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

                                   FORM 10-QSB

(Mark One)

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

                For the quarterly period ended September 30, 2006

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

          For the transition period from ____________ to ______________

                        Commission file number 333-118902

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

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

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

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

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

     As  of  November  8, 2006, 12,125,496, shares of Common Stock of the issuer
were  outstanding  ("Common  Stock").

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

     Traditional Small Business Disclosure Format (Check One): Yes [ ] No [X].

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS












                           SIBERIAN ENERGY GROUP INC.
                          (A DEVELOPMENT STAGE COMPANY)

                             CONDENSED CONSOLIDATED
                               FINANCIAL STATEMENTS

                               SEPTEMBER 30, 2006
















<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Stockholders
Siberian Energy Group Inc.


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

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

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

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


Lumsden & McCormick, LLP
Buffalo, New York
November 8, 2006

<PAGE>

<TABLE>
<CAPTION>

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

CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                   (UNAUDITED)
                                                                   SEPTEMBER 30,  December 31,
                                                                       2006           2005
                                                                   -----------    -----------
<S>                                                                    <C>            <C>
ASSETS
CURRENT ASSETS:
  Cash                                                             $    32,096   $    11,551
  Management fee receivable                                             25,000        50,000
  Prepaid expenses and other                                               270           270
                                                                   -----------   -----------
                                                                        57,366        61,821
                                                                   -----------   -----------

Investment in joint venture                                                  -             -

Investment purchase option                                             177,000             -

Property and equipment, net                                              1,308         1,539
                                                                   -----------   -----------

                                                                   $   235,674   $    63,360
                                                                   -----------   -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Demand loan from individual, interest at 6.5%                    $         -   $    62,500
  Accounts payable:
    Related party - stockholders                                       348,593       328,376
    Related party - Baltic Petroleum                                    49,083        43,664
    Others                                                             100,725       117,230
  Accrued payroll                                                      327,539       304,341
                                                                   -----------   -----------
                                                                       825,940       856,111
                                                                   -----------   -----------

STOCKHOLDERS' EQUITY:
  Common stock - authorized 100,000,000 shares, $.001 par value,
    12,125,461 and 11,487,886 issued and outstanding                    12,126        11,488
  Additional paid-in capital                                         4,146,793     1,786,286
  Accumulated deficit
    Pre-development stage                                             (449,785)     (449,785)
    Development stage                                               (4,292,968)   (2,138,234)
  Accumulated other comprehensive income (loss)                         (6,432)       (2,506)
                                                                   -----------   -----------
                                                                      (590,266)     (792,751)
                                                                   -----------   -----------

                                                                   $   235,674   $    63,360
                                                                   -----------   -----------
</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,
                                              2006            2005            2006              2005             2006
                                          ------------     ------------    ------------     ------------   ---------------
<S>                                            <C>             <C>           <C>                <C>              <C>
Revenues and other income:
  Management fees from joint venture      $     75,000     $         -     $    225,000     $          -   $       300,000
  Gain from entrance into joint venture              -               -                -                -           364,479
  Other                                              -               -                -                -             6,382
                                          ------------     -----------     ------------      -----------       -----------
    Total revenues and other income             75,000               -          225,000                -           670,861
                                          ------------     -----------     ------------      -----------       -----------


Expenses:
  Salaries                                      32,994         103,920          101,556          352,644         1,176,103
  Professional and consulting fees             166,111          86,324        1,755,256          167,169         2,460,184
  Rent and occupancy                             9,912          28,162           29,658           70,792           166,203
  Depreciation and amortization                     86           9,385              253           28,153           102,633
  Finance charges and interest                   2,626          31,514            8,890           47,607            56,497
  Marketing and other                          130,903          77,304          484,121          213,785         1,002,209
                                          ------------     -----------     ------------      -----------       -----------
    Total expenses                             342,632         336,609        2,379,734          880,150         4,963,829
                                          ------------     -----------     ------------      -----------       -----------

    Loss before income taxes                   267,632         336,609        2,154,734          880,150         4,292,968

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

    Net loss (development stage)          $    267,632     $   336,609     $  2,154,734      $   880,150        $4,292,968
----------------------------------------  ------------     -----------     ------------      -----------       -----------




Basic and diluted loss per common share   $      (0.02)    $     (0.04)    $      (0.19)     $     (0.09)      $     (0.51)
                                          ------------     -----------     ------------      -----------       -----------

Weighted average number of basic and
  diluted common shares outstanding         11,671,174       9,477,886       11,582,245        9,441,008         8,485,816
----------------------------------------  ------------     -----------     ------------      -----------       -----------
</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, 2006
------------------


                                                   Common Stock
                                                   -------------                               Accumulated
                                                                  Additional                     Other
                                        Number of                  Paid-In    Accumulated   Comprehensive             Comprehensive
                                         Shares      Par Value     Capital     Deficit     Income (Loss)     Total        Loss
                                      -----------  -----------  -----------  -----------   -------------   ---------  -------------
<S>                                       <C>         <C>           <C>         <C>            <C>            <C>         <C>

Balance, January 1, 2003
  (pre-development stage)               4,902,886  $     4,903  $   430,195  $  (449,785)  $           -   $ (14,687)

Loss for the year - 2003                        -            -            -     (422,516)              -   $(422,516) $    (422,516)
                                                                             -----------   -------------   ---------  -------------
Shares issued in acquisition            1,000,000        1,000       (1,000)           -               -           -
                                      -----------  -----------  -----------  -----------   -------------   ---------

  Balance, December 31, 2003            5,902,886        5,903      429,195     (872,301)              -    (437,203)
                                      -----------  -----------  -----------  -----------   -------------   ---------

Loss for the year - 2004                        -            -            -     (833,567)              -    (833,567)

Foreign currency translation adjustment         -            -            -            -         (53,120)    (53,120) $    (886,687)
                                                                             -----------   -------------   ---------  -------------
Shares issued in acquisition            3,450,000        3,450      746,550            -               -     750,000

Shares issued for professional services    50,000           50        9,950            -               -      10,000

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

  Balance, December 31, 2004            9,402,886        9,403    1,220,121   (1,705,868)        (53,120)   (529,464)
                                      -----------  -----------  -----------  -----------   -------------   ---------

Loss for the year - 2005                       -            -            -      (882,151)                   (882,151)

Foreign currency translation adjustment        -            -            -             -          50,614      50,614  $    (831,537)
                                                                             -----------   -------------   ---------  -------------
Shares issued for professional services   385,000          385      138,365            -               -     138,750

Shares issued for accrued salaries      1,700,000        1,700      210,800            -               -     212,500

Warrants granted for professional services      -            -      217,000            -               -     217,000
                                      -----------  -----------  -----------  -----------   -------------   ---------

  Balance, December 31, 2005           11,487,886       11,488    1,786,286   (2,588,019)         (2,506)   (792,751)
                                      -----------  -----------  -----------

Loss for nine months - 2006                     -            -            -   (2,154,734)              -  (2,154,734)

Foreign currency translation adjustment         -            -            -            -          (3,926)     (3,926) $  (2,158,660)
                                                                              ----------   -------------   ---------  -------------
Shares issued for employee stock
  option plan                             142,500            143       13,857          -               -      14,000

Shares issued for professional
  services                              1,104,499        1,105    1,635,243            -               -   1,636,348

Warrants granted for professional
  services                                      -            -      710,797            -               -     710,797

Shares cancelled                         (609,424)        (610)         610            -               -           -
                                      -----------  -----------  -----------   ----------   -------------   ---------

                                       12,125,461  $    12,126  $ 4,146,793  $(4,742,753)  $      (6,432)  $(590,266)
                                      -----------  -----------  -----------  -----------   -------------   ---------
</TABLE>



See accompanying notes.

<PAGE>

<TABLE>
<CAPTION>

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                           For the
                                                                                         cumulative
                                                                                         period of
                                                                                        Development
                                                                FOR THE NINE          Stage Activity-
                                                                MONTHS ENDED           January 1, 2003
                                                         ---------------------------      through
                                                         SEPTEMBER 30,  September 30,  September 30,
                                                             2006          2005             2006
                                                         ------------   ------------   -------------
<S>                                                           <C>         <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss (development stage)                           $ (2,154,734)  $   (880,150)  $  (4,292,968)
  Depreciation and amortization                                   253         28,153         102,633
  Common stock and warrants issued
    for professional services and salaries                  2,107,645         15,000       2,748,395
  Gain from entrance into joint venture                             -              -        (364,479)
  Changes in other current assets and
    current liabilities:
      Prepaid expenses and other assets                        25,000        (23,914)       (178,662)
      Accounts payable and accrued expenses                    32,307         47,263       3,102,756
                                                         ------------    -----------   -------------
        NET CASH FLOWS FROM (FOR) OPERATING ACTIVITIES         10,471       (813,648)      1,117,675
                                                         ------------    -----------   -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Expenditures for licenses and related                             -       (348,137)       (528,961)
  Expenditures for oil and gas properties                           -        (36,532)       (770,750)
  Expenditures for property and equipment                           -         (1,710)         (2,868)
  Cash received in acquisition                                      -              -               6
  Cash received from entrance into joint venture                    -              -         175,000
                                                         ------------    -----------   -------------
        NET CASH FLOWS FOR INVESTING ACTIVITIES                     -       (386,379)     (1,127,573)
                                                         ------------    -----------   -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from loans                                           -      1,171,149               -
  Common stock issued for employee stock option plan           14,000              -          14,000
  Additional paid-in capital                                        -          1,631          34,426
                                                         ------------    -----------   -------------
        NET CASH FLOWS FROM FINANCING ACTIVITIES               14,000      1,172,780          48,426
                                                         ------------    -----------   -------------

Effect of exchange rates on cash                               (3,926)        29,224          (6,432)
                                                         ------------    -----------   -------------

    Net increase in cash                                       20,545          1,977          32,096

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

    Cash - ending                                        $     32,096    $     1,977   $      32,096
-------------------------------------------------------  ------------    -----------   -------------
</TABLE>


See accompanying notes.


<PAGE>

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

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


1.  BASIS  OF  PRESENTATION:

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

2.  THE  COMPANY  AND  DESCRIPTION  OF  BUSINESS:

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

On  October  14, 2005, the Company entered into a joint venture agreement with a
third party, Baltic Petroleum Limited (Baltic).  The Company transferred 100% of
its  ownership  interest  in ZNG to the Joint Venture and transferred 50% of the
Joint  Venture  interest  to  Baltic for $175,000 and the agreement by Baltic 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.

<PAGE>


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

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

In  connection  with  the current program of seismic studies and drilling of the
first  four  (4)  wells in ZNG's license blocks, additional funds of $15 million
were  raised by Baltic's parent through a placement of shares. It is anticipated
that  ZNG  will enter into a new loan agreement covering such funds as well as a
gross  override royalty agreement with Baltic. The new loan will not be dilutive
to  the  Company's  ownership  in  ZNG.

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

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

<PAGE>


Effective  October  14,  2005,  the  Company's  investment  in  Joint Venture is
recorded  on  the  equity method of accounting. Since cumulative losses of Joint
Venture exceed the Company's investment, the investment asset is carried at zero
value  as  of  September 30, 2006 and December 31, 2005. Loan financing balances
outstanding  of  Joint  Venture to Baltic and Baltic's financing subsidiaries at
September  30,  2006  total approximately $7,800,000. Activities of ZNG prior to
October  14,  2005  are  otherwise  included in the consolidated accounts of the
Company  in  the  accompanying  financial  statements.

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

On  September  14,  2006,  the Company entered into an Option Agreement with Key
Brokerage, Inc., a Delaware Corporation, the sole owner of Kondaneftegaz, LLC, a
Russian  limited  liability  company.  Under  the  terms  of  the agreement, the
Company  has  the  exclusive right for up to sixty days to purchase seventy-five
percent  (75%)  of  the shares of Kondaneftegaz.  The purchase is expected to be
completed  in  the  fourth  quarter  of  2006.  Value of the options granted are
included  in  the  financial  statements  under  investment  purchase  option.

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.  INCOME  TAXES:

At  September  30,  2006,  the Company has estimated U.S. tax net operating loss
carryforwards  totaling  approximately  $3,936,000.  These  carryforwards may be
used  to  offset  future  taxable  income, and expire in varying amounts through
2026.  No  tax  benefit  has been reported in the financial statements, however,
because  the  Company  believes  there  is  at  least  a  50%  chance  that  the
carryforwards  will  expire  unused.  Accordingly,  the  $787,000  estimated
cumulative  tax  benefit of the loss carryforward has been offset by a valuation
allowance  of  the  same  amount.


4.  LOSS  PER  COMMON  SHARE:

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


5.  GOING  CONCERN:

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

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

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

<PAGE>

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

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

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

BUSINESS  DEVELOPMENT

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

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

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

On  May  9,  2003,  the  Company  entered  into  an  Acquisition  Agreement (the
"Acquisition  Agreement")  by  and among the Company, Zaural Neftegaz, a Russian
corporation  ("ZNG"),  the  shareholders of ZNG and Oleg Zhuravlev, President of
ZNG.  Pursuant to the Acquisition Agreement, the Company acquired a 51% interest
in ZNG by issuing to ZNG 2,000,000 shares of the Company's Common Stock. In June
2004,  the  Company purchased the remaining 49% of ZNG in exchange for 6,900,000
shares  of  the  Company's Common Stock, making ZNG a wholly owned subsidiary of
the  Company. ZNG holds seven (7) oil and gas licenses (see "Patents, Trademarks
and  Licenses"  below) for the rights to prospect, explore, drill and remove oil

<PAGE>

and  gas  (the  "Exploration Rights") in the eastern parts of Kurgan Province in
Russia.  The Company had no affiliation with ZNG prior to the acquisition in May
2003.

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

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

BUSINESS  OPERATIONS

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

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

DESCRIPTION  OF  ZNG

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

In  March  2003,  ZNG  acquired  four  5-year  exploration  licenses  through  a
government  tender,  which licenses expire in March 2008, and which licenses are
for  concessions covering a total territory of 643,000 acres. Upon expiration of

<PAGE>

the  licenses, ZNG will have, subject to the signing of the Subsoil Legislation,
preferential  right  to apply for the full production license for the term of 25
years.

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

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

Brief  characteristics  of  the  three  new  blocks  are  given  below:

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

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

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

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

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

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

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

<PAGE>

     crosses the block and to the South-West of the block is Sukhmensky regional
     seismic  profile  acquired by seismic reflection and correlation refraction
     methods.

     Four  deep  cored  wells  drilled  both  in  the territory of the block and
     in  the  adjacent  areas provide an idea of the geological structure of the
     block.

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

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

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

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

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

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

Following  detailed data collection, survey and seismic testing ZNG will proceed
with  development  of  the  most prospective licenses first.   As of November 1,
2006  ZNG  has  performed  the  following  research and exploration works on its
licensed  areas:

     -    Obtained  core  samples  from  parametric  wells  drilled  in  prior
          years  on  the  licensed areas and adjacent territories in the Eastern
          part of Kurgan region during the initial search for oil and gas in the
          region,  and  performed  analysis of the data provided by the samples.
     -    Completed  a  2D  seismic  survey  on  West-Suersky  block.
     -    Performed  gravimetric  surveys  on  the  West-Suersky,  Privolny  and
          Mokrousovsky  blocks.
     -    Completed  approximately  822  linear  kilometers  of  gas
          seismotomographic  and geochemical surveys performed by Exotrad on the
          Privolny  and  Mokrousovsky  blocks,  which  surveys  are  currently
          continuing  on  the  other  5  blocks.
     -    Completed  high  definition  2D  seismic  surveys  across  the  grids
          made  by  the  gas seismotomography surveys, using Bashneftegeofizika,

<PAGE>

          which  has  been completed on the northern part of Privolny block, and
          is  currently  underway  on  the Mokrousovsky block, which surveys are
          planned  to  follow  on  other  5  licensed  blocks.
     -    Scientific  and  technical  analysis  is  being  performed by the team
          of  geologists,  which  includes  experts from Exploration Consultants
          Limited  ("ECL"),  a leading international oil and gas consulting firm
          (part  of  RPS Group). Initial analysis was completed by June 30, 2006
          and  such  data  will be combined with the results of seismic studies,
          which  are described in greater detail below under "Results of Seismic
          Studies."

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

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

On  November 9, 2005, ZNG entered into a New Loan with Caspian (the "New Loan").
Under  the loan agreement, Caspian Finance Limited ("Caspian") agreed to provide
a  loan  of  up  to approximately $6,874,325 representing the assumed commitment
under  a prior loan equal to $1,739,658, of which ZNG had received $1,110,624 as
of  November  9,  2005, and a new commitment of up to $5,134,667, to be used for
operations  in the Kurgan region in 2005 and through the first half of 2006. The
New  Loan is available to ZNG until the sixth anniversary of the date of the New
Loan,  or  November  9,  2011 (the "Term"). The New Loan had a total outstanding
balance,  including  principal and accrued interest of $5,471,288 as of November
1,  2006.

Interest on any amounts loaned under the New Loan bear interest at the following
rates,  calculated  and accrued on a daily basis, 14% per annum during the first
two  years of the Term, 13% per annum during the third year of the Term; and 12%
thereafter  until  the  end of the Term. In the event that ZNG does not make the
Interest Payments when due, interest on the unpaid amounts shall be payable from
the  due  date  to  the  date  paid  at the rate of 6% per annum, calculated and
accrued on a daily basis. The New Loan is unsecured by ZNG, but Caspian reserved
the  right to request security over all or some of the assets and/or undertaking
of  ZNG at any time prior to any drawdown of the New Loan, or while any money is
outstanding  under  the  New  Loan.

<PAGE>

Pursuant  to the New Loan, ZNG is responsible for satisfying all requirements of
Russian  Federation  law  and  regulations  in connection with each advance made
under  the  New  Loan, and ZNG shall indemnify Caspian for any loss or damage it
may  suffer  as  a  result  of  the  New  Loan.

The  New  Loan  provided  for  the  payment  of certain debts of ZNG, which were
incurred  before  the  Joint Venture. Payments under the New Loan will included:

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

     o    payment  of  salaries  of  ZNG  for  August and September ($32,000); o
          payment  of  50%  of  the amount of director's and shareholder's loans
          ($170,000);

     o    50%  of  outstanding  rent  payments  ($44,000);

     o    mineral  tax  for  the  second  quarter  of  2005  ($3,865);  and

     o    $102,800  for  gathering  and  coordination  of data in respect to the
          new  licenses  ZNG  has  recently  applied  for.

     2)     $882,699  which  was paid upon the Company receiving licenses to the
two  additional  license blocks which were received during the nine months ended
September  30,  2006,  which  was  spent  as  follows:

     o    further  payment  for  gathering  and  coordination  of  data  in
          connection  with  the  new  licenses  (up  to  $340,000);

     o    final payments  for  seismic  and  gravimetric  works performed on the
          West-Suerski  field  (up  to  $324,834);

     o    to repay  the  remaining  amounts  owed  by  ZNG  to  directors  and
          shareholders  ($170,000);

     o    to  pay  the  remaining amount of outstanding rent payments ($44,000);
          and

     o    to  pay  mineral  tax  for  the  third  quarter  of  2005  ($3,865).

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

<PAGE>

the Ministry of Natural resources of the Russian Federation confirming that five
new  licenses  were  awarded  to  ZNG, of which three have been awarded to date.
There  is  no  assurance  the  additional  two  licenses will be awarded to ZNG.

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

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

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

AGREEMENT  WITH  ALTERNATIVE  ENERGY  FINANCE,  LTD.

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

<PAGE>

been  paid  to  AEF  to date and 17,561 options to purchase shares of our common
stock  at  $0.67  per share for the first quarter of 2006, which were granted to
Mr.  Peara  on  March  31,  2006,  which  options  contain  a  cashless exercise
provision.

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

On  September  30, 2006, in connection with our agreement with AEF, we agreed to
grant AEF a warrant to purchase 20,952 shares of our common stock at an exercise
price  of $1.53 per share, which warrants contained a cashless exercise feature.
The  warrants  expire three years from the grant date. We were also obligated to
pay  AEF  $18,303  during  the  quarter ended September 30, 2006 (equal to 1% of
Baltic's  $1,830,292 investment in the Joint Venture in the third quarter 2006),
which  amount  has  not  been  paid  to  AEF  to  date.

As  of  August  1, 2006, we owed approximately $66,273 to AEF in connection with
AEF's  introduction  of the parties of the Joint Venture, as described above. We
are currently in discussions with AEF to pay all or a portion of the amount owed
to  AEF  in the form of shares of common stock, however we can make no assurance
that  such  discussions  will  result  in  the consummation of a debt conversion
agreement.

                                  RECENT EVENTS
                                  -------------

OPTION  AGREEMENT
-----------------

On  September 14, 2006, Siberian Energy Group Inc. ("we," and "us") entered into
an  Option  Agreement  with  Key  Brokerage,  Inc., a Delaware corporation ("Key
Brokerage"  and  the  "Option  Agreement").  Key  Brokerage is the sole owner of
Kondaneftegaz,  LLC,  a  Russian  limited  liability  company ("Kondaneftegaz").

Kondaneftegaz  has  applied  for  ten  (10)  oil  and  gas  licenses  in  the
Khanty-Mansiysk  district of Western Siberia, Russia, which will be proposed for
distribution  by  the  Russian  government  through a tender auction in 2006 and
2007.

The  Option  Agreement provided us the exclusive right for up to sixty (60) days
from  the  date of the Option Agreement, subject to us conducting due diligence,
to  enter  into  a  transaction  with  Key  Brokerage  whereby we would purchase
seventy-five  percent  (75%)  of  the  shares  of  Kondaneftegaz (the "Option").

In  consideration  for  agreeing to the Option, we granted Key Brokerage 250,000
warrants  to  purchase  shares of our common stock at an exercise price of $2.20
per  share,  exercisable  for  up  to  two (2) years from the date of the Option
Agreement (the "Warrants"). In the event we choose to extend the Option, we have

<PAGE>

agreed  to  grant  Key  Brokerage  additional warrants on identical terms as the
Warrants,  with  the exception that such additional warrants will be exercisable
until  the  second  anniversary  of the date the Option is extended.  We hope to
consummate  the  Option  by an entry into a final agreement with Key Bank during
the  fourth  quarter  of  2006  or  the  first  quarter of 2007, and purchase an
interest  in  Konaneftegaz for shares of our common stock, of which there can be
no  assurance.

RESULTS  OF  SEISMIC  STUDIES

In  October  2006,  ZNG  received  the  results  of its 822 linear kilometers of
seismotomographic  and  geochemical  survey  of  the  Privolny and Morkrousovsky
blocks,  which  study  included  high definition 2D seismic studies conducted on
the  north  portion  of  its  licensed Privolny block.  The results of the study
included  the  identification  of two drilling prospects with a combined area of
approximately  29  square  kilometers  in  ZNG's northern Privolny license area.

The  survey  was conducted by Exotrad Limited, a gas seismotomography specialist
with  more  than  16  years  of  experience,  including  work  for international
companies  such  as  Victoria  Oil  &  Gas.  Actual  data  values, sample layout
geometry,  data  density  and  processing  limitations  were  used  to  evaluate
potential  subsurface  hydrocarbon  prospective accumulations, and sophisticated
multivariate  statistical  models  were used to identify four sites for detailed
seismic  studies  and  drilling.

ZNG's  Board  of  Directors subsequently decided to drill up to four exploration
wells  in ZNG's Kurgan Region license blocks in connection with such surveys. At
least two of these wells are proposed to be drilled in northern locations in the
Privolny block and the other two wells are proposed to potentially be drilled on
the  Mokrousovsky  block,  following  the completion of 2D studies on that block
which  is  expected  to  be  completed  in  the  fourth  quarter  of 2006. It is
anticipated  that  the  first  well  will  be drilled on the Privolny block to a
maximum  depth  of 2000 meters, with logging and coring undertaken in accordance
with a program designed by RPS Energy and the Tyumen State Oil and Gas Institute
in  Russia,  which will be used as the basis for a drilling license application.

In  the  event  that  the wells prove successful in establishing the presence of
hydrocarbons,  of which there can be no assurance, the Board of Directors of ZNG
intends  that  production  testing  will  be  supervised  by  a  leading firm of
reservoir  evaluation  consultants  and  the  Board will then determine the most
appropriate  means  of  commercializing  the  license  blocks.

The  total budget for the exploration program and further seismic studies, which
the  Board  has  proposed  to shoot on ZNG's Lebyazhevsky licensed block, totals
approximately 8 million British pounds or $15 million US dollars. The funds were
raised  by  BP's parent via a placement of shares and it is anticipated that ZNG
will  enter  into  a  new  loan agreement covering such funds as well as a gross
override  royalty agreement with BP, which loan is not dilutive to our ownership
of  ZNG,  subsequent to the filing of this report as described below under "Deed
of  Agreement,"  of  which  there  can  be  no  assurance.

<PAGE>

DEED  OF  AGREEMENT

On  July  26,  2006,  we  entered into a Deed of Agreement with Baltic Petroleum
(E&P) Limited ("BP" or "Baltic") and ZNG.  Pursuant to the Deed of Agreement, BP
agreed  to  allow the drawdown by ZNG, within 10 days of the date of the Deed of
Agreement,  of  certain  funds  from  Caspian  under  the  New  Loan, including:

     o    $185,000  to  be  paid  to  Business  Standard,  which  was  owed  to
          Business  Standard  from  ZNG  in  consideration for Business Standard
          assisting  ZNG  with  the process of the granting of the three oil and
          gas  licenses  awarded  to  ZNG  in  June  2006;

     o    $170,000  to  be  paid  to  Mr.  Victor  Repin  (a  significant
          shareholder  of  the  Company)  and  Sergey Potapov (a Director of the
          Company)  in  final  settlement  of  amounts  due  to them by ZNG; and

     o    $44,000  to  ZNG's  landlord  in  full  settlement  of all sums due in
          connection  with  the  rent  on  ZNG's  offices  in  Kurgan,  Russia.

The  Deed  of  Agreement  also  contemplated  ZNG's  entry  into  a further loan
agreement  with  Caspian  (assuming  Caspian  is able to raise such financing on
terms  acceptable  to  BP),  substantially  with  the same terms as the New Loan
(other  than  due dates and interest amounts), whereby Caspian would provide ZNG
funds  for  seismic drilling and work programs of approximately $12,000,000 (the
"Additional  Loan").

The  Deed  of  Agreement  also  provided that upon the entry into the Additional
Loan, we, BP and ZNG will enter into a gross override royalty agreement, whereby
ZNG  will  grant a gross override royalty ("GOR") to BP equal to 3% of the gross
turnover on all production of oil and gas at the wellhead in Kurgan by ZNG until
BP  has received in aggregate $20,000,000 from such GOR (the "GOR Sum"); however
in  the  event  the  actual  amount  loaned  to ZNG is less than or greater than
$12,000,000,  the  GOR  Sum shall be decreased or increased proportionately.  We
hope  to enter into a final Additional Loan in the fourth quarter of 2006 or the
first  quarter  of  2007,  of  which  there  can  be  no  assurance.

ESTIMATE  OF  AMOUNT  OF  TIME  SPENT  ON  RESEARCH  AND  DEVELOPMENT

Initial  business  plan  was  developed over the course of three months in 2003.
During that time period, market research was conducted. Research and development
activities  on  the  licensed blocks in the Kurgan Region were directly borne by
the  Company  up  to the time the Joint Venture was closed in October 2005. As a
result of the closing of the Joint Venture, these research and development costs

<PAGE>

are  now  borne  both  by  ZNG,  Ltd.  (as  described  above)  and ZNG. Research
activities  include  gravimetric,  seismic works and seismotomography studies on
the  licensed areas. Costs incurred by ZNG and ZNG Ltd. in connection with these
studies  as  of  September  30,  2006  totaled  approximately  $4,100,000.

EMPLOYEES

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

PLAN  OF  OPERATIONS

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

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

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

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

<PAGE>

In the past, we have obtained cash financing from organizing stockholders in the
form  of loans and advances, as a result, amounts totaling $348,593 and $328,376
were payable to the stockholders as of September 30, 2006 and December 31, 2005,
respectively.  However,  there  can  be  no  certainty as to the availability of
continued  financing  in  the future. Failure to obtain sufficient financing may
require  us to reduce our operating activities. A failure to continue as a going
concern  would  then  require  stated  amounts  of  assets and liabilities to be
reflected  on  a  liquidation  basis  which  could differ from the going concern
basis.

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

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

We had total expenses of $342,632 for the three months ended September 30, 2006,
compared  to  total  expenses  for the three months ended September 30, 2005, of
$336,609,  which represented an increase in total expenses from the prior period
of  $6,023  or  2%.

Total  expenses  for the three months ended September 30, 2006, included $32,994
of  salaries,  which  included  $18,243  which  was  paid to our Chief Financial
Officer,  Elena  Pochapski;  $166,111  of  professional  and  consulting  fees,
including  amounts  paid  to our legal counsel and accountant in connection with
the  preparation  and filing of our quarterly report on Form 10-QSB and warrants
granted for consulting services rendered during the three months ended September
30, 2006, as described herein; $9,912 in rent and occupancy; $86 of depreciation
and  amortization;  $2,626  of  finance  charges  and  interest, attributable to
interest paid on the advances we received from BP; and $130,903 of marketing and
other  expenses, in connection with marketing and advertising in connection with
road shows, various general and administration expenses relating to the Company,
and  travel and hotel expenses in connection with research on potential business
acquisitions.  Our Chief Executive Officer, David Zaikin has agreed to waive his
salary and any accrual of his salary until such time as we have sufficient funds
to  pay  such  salary  to  Mr.  Zaikin.

The  main  items  leading to the increase in total expenses for the three months
ended September 30, 2006, compared to the three months ended September 30, 2005,
were  an  increase  of  $79,787  or  92% in professional and consulting fees, to
$166,111  for the three months ended September 30, 2006, compared to $86,324 for
the  three  months  ended  September  30, 2005, and an increase in marketing and
other  expenses  of  $53,599  or  69%  to  $130,903  for  the three months ended
September 30, 2006, compared to $77,304 for the three months ended September 30,
2005.  The  increase in professional and consulting fees during the three months
ended September 30, 2006, compared to the three months ended September 30, 2005,
is  largely  attributable to $18,750 of advisory services in connection with the

<PAGE>

Company's  business development activities, $17,561 of legal and accounting fees
and  the grant of warrants valued at $129,800 for consulting services during the
three  months  ended  September 30, 2006, as described herein.  Certain other of
our  expenses  during  the  three  months  ended  September  30, 2006 decreased,
including  salaries,  which  declined by $70,927 or 68% to $32,993 for the three
months  ended September 30, 2006 compared to $103,920 for the three months ended
September  30,  2005,  and  rent and occupancy, which declined by $18,250 or 65%
during  the  same period, which decreases were due to the fact that the expenses
of  ZNG,  our former wholly owned subsidiary, which is currently solely owned by
ZNG,  Ltd.,  which  we  own  50%  of, are no longer included in our consolidated
statement  of  operations due to the fact that ZNG is no longer our wholly owned
subsidiary,  but  which  expenses were included in our consolidated statement of
operations  during  the  three  months  ended  September  30,  2005.

We  had  a  net  loss of $267,632 for the three months ended September 30, 2006,
compared  to  a  net  loss  of $336,609 for the three months ended September 30,
2005, a decrease in net loss of $68,977 or 20% from the prior year. The decrease
in net loss was mainly attributable to an increase of $75,000 in revenue for the
three months ended September 30, 2006, compared to $-0- of revenue for the three
months  ended  September  30,  2005.

RESULTS  OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006, COMPARED TO
THE  NINE  MONTHS  ENDED  SEPTEMBER  30,  2005

We had revenues and other income of $225,000 for the nine months ended September
30,  2006,  which  was solely due to $25,000 of monthly management fees received
from ZNG, Ltd. We had $-0- of revenue and other income for the nine months ended
September  30, 2005. We have not generated any revenues to date through the sale
of  oil  and/or  gas.

We  had  total  expenses  of  $2,379,734 for the nine months ended September 30,
2006,  compared  to total expenses for the nine months ended September 30, 2005,
of  $880,150,  which  represented  an  increase in total expenses from the prior
period  of  $1,499,584  or  170%.

Total  expenses  for the nine months ended September 30, 2006, included $101,556
of salaries, of which $57,305 was attributable to the salaries and payroll taxes
paid  to  the  Company's  Chief  Financial Officer, Elena Pochapski, and $44,250
which  was  paid  to  various  other  employees  and  consultants; $1,755,256 of
professional  and  consulting  fees, including amounts paid to our legal counsel
and  accountant  in  connection  with  the  preparation and filing of our annual
report  on  Form  10-KSB and 10-QSB, and certain warrants and shares granted for
professional  services  during the nine months ended September 30, 2006; $29,658
in  rent and occupancy; $253 of depreciation and amortization; $8,890 of finance
charges  and interest, attributable to interest paid on the advances we received
from BP and other loans; and $484,121 of marketing and other expenses, including
marketing  and  advertising  in  connection with road shows, various general and
administration  expenses  relating  to the day to day operations of the Company,

<PAGE>

and  travel  and  hotel  expenses  in  connection with the research on potential
business  acquisitions.  Our Chief Executive Officer, David Zaikin has agreed to
waive  his  salary  and  any  accrual  of  his salary until such time as we have
sufficient  funds  to  pay  such  salary  to  Mr.  Zaikin,  if  at  all.

The  main  items  leading  to the increase in total expenses for the nine months
ended  September 30, 2006, compared to the nine months ended September 30, 2005,
were  an  increase of $1,588,087 or 949% in professional and consulting fees, to
$1,755,256,  an  increase in marketing and other expenses of $270,336 or 126% to
$484,121  for the nine months ended September 30, 2006, compared to $213,785 for
the  nine  months ended September 30, 2005. The professional and consulting fees
for  the  nine  months ended September 30, 2006 included the following expenses:
$40,625  of  advisory  services  in  connection  with  the  Company's  business
development,  $1,113,000,  representing  the  value  of 600,000 shares of common
stock  issued to a consulting company in consideration for its assistance to ZNG
in obtaining geological information relevant to new potential licensed areas and
its assistance in the application process for such licenses (see "Description Of
ZNG,"  above  for  information  on these new licenses), and the grant of certain
warrants  valued  at  $618,300  for consulting services rendered during the nine
months ended September 30, 2006. The increase in marketing and other expenses is
attributable to increased marketing and advisory services in connection with our
operations.  Certain  other  expenses  were  less  during  the nine months ended
September  30,  2006,  compared  to  the  nine  months ended September 30, 2005,
including salaries, which declined by $251,088 or 71% from the prior period, and
rent  and  occupancy,  which  declined  by $41,134 or 58% from the prior period,
which decreases were due to the fact that the expenses of ZNG, our former wholly
owned subsidiary, which is currently solely owned by ZNG, Ltd., which we own 50%
of,  are  no  longer included in our consolidated statement of operations due to
the  fact  that ZNG is no longer our wholly owned subsidiary, but which expenses
were included in our consolidated statement of operations during the nine months
ended  September  30,  2005.  Additionally, the fact that David Zaikin agreed to
not  receive  or accrue a salary from the Company until such time as the Company
had sufficient capital to pay such salary, if at all in September 2005, led to a
decrease  in  our  salary  expense for the nine months ended September 30, 2006,
compared  to the nine months ended September 30, 2005, and as a result our total
expenses  for  such  periods.

We  had  a  net loss of $2,154,734 for the nine months ended September 30, 2006,
compared to a net loss of $880,150 for the nine months ended September 30, 2005,
an  increase  in  net  loss  of  $1,274,584  or  145% from the prior period. The
increase  in  net  loss  was mainly attributable to increases in total expenses,
namely  the  increases  in  professional and consulting fees and other expenses,
described  above, which were not sufficiently offset by the $225,000 increase in
revenue  for  the  nine  months  ended  September  30, 2006, compared to $-0- of
revenue  for  the  nine  months  ended  September  30,  2005.

LIQUIDITY  AND  CAPITAL  RESOURCES

We  had  current assets of $57,366 as of September 30, 2006, which included cash
of $32,096; management fee receivable of $25,000, which represented amounts owed

<PAGE>

to  us  by ZNG, Ltd. in management fees, which amount has been paid to date; and
prepaid  expenses  and  other  of  $270.  This represented a decrease in current
assets  of  $4,455  or  7.2%,  from $61,821 of current assets as of December 31,
2005,  which decrease was mainly due to a decrease in management fees receivable
of $25,000 and an increase of $20,545 in cash, which cash was received from ZNG,
Ltd., in connection with our $25,000 monthly management fees, which ZNG, Ltd. is
obligated  to  pay  to  us.

We had total assets of $235,674 as of September 30, 2006, which included current
assets  of  $57,366  and  non-current  assets  of  $178,308.  Non-current assets
included  $1,308 relating to net property and equipment and $177,000 relating to
the  value of the warrants granted to Key Brokerage for our option for the right
to  purchase  75%  of  Kondaneftegaz  as  described  above.  This represented an
increase of $172,314 or 271% in total assets of $63,360 as of December 31, 2005,
versus  total  assets  of  $235,674 as of September 30, 2006, which increase was
mainly  attributable  to  the  above  mentioned  investment in the Kondaneftegaz
purchase  option.

We had total liabilities of $825,940 as of September 30, 2006, which were solely
current  liabilities  and which included $348,593 of accounts payable to related
party  stockholders  in connection with those shareholders paying certain of our
expenses  from the period between January 1, 2003 to September 30, 2006; $49,083
of  accounts  payable  to Baltic in connection with the $29,000 loan advanced to
the  Company from Baltic, as described above under "Description of Business" and
certain  other  expenses  owed to Baltic; $100,725 of accounts payable to others
for  advisory  and  professional  services  rendered;  and  $327,539  of accrued
payroll,  which  included $112,500 payable to our Chief Executive Officer, David
Zaikin  which  amount  was  owed to Mr. Zaikin prior to September 2005, at which
time  he  agreed  to  stop accruing salary until such time as we have sufficient
monies to pay such salary, $90,338 payable to our Chief Financial Officer, Elena
Pochapski,  and  $69,241.97  of  accrued  salary  payable  to  our  former Chief
Executive Officer, Shakeel Adam. Current liabilities of $825,940 as of September
30,  2006, represented a decrease in current liabilities of $30,171 or 3.5% from
total  current liabilities of $856,111 as of December 31, 2005. The main reasons
for  this  decrease was the repayment of a $62,500 loan to an individual through
the  issuance  of  Company  shares,  the  payment  of  current  amounts owed for
professional and advisory services, which was partially offset by an increase in
accrued  payroll  of $23,198 and an increase in net amount owed to related party
stockholders  by $20,217 which was due to certain expenses paid on the Company's
behalf  by  the  Company's  Chief  Executive  Officer,  David Zaikin, as well as
certain  unpaid  commissions  payable  to  AEF  (as  described  herein).

We  had  negative  working  capital  of $768,574 and a total pre development and
development  stage  accumulated  deficit of $4,742,753 as of September 30, 2006.

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

<PAGE>

We  had  $10,471 of net cash flows from operating activities for the nine months
ended September 30, 2006, which included $2,107,645 of common stock and warrants
issued  for  professional services and salaries, $32,307 of accounts payable and
accrued  expenses,  $25,000  of  prepaid  expenses  and other assets and $253 of
depreciation  and  amortization,  which  was  offset  by $2,154,734 of net loss.

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

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

As  of  November  1, 2006, ZNG had received $5,070,015 pursuant to the New Loan,
which  amount  includes  $1,110,624 assumed by ZNG in connection with a previous
loan  made  to  ZNG.Total  interest  accrued as of November 1, 2006 is $401,273,
including  $189,520 of interest on the New Loan and  $211,753 of interest on the
previous  loan.

Additionally,  in July 2006, we entered into a Deed of Agreement, whereby Baltic
agreed  (funding permitting) to loan ZNG approximately $12,000,000 to be used on
seismic  studies,  drilling and a work program, which funds have not been loaned
to  date.

Under  the  Joint Venture, we will receive $25,000 per month as a management fee
from  ZNG,  Ltd.  In  addition to the monthly management fee, ZNG Ltd. agreed to
lend  $78,000  to us to pay for legal and consulting services in connection with
establishing  the  Joint Venture. We received $29,000 of this amount in November
2005;  and  will  receive the additional $49,000 if all five of the new licenses
are  awarded to ZNG, of which three have been awarded to date, and ZNG submits a
letter  from the relevant license authority of the Ministry of Natural Resources
of  the  Russian  Federation  confirming  such  awards, of which there can be no
assurance.

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

We  are  taking  steps  in  an  attempt to raise equity capital and/or to borrow
additional  funds.  There  can  be  no  assurance  that  any new capital will be

<PAGE>

available  to  us  or  that  adequate funds for our operations, whether from our
financial  markets,  or  other  arrangements will be available when needed or on
terms  satisfactory  to  us,  if  at  all. We have no commitments from officers,
directors  or  affiliates  to  provide  funding.  Our failure to obtain adequate
financing  may  require  us  to  delay, curtail or scale back some or all of our
operations.  Additionally,  any additional financing may involve dilution to our
then-existing  shareholders.


                                  RISK FACTORS

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

RISK  OF  CONTINUING  OUR  BUSINESS  PLAN  WITHOUT  ADDITIONAL  FINANCING.

We  depend  to  a  great  degree on the ability to attract external financing in
order  to  conduct  future  exploratory  and development activities. The Company
believes  it  can  satisfy  its  cash requirements during the next twelve months
through funding provided by existing stockholders and with amounts received from
the Joint Venture (described above), including $25,000 a month which the Company
is  to  receive from ZNG, Ltd., pursuant to the Joint Venture. Additionally, ZNG
has  received  approximately  $1,110,624  from  BP  pursuant to a prior loan and
another  $3,959,391  pursuant  to  the  New  Loan, which had a total outstanding
balance,  including the assumed balance of the prior loan and accrued and unpaid
interest  on  the  prior  loan  and  the  New  Loan  as  of November 1, 2006, of
$5,471,288,  which  has  been  spent  on  various  purposes,  including  paying
consultants  for  services  performed  in  connection  with  surveys  previously
performed  on the licensed area. As the Joint Venture is now responsible for the
funding of the operations of ZNG, we believe our expenditures in connection with
ZNG  will  decrease  in  the  upcoming  periods.  If  we are unable to raise the
additional  funds  required  for the planned activities of the Joint Venture and
for  additional  activities, separate than the Joint Venture, our Company may be
forced to abandon its current business plan. If you invest in our Company and we
are  unable to raise the required funds, your investment could become worthless.

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

Approximately  $654,000 in loans, which ZNG is to receive in connection with the
New  Loan  are  contingent  upon  ZNG  obtaining  rights to the two new licenses
applied for in August and September 2005. The Russian government and Ministry of
Natural  Resources  together  with Rosnedra Federal Agency set the dates for the
auctions  on  the  two  blocks,  the  Pichuginski and Mihailovski parcels, which

<PAGE>

auctions we anticipate occurring in the fourth quarter of 2006. The licenses may
be  bid  on  by companies with resources much greater than ZNG, and as a result,
ZNG  may not win the rights to the licenses applied for. If this were to happen,
the approximately $654,000 in loans which are contingent upon ZNG obtaining such
licenses  may  not  be  granted.  As  a  result, ZNG may be forced to curtail or
abandon  its business operations and consequently, our investment in ZNG and the
value  of  our  securities  may  become  worthless.

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

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

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

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

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

<PAGE>

Our  Company  is in its early development stage, as planned principal activities
have  not  begun.  We  have  not generated any revenues since inception and have
incurred  substantial  losses  including  a  net  loss of $267,632 for the three
months  ended  September  30, 2006, a net loss of $2,154,734 for the nine months
ended  September  30,  2006  and a total accumulated deficit of $4,742,753 as of
September  30, 2006. These factors among others indicate that the Company may be
unable  to continue as a going concern, particularly in the event that it cannot
generate sufficient cash flow to conduct its operations and/or obtain additional
sources  of  capital  and  financing.

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

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

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

As  a  development stage company, we have no revenues or profits to date and our
net cumulative deficit attributable to our development stage as of September 30,
2006,  was  $4,292,968,  and  our  total cumulative deficit was $4,742,753 which
included  $449,785  of pre-development stage deficit. We had $327,539 in accrued
and  unpaid  salaries  and a working capital deficit of $825,940 as of September
30, 2006. The Company is currently being funded by existing shareholders and the
$25,000  monthly  payments, which the Company receives from the Joint Venture in
connection  with management fees, but there can be no assurance this amount will
be  sufficient  to  continue  our planned operations or that we will have enough
money  to repay our outstanding debts. There is a risk that ZNG will never begin
production  and  our  Company  will  never  generate  any  revenues  through our
ownership  of  ZNG, Ltd. If throughout ZNG's oil exploration, it finds no viable
wells, and consequently, we generate only minimal revenues through ZNG, Ltd., we
will  likely be forced to curtail or abandon our business plan. If this happens,
you  could  lose  your  investment  in our Company. If we are unable to generate
profits,  we  will be forced to rely on external financing, of which there is no
guarantee,  to  continue  with  our  business  plan.

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

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

<PAGE>

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

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

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

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

OUR  GROWTH  WILL  PLACE  SIGNIFICANT  STRAINS  ON  OUR  RESOURCES.

The  Company's growth is expected to place a significant strain on the Company's
managerial,  operational  and  financial  resources. Furthermore, as the Company
receives  contracts,  the  Company  will  be  required  to  manage  multiple
relationships with various customers and other third parties. These requirements
will  be  exacerbated  in  the  event of further growth of the Company or in the
number  of  its contracts. There can be no assurance that the Company's systems,
procedures  or  controls will be adequate to support the Company's operations or
that  the  Company  will  be  able  to  achieve the rapid execution necessary to
succeed  and implement its business plan. The Company's future operating results
will  also  depend  on its ability to add additional personnel commensurate with
the  growth  of  its  business.  If  the  Company  is  unable  to  manage growth
effectively,  the  Company's  business,  results  of  operations  and  financial
condition  will  be  adversely  affected.

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

We  rely  on  the Company's Chief Executive Officer and Chief Financial Officer,
David  Zaikin  and Elena Pochapski, for the success of our Company, both of whom
are  employed  under contracts. Their experience and input create the foundation
for  our business and they are responsible for the directorship and control over

<PAGE>

the  Company's  development  activities.  The  Company  does  not hold "key man"
insurance  on  either  member of management. Moving forward, should they be lost
for  any  reason,  the  Company  will  incur  costs  associated  with recruiting
replacement  personnel  and any potential delays in operations. If we are unable
to  replace  Mr. Zaikin and/or Ms. Pochapski, the Company may be forced to scale
back  or curtail its business plan. As a result of this, any securities you hold
in  our  Company  could  become  devalued.

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

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

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

Under new Over-The-Counter Bulletin Board ("OTCBB") rules relating to the timely
filing  of  periodic  reports with the SEC, any OTCBB issuer who fails to file a
periodic  report (Form 10-QSB's or 10-KSB's) by the due date of such report (not
withstanding  any  extension  granted  to  the  issuer  by  the filing of a Form
12b-25),  three (3) times during any twenty-four (24) month period are de-listed
from the OTCBB. Such removed issuer would not be re-eligible to be listed on the
OTCBB  for  a  period  of one-year, during which time any subsequent late filing
would  reset  the  one-year  period  of de-listing. Therefore, if we are late in
filing  a  periodic  report three times in any twenty-four (24) month period and
are  de-listed from the OTCBB, our securities may become worthless and we may be
forced  to  curtail  or  abandon  our  business  plan.

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

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

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

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

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

Our Common Stock will be subject to the requirements of Rule 15(g)9, promulgated
under  the  Securities  Exchange Act as long as the price of our Common Stock is
below  $4.00 per share. Under such rule, broker-dealers who recommend low-priced
securities  to persons other than established customers and accredited investors
must  satisfy  special sales practice requirements, including a requirement that
they  make an individualized written suitability determination for the purchaser
and  receive  the  purchaser's  consent prior to the transaction. The Securities
Enforcement  Remedies  and  Penny  Stock  Reform  Act  of  1990,  also  requires
additional disclosure in connection with any trades involving a stock defined as
a  penny  stock.  Generally,  the Commission defines a penny stock as any equity
security  not  traded on an exchange or quoted on NASDAQ that has a market price
of  less  than $4.00 per share. The required penny stock disclosures include the
delivery,  prior  to  any  transaction,  of a disclosure schedule explaining the
penny  stock  market  and  the risks associated with it. Such requirements could
severely  limit  the  market  liquidity  of  the  securities  and the ability of
purchasers  to  sell  their  securities  in  the  secondary  market.

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

<PAGE>

CRITICAL  ACCOUNTING  POLICIES

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

ITEM  3.  CONTROLS  AND  PROCEDURES

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

(b)     Changes  in  internal  control  over  financial reporting. There were no
significant changes in our internal control over financial reporting during  our
most  recent  fiscal quarter that materially affected, or were reasonably likely
to  materially  affect,  our  internal  control  over  financial  reporting.

PART  II  -  OTHER  INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS

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

<PAGE>

ITEM  2.  UNREGISTERED  SALES  OF  EQUITY  SECURITIES

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

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

On  June 30, 2006, in connection with our agreement with AEF, we agreed to grant
AEF a warrant to purchase 20,412 shares of our common stock at an exercise price
of  $2.02,  which  warrants  contained a cashless exercise feature. The warrants
expire  three  years  from  the  grant  date.  We were also obligated to pay AEF
$23,562  during  the  quarter  ended  June  30,  2006  (equal  to 1% of Baltic's
$2,356,153  investment  in  the Joint Venture in the second quarter 2006), which
amount  has  not  been paid to AEF to date. The Company claims an exemption from
registration  afforded  by  Section  4(2) of the Act since the foregoing did not
involve  a public offering, the recipient took the securities for investment and
not  resale  and  the Company took appropriate measures to restrict transfer. No
underwriters  or  agents  were  involved  in  the  foregoing and no underwriting
discounts  or  commissions  were  paid  by  the  Company.

In  July  2006,  the  Company issued 13,500 shares of restricted common stock to
Harbinger  Research,  LLC  ("Harbinger"), in connection with the Company's entry
into  an  Investment  Report  Services  Agreement with Harbinger (the "Harbinger
Agreement"),  whereby  Harbinger  agreed to prepare and distribute an investment
report  for  the  Company  to  approximately 1,500,000 individual investors. The
consideration for the entry into the Harbinger Agreement and the preparation and
dissemination  of  the  report was 13,500 restricted shares of common stock. The
Company  claims  an  exemption from registration afforded by Section 4(2) of the
Act  since  the  foregoing  issuance  did  not  involve  a  public offering, the
recipient  took  the  shares  for investment and not resale and the Company took

<PAGE>

appropriate  measures  to  restrict  transfer.  No  underwriters  or agents were
involved  in the foregoing issuance and no underwriting discounts or commissions
were  paid  by  the  Company.

In  September  2006, in connection with our entry into the Option Agreement with
Key  Brokerage  (as  described  above)  we granted Key Brokerage an aggregate of
250,000  warrants to purchase shares of our common stock at an exercise price of
$2.20  per  share,  exercisable  until September 14, 2008. We claim an exemption
from  registration  afforded by Section 4(2) of the Securities Act of 1933 since
the foregoing grant of warrants did not involve a public offering, the recipient
took  the  shares  for  investment  and  not  resale  and any shares issuable in
connection  with  an exercise of the warrants will be restricted once issued. No
underwriters  or agents were involved in the foregoing grant and no underwriting
discounts  or  commissions  were  paid  by  us.

In  August  2006,  we  agreed  to issue restricted shares of our common stock to
certain  individuals  and entities to which we owed money as of August 2006. The
shares  were  issued  at  a 30% discount to the then current market price of our
common  stock,  being  the  discount  for  the restrictive nature of the shares.

In  August  2006,  two  individuals  agreed to be issued an aggregate of 113,530
restricted  shares  of  common  stock  in  consideration  for the forgiveness of
$182,783  in  money  which we owed the individuals in connection with loans they
provided  us  in  December  2005  and  in  connection  with  such  individuals
representing  us  in  Moscow,  Russia.

In September 2006, we issued an aggregate of 417,469 restricted shares of common
stock  to Business Standard (and nominees thereof), of which 400,000 shares were
issued  in consideration for consulting services rendered in connection with the
application  for  and  subsequent  grant  of two (2) oil and gas exploration and
production licenses in the Kurgan region of Siberia, Russia (the "Licenses"), to
Zauralneftegaz,  Ltd.,  a  Russian  company  ("ZNG"),  which  is wholly owned by
Zauralneftegaz,  Ltd.,  a  United Kingdom company, which we own 50% of through a
joint  venture  in connection with our agreement with Business Standard, whereby
we  agreed  to  issue  Business Standard 200,000 restricted shares of our common
stock  for  each license ZNG receives. The remaining 17,469 shares of restricted
common  stock  were  issued  to  Business  Standard  in connection with Business
Standard  forgiving  $28,125  in  amounts owed for consulting services rendered.

We  claim  an  exemption  from  registration  afforded  by  Section  4(2) of the
Securities  Act  of  1933 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  September  2006,  we  agreed to issue 10,000 shares of our restricted common
stock  to  the  Investor  Relations  Group,  Inc.  ("IRG"), in accordance with a
contract  entered  into  on  March  16, 2006. Pursuant to the contract (the "IRG
Agreement"),  IRG  agreed  to  perform  investor  relations and public relations
services,  including  the  overall  management  of  a  corporate  communications
program,  as  well  as agreeing to design a corporate fact sheet, and organizing

<PAGE>

road  shows  for  the  Company.  The  Company's  Board of Directors approved the
issuance  of  150,000  restricted  shares  of  the  Company  upon signing of the
agreement,  which  shares  have  previously  been issued and agreed to issue IRG
10,000  restricted  shares  per  month  for  the  six  (6) month duration of the
contract,  of  which  10,000  shares  were issued in September 2006 for investor
relations  services  rendered in the month of August 2006. We claim an exemption
from  registration  afforded  by  Section  4(2)  of  the Act since the foregoing
issuance  did  not  involve a public offering, the recipient took the shares for
investment and not resale and we took appropriate measures to restrict transfer.
No  underwriters  or  agents  were  involved  in  the  foregoing issuance and no
underwriting  discounts  or  commissions  were  paid  by  us.

On  September  30, 2006, in connection with our agreement with AEF, we agreed to
grant AEF a warrant to purchase 20,952 shares of our common stock at an exercise
price  of $1.53 per share, which warrants contained a cashless exercise feature.
The  warrants  expire three years from the grant date. We were also obligated to
pay  AEF  $18,303  during  the  quarter ended September 30, 2006 (equal to 1% of
Baltic's  $1,830,292 investment in the Joint Venture in the third quarter 2006),
which  amount has not been paid to AEF to date.  When such warrant is issued, we
will  claim  an  exemption from registration afforded by Section 4(2) of the Act
since  the  foregoing issuance will not involve a public offering, the recipient
will  take the shares for investment and not resale and we will take appropriate
measures to restrict transfer. No underwriters or agents will be involved in the
foregoing  issuance and no underwriting discounts or commissions will be 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

None.

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

a)     Exhibits

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

10.15(3)            Deed  of  Amendment  between  ZNG  and  BP

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

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

<PAGE>

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

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

10.20(5)            Deed  of  Release

10.21(5)            Release  of  Pledge

10.22(5)            Guarantee

10.23(5)            Debenture

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

10.25(5)            Sale  and  Purchase  Agreement

10.26(7)            Option Agreement with Key Brokerage

10.27(7)            Warrant Agreement with Key Brokerage

10.28*              July 26, 2006 Deed of Agreement

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

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

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

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

99.1(6)             Glossary

*  Filed  Herein.

(1)     Filed  as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 to the Company's Form
8-K  filed  with  the  Commission  on  May  20, 2005, and incorporated herein by
reference.

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

<PAGE>

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

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

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

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

(7)     Filed  as  Exhibits to our Report on Form 8-K, filed with the Commission
on  September  19,  2006,  and  incorporated  herein  by  reference.

b)     Reports on Form 8-K

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

September  14,  2006 -   To  report  our  entry  into  a  preliminary  extension
                         with  Baltic  regarding  the terms of our Joint Venture
                         Agreement.

September  19,  2006 -   To  report  our  entry  into  an  option agreement with
                         Key  Brokerage,  Inc.

September  22,  2006  -  To  report  the  issuance  of  various shares of common
                         stock in forgiveness of debt owed to various parties in
                         August  and  September  2006.

We  filed  the following reports on Form 8-K subsequent to the period covered by
this  report:

October 23, 2006 -       To  report  that  ZNG  had  received  results of the 2D
                         Seismic  analysis  conducted  on  its  licensed blocks.

October  25,  2006  -    To  further  report  the  results  of  ZNG's 2D Seismic
                         analysis  conducted  on  its  licensed  blocks.

November 6, 2006 -       To  report  ZNG's  plans  for  drilling in its licensed
                         blocks.

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                                   SIGNATURES

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

 SIBERIAN ENERGY GROUP INC.

DATED: November 14, 2006                    By: /s/ David Zaikin
                                            --------------------
                                            David Zaikin
                                            Chief Executive Officer

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