaid salaries as of September 30, 2005. The  Company
is currently being funded by existing shareholders and amounts received by BP in
connection  with  the  Loan  Agreement  and  Joint  Venture, but there can be no
assurance  this  amount will be sufficient to continue our planned operations or
that we will have enough money to repay these amounts. There is a risk that ZNG,
Ltd.  will  never  begin  production  and  our  Company  will never generate any
revenues. If throughout ZNG, Ltd's oil exploration, it finds no viable wells, 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  THE  COMPANY  DOES NOT FIND
HYDROCARBON  RESERVES,  WE  MAY  BE  FORCED  TO  CURTAIL  OUR  BUSINESS  PLAN

     There  is  a risk that ZNG, Ltd. will not find any hydrocarbon reserves and
the  cost  of exploration will become too high for ZNG, Ltd. and therefore us to
continue as a corporation. If this happens, your investment in our Company could
become  devalued.

<PAGE>

ZNG,  LTD.'S  DRILLING  LICENSES  MAY  NOT  BE  EXTENDED  OR WE MAY NOT GAIN THE
APPROVAL  OF  FEDERAL  AND STATE GOVERNMENT AGENCIES TO CONVERT SUCH EXPLORATION
LICENSES  INTO  PRODUCTION  LICENSES.

     ZNG, Ltd. holds four (4) exploration licenses acquired on March 7, 2003, to
explore  four  individual  properties  in  the  Kurgan province of Russia. These
licenses  require  ZNG, Ltd. to conduct seismic surveys on the properties and to
report  any  discoveries  to the regional government. The licenses are currently
classified  as  5-year  exploration  licenses  and  are convertible into 25-year
production licenses upon discovery of hydrocarbon reserves, of which there is no
assurance.  Additionally,  ZNG, Ltd. can request and may be granted an extension
if it can show initiative to continue and finalize all exploratory activities on
the  licensed  areas. Therefore, under the Russian Ministry of Natural Resources
("Ministry")  current policies, ZNG, Ltd.'s exploration licenses may be extended
indefinitely as long as all of the terms and conditions of the licenses are met.
The  Ministry  may not withdraw the licenses at the end of the initial five-year
period,  or  thereafter, if the exploration activities are ongoing and privately
funded.  However,  there  is  a  risk that ZNG, Ltd. will not have the financial
resources on March 7, 2008, at the end of the five-year license term, to conduct
exploration  activities which will satisfy the license agreement and allow it to
extend  the  term of the license until viable resources are discovered, if ever,
and  the licenses caIf ZNG, Ltd.'s exploration licenses expire because it cannot
show  the  initiative to continue and finalize exploration activities at the end
of  the initial five-year term of the licenses, or the government does not allow
its  exploration  licenses  to  be  converted into production licenses, it would
cause the Company's revenues, if any, to decrease, or may mean that we are never
able  to  generate revenues, which in turn would lead to a decrease in the value
of any securities held by investors in the Company.

IF ZNG, LTD., DOES PRODUCE OIL, IT WILL BE REQUIRED TO SELL 70% OF ITS CRUDE OIL
PRODUCTION  IN  THE  DOMESTIC  RUSSIAN MARKET, LEAVING ONLY 30% OF ITS CRUDE OIL
PRODUCTION  TO  BE  SOLD  IN  THE  MORE  LUCRATIVE  FOREIGN  MARKETS.

     There  is a risk that if commercial hydrocarbon reserves are discovered, of
which  there  is  no  assurance,  that  ZNG,  Ltd. will be constrained as to the
amounts  it  can export to foreign markets. Currently it is more advantageous to
export  crude  oil, because domestic Russian prices of Urals blend oil are lower
than foreign market prices. However, Russia has export quota restrictions on the
amount  of  oil  which  any  company  can export to foreign markets. The current
percentage  of  crude  oil  allowed  to  be  exported  to  foreign   markets  is
approximately  30%.  The remaining 70% cannot be exported as crude oil, but only
as  a refined product such as gasoline or kerosene. If ZNG, Ltd. fails to refine
its  products,  if  any, it will be required to sell 70% of its crude oil in the
domestic  Russian  market.  If  ZNG, Ltd. decides to refine the oil it finds, if
any,  it  will  entail  substantial  expenditures.  Even if ZNG, Ltd. is able to
produce  oil, we may still not be able to generate enough revenues to recoup the
costs of exploration and production, because ZNG, Ltd. will only be able to sell
30% of its crude oil production to the larger more lucrative foreign markets. If
we  are  unable to generate sufficient revenues, we may be forced to abandon our
business  plan  or  curtail  our  future  business  activities.

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 is 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 we require
for  greater  exploration, the Company may be forced to liquidate its assets and
an  investment  in  our  Company  could  become  worthless.

<PAGE>

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

     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.

OUR  PROJECTIONS,  ESTIMATES  AND  STATISTICAL  ANALYSIS  MAY  BE  INACCURATE OR
SUBSTANTIALLY  WRONG,  WHICH  MAY  PREVENT  US  FROM EXECUTING OUR 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  our  projections  or  estimates  are wrong or our statistical
analysis faulty, our revenues may be adversely affected which could keep us from
executing our 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.

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.

     There  are  new  rules and regulations proposed to the SEC by NASDAQ, which
rules  are  proposed  to  be effective as of October 1, 2005, and will amend the
Over-The-Counter Bulletin Board ("OTCBB") rules relating to the timely filing of
periodic  reports with the SEC. Pursuant to the proposed rules, 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  would  be  de-listed  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.
As  the  proposed  rule has not been adopted as of the filing of this Report, we
can  make  no  assurance that the final rule, if any, will be more or less harsh
and/or carry a lesser or greater penalty. If the proposed rule change is adopted
and/or  any rule relating to the late filing of our periodic reports, and we are
late 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.

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

     Since  our  Common  Stock  is  listed  on  the OTC Bulletin Board under the
trading  symbol  "SIBN,",  it  is  subject  to  the requirements of Rule 15(g)9,
promulgated  under the Securities Exchange Act, and will be as long as the price
of  our  Common  Stock is below $5.00 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 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 $5.00 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.

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  Chief Financial Officer, as appropriate, to allow timely decisions
regarding  required  disclosure.

<PAGE>

     (b)  Changes  in  internal  control over financial reporting. There were no
significant  changes in our internal control over financial reporting during the
last  fiscal  year  and/or  up  to and including the date of this filing that we
believe  materially affected, or are 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  AND  USE  OF  PROCEEDS

     In October 2005, the Company issued 125,000 shares of its restricted Common
Stock  to  Denis Saveliev in consideration for consulting services rendered.  We
claim  an  exemption from registration afforded by Section 4(2) of the Act since
the  foregoing  issuances did not involve a public offering, the recipients took
the  shares  for  investment  and not resale and we took appropriate measures to
restrict  transfer.  No  underwriters  or  agents were involved in the foregoing
issuances  and  no  underwriting  discounts  or  commissions  were  paid  by us.

     In October 2005, the Company issued 150,000 shares of its restricted Common
Stock  to  David  M.  Loev, Attorney at Law, an individual, in consideration for
legal  services  rendered.  We  claim an exemption from registration afforded by
Section  4(2)  of the Act since the foregoing issuances did not involve a public
offering,  the  recipients  took the shares for investment and not resale and we
took  appropriate  measures to restrict transfer. No underwriters or agents were
involved in the foregoing issuances and no underwriting discounts or commissions
were  paid  by  us.

     Additionally,  the  Company  has agreed to issue the following shares as of
the  date  of  this  Report, which shares have not been issued as of the date of
this  Report,  and  which  shares  have  not  been  included  in  the issued and
outstanding shares listed throughout this 10-QSB:

     On  November 8, 2005, the Company agreed to issue an aggregate of 1,810,000
restricted shares of the Company's common stock to the following individuals and
entities:

o    25,000  restricted  shares  of  the  Company's  common  stock  to Friedland
     Capital  Inc. and 25,000 restricted shares of the Company's common stock to
     Galt  Capital LLC, both in consideration for services rendered by Friedland
     Capital  Inc.

o    25,000  restricted  shares  of  the  Company's  common  stock  to  the
     Company's  previous  attorney,  Carmine  J.  Bua,  pursuant to a Settlement
     Agreement  and Mutual Release entered into with Mr. Bua on October 31, 2005
     (described  in  more detail above under "Subsequent Events During the three
     months ended September 30, 2005");

<PAGE>

o    15,000  restricted  shares  of  the  Company's  common  stock to one of the
     Company's  Directors,  Timothy  Peara,  in  consideration  for  consulting
     services  rendered  by Mr. Peara, prior to Mr. Peara becoming a Director of
     the Company;

o    300,000  restricted  shares  of  the  Company's  common  stock  to Vladimir
     Orlov  and  500,000  restricted shares of the Company's common stock to OOO
     "Business  Standard" in consideration for forgiving $167,609 owed to him by
     the Company in connection with services rendered to the Company as a Moscow
     representative  of  the  Company in connection with the Company's licenses,
     compliance with Russian banking regulations, and transportation and lodging
     agreements for the Company's management in Russia;

o    500,000  restricted  shares  of  the  Company's  common  stock  to  David
     Zaikin  in  consideration for Mr. Zaikin forgiving $62,500 of the amount he
     is owed under his employment agreement for services rendered;

o    400,000  restricted  shares  of  the  Company's  common  stock  to  the
     Company's  Chief  Financial  Officer, Elena Pochapski, in consideration for
     Ms.  Pochapski  forgiving  $50,000  of  the  amount  she  is owed under her
     employment contract for services rendered; and

o    20,000  restricted  shares  of  the  Company's  common  stock  and  15,000
     warrants  to  purchase  shares  of  the Company's common stock at $0.30 per
     share, in connection with a Settlement Agreement and Mutual Release entered
     into  between  the  Company  and  Mr. Laska (described in more detail above
     under  "Subsequent  Events  During  the  three  months  ended September 30,
     2005").

     We claim an exemption from registration afforded by Section 4(2) of the Act
since  the foregoing issuances did not involve a public offering, the recipients
took  the  shares for investment and not resale and we took appropriate measures
to  restrict  transfer. No underwriters or agents were involved in the foregoing
issuances and no underwriting discounts or commissions were paid by us.

ITEM  3.     DEFAULTS  UPON  SENIOR  SECURITIES.

     None.

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

     None.

ITEM  5.     OTHER  INFORMATION.

     RELATED  PARTY  TRANSACTIONS

     Oleg  V.  Zhuravlev,  Chief  Executive  Officer  of  ZNG,  entered  into an
employment  agreement on January 1, 2004, which will be in effect until December
31,  2008.  Additionally, Mr. Zhuravlev entered into a stock option agreement on
January  1,  2003.  Pursuant to that agreement, 100,000 options vested to him in
2004,  at an exercise price of $0.20 per share. As of September 30, 2005, 77,500
additional  options  had  vested  to him at an exercise price of $.60 per share.
Effective  October 14, 2005 in connection with establishing of the Joint Venture
Agreement,  the  employment  agreement  between  Mr.  Zhuravlev and SEG has been
voluntarily  terminated.  The  stock  option agreement continues to be in effect
during the period Mr. Zhuravlev is serving as a director of the Company.

     Vladimir  V.  Eret,  Chief  Operating  Officer of ZNG, signed an employment
agreement  with  the  Company  on January 1, 2003, which will be in effect until
December  31, 2008. Mr. Eret also entered into a stock option agreement with the
Company on January 1, 2004. Pursuant to the stock option agreement, Mr. Eret was
granted  84,000 options in 2004, exercisable at $0.20 per share. As of September
30,  2005, he had been granted 70,000 additional options exercisable at $.60 per
share.  Effective  October 14, 2005 in connection with establishing of the Joint

<PAGE>

Venture  Agreement,  the  employment agreement between Mr. Eret and SEG has been
voluntarily  terminated.  The  stock  option agreement continues to be in effect
during the period Mr. Eret is serving as a director of the Company.

     Sergey Potapov, Vice President of ZNG, entered into an employment agreement
with the Company on January 1, 2003 which will be valid until December 31, 2008.
He also entered into a stock option agreement at the same time as his employment
agreement.  Pursuant  to  his  stock  option  agreement, Mr. Potapov was granted
84,000  options  in  2004,  exercisable  at $0.20 per share. As of September 30,
2005,  he  had  been  granted  70,000 additional options exercisable at $.60 per
share.  Effective  October 14, 2005 in connection with establishing of the Joint
Venture Agreement, the employment agreement between Mr. Potapov and SEG has been
voluntarily  terminated.  The  stock  option agreement continues to be in effect
during the period Mr. Potapov is serving as a director of the Company.

     David  Zaikin,  the  Company's  Chief  Executive  Officer,  entered into an
employment agreement and a stock option agreement with the Company on January 1,
2003,  which will be in effect until December 31, 2008. In 2003, 100,000 options
vested  to Mr. Zaikin under his stock option agreement, exercisable at $0.14 per
share.  In  2004,  100,000  options vested to Mr. Zaikin under this stock option
agreement,  exercisable  at  $0.20  per  share. As of September 30, 2005, 77,500
additional options had vested to him at an exercise price of $.60 per share.

     Elena  Pochapski,  the  Company's  Chief Financial Officer, entered into an
employment  agreement and a stock option agreement with the Company on August 1,
2003,  which will be valid until December 31, 2008. Under her stock option plan,
Mrs.  Pochapski  vested 200,000 options in 2003, exercisable at $0.14 per share,
and an additional 100,000 options in 2004, exercisable at $0.20 per share. As of
September  30,  2005, 77,500 additional options had vested to her at an exercise
price of $.60 per share.

     On  September  1,  2005,  the  Company  entered  into  an "Amendment to the
Employment Agreement Dated August 1, 2003" ("Amended Employment Agreement") with
its  Director  and  Chief  Financial  Officer, Elena Pochapski.  Pursuant to the
terms  of  the  Amended  Employment  Agreement,  Ms. Pochapski agreed to forgive
$50,000  of salary which she was owed for services rendered under her employment
agreement, in return for the Company issuing her 400,000 shares of the Company's
restricted  common  stock,  which shares have not been issued or included in the
issued  and  outstanding  shares of the Company as of the filing of this Report.
Additionally,  Ms.  Pochapski  agreed  to  postpone the payment of the remaining
$84,707  which  she is owed in connection with her employment agreement from the
period  from  August  1, 2003 to August 30, 2005, until such time as the Company
has  sufficient  profits  to pay the amount in cash either partially or in full.
The  Amended Employment Agreement also set Ms. Pochapski's annual salary for the
period  from September 1, 2005 until August 30, 2006 at CND $75,000, after which
time  her  salary  will  return  to  the  amounts  listed  in her August 1, 2003
employment  agreement, depending on the financial condition of the Company.  The
Amended  Employment Agreement also provided for the Company to pay Ms. Pochapski
a  monthly  allowance  of  $500  in  consideration  for  her  using her personal
automobile  for  Company  related  services.

     As  of  September  30,  2005,  no  stock  options  had  been  exercised.

     In October and November 2005, several of the Company's creditors, including
the  Company's  Chief  Executive  Officer,  David  Zaikin,  the  Company's Chief
Financial  Officer, Elena Pochapski, the Company's Director, Sergey Potapov, the
Company's  Director  Vladimir Eret, the Company's Director, Timothy Peara, , the
Company's Director, Oleg Zhuravlev, and Victor Repin, a large shareholder of the
Company,  who  also  has loan agreements with the Company, among others, entered
into  Waiver  Agreements which the Company in connection with the Joint Venture,
which stated that such creditors agreed not to enforce their rights to repayment
of  monies owed by the Company to the creditors, until such time as BP is repaid
the  $1,171,149  owed  to  BP  in  connection  with  loans  made to the Company.

<PAGE>

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

EXHIBIT NO.     DESCRIPTION OF EXHIBIT
-----------     ----------------------

 3.1 (1)    Original Articles of Incorporation of the Company then called
            "Advanced Rehab Technology Corporation."

 3.2 (2)    Certificate of Amendment to the Company's Articles of Incorporation
            filed March 9, 2001, changing the Company's name to "Talking Cards,
            Inc."

 3.3 (2)    Certificate of Amendment to the Company's Articles of  Incorporation
            filed February 12, 2002, changing the Company's name to "Osterking
            Incorporated."

 3.4 (2)    Certificate of Amendment to the Company's Articles of Incorporation
            filed December 3, 2002, changing the Company's name to "17388
            Corporation Inc."

 3.5 (2)    Certificate of Amendment to the Company's Articles of Incorporation
            filed May 5, 2003, changing the Company's name to "Trans Energy
            Group Inc."

 3.6 (2)    Certificate of Amendment to the Company's Articles of  Incorporation
            filed December 3, 2003, changing the Company's name to "Siberian
            Energy Group Inc."

 3.7 (2)    Certificate of Amendment to the Company's Articles of  Incorporation
            filed April 25, 2005, affecting a 1:2 reverse stock split,
            re-authorizing 100,000,000 shares of common stock, par value $0.001
            per share, and authorizing 10,000,000 shares of preferred stock,
            par value $0.001 par value per share

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

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

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

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

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

10.6(4)     Option  Agreement with Baltic Petroleum Limited dated
            April 28, 2005

10.7(4)     License  Agreement  between  OOO Zauralneftegaz and
            Baltic Petroleum Limited  dated  April  28,  2005

10.8(4)     Loan  Agreement  between  OOO  Zauralneftegaz  and
            Baltic  Petroleum Limited  dated  April  28,  2005

10.9(4)     Guarantee by Siberian Energy Group, Inc. dated April 28,
            2005

<PAGE>

10.10(4)    Pledge and Security Agreement between Siberian Energy
            Group, Inc. and Baltic Petroleum Limited dated April 28, 2005

10.11(5)    Clarification to the Contract of Purchase and Sale of the
            Share in Charter Capital of LLC "Zauralneftegaz" dated 15 May
            2004

10.12(5)    Agreement with Business - Standard (translated from
            Russian version)

10.13(5)    Supplementary Agreement to Business - Standard Agreement
            (translated from Russian version)

10.14(5)    Supplementary Agreement No. 2 to Business - Standard
            Agreement (translated from Russian version)

10.15(5)    Deed of Amendment between ZNG and BP

10.16(5)    Deed of Amendment between the Company and BP

10.17(6)    Joint Venture Shareholders' Agreement with Baltic Petroleum
            (E&P)Limited and Zauralneftegaz Limited dated October 14, 2005

10.18*      Amendment to the Employment Agreement Dated August 1, 2003, with
            Elena Pochapski

10.19*      Form of Waiver Agreement

10.20(7)    Deed of Novation

10.21(7)    Loan Agreement (October 2005)

31.1*       Certification by Chief Executive Officer pursuant to
            15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the
            Sarbanes-Oxley Act of 2002

31.2*       Certification by Chief Financial Officer pursuant to
            15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the
            Sarbanes-Oxley Act of 2002

32.1*       Certification by Chief Executive Officer pursuant to
            18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002

32.2*       Certification by Chief Financial Officer pursuant to
            18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002

*     Filed  herein.

(1)     Filed  as  Exhibit 3.1 to the Company's Form SB-2 Registration Statement
        filed  with  the  Commission  on  September 10, 2004, and incorporated
        herein by reference.

(2)     Filed  as  Exhibits  3.2,  3.3, 3.4, 3.5, 3.6, 3.7, respectively, to the
        Company's  Form  8-K  filed with the Commission on May 2, 2005, and
        incorporated herein  by  reference.

(3)     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.

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

(5)     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.

(6)     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.

(7)     To be filed as Exhibits to a Report on Form 8-K to be filed subsequent
        to the filing  of this Report.

<PAGE>

REPORTS ON FORM 8-K

     The  Company  filed  no  Reports on Form 8-K with the Commission during the
quarter  for  which  this  report  is  filed.

     The  Company  filed  the  following  Reports  on Form 8-K subsequent to the
quarter  for  which  this  report  is  filed:

o    On  October  28,  2005,  the  Company  filed a Report on Form 8-K to report
     that  on  October  14,  2005,  the  Company  entered  into  a Joint Venture
     Shareholders'  Agreement  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"), which the
     Company  had  previously  entered  into  with  Baltic  Petroleum  Limited
     ("Baltic") on April 28, 2005.


                                   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.
                                        ------------------------------

                                        By:    /s/  David  Zaikin
                                               ---------------------------
                                        Name:  David  Zaikin
                                               ---------------------------
                                        Title: Chief  Executive  Officer
                                               ---------------------------
                                        Date:  November 21,  2005
                                               ---------------------------

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