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

                                  FORM 10-QSB

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

                  For the quarterly period ended June 30, 2005

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

                        For the transition period from     to

                        Commission file number 333-118902

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

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

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

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

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

                                      NONE

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

     At August 22, 2005, there were outstanding 9,402,886 shares of the
Issuer's common stock, $.001 par value per share.

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

<PAGE>


                           SIBERIAN ENERGY GROUP INC.
                          (A DEVELOPMENT STAGE COMPANY)

                             CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS

                                  JUNE 30, 2005


<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




The Board of Directors and Stockholders
Siberian Energy Group Inc.


We  have  reviewed  the  accompanying  condensed  consolidated  balance sheet of
Siberian  Energy  Group  Inc. (a development stage company) as of June 30, 2005,
and  the  related condensed consolidated statements of operations, stockholders'
equity,  and  cash  flows  for  the three and six months ended June 30, 2005 and
2004,  and  the cumulative period of development stage activity (January 1, 2003
through  June  30, 2005).   These financial statements are the responsibility of
the  Company's  management.

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

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

We  have previously audited, in accordance with auditing standards of the Public
Company  Accounting  Oversight  Board,  the  consolidated  balance  sheet  as of
December  31,  2004,  and  the  related  consolidated  statements of operations,
stockholders'  equity  and  cash  flows  for  the year then ended (not presented
herein);  and  in our report dated February 25, 2005, we included an explanatory
paragraph  describing  conditions  that  raised  substantial  doubt  about  the
Company's  ability  to  continue  as  a  going  concern.  In  our  opinion,  the
information  set  forth in the accompanying condensed consolidated balance sheet
as  of December 31, 2004 is fairly stated, in all material respects, in relation
to  the  balance  sheet  from  which  it  has  been  derived.


Lumsden & McCormick, LLP
Buffalo, New York
July 29, 2005

<PAGE>

<TABLE>
<CAPTION>


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

CONDENSED CONSOLIDATED BALANCE SHEETS                               (UNAUDITED)
                                                                      JUNE 30,     December 31,
                                                                        2005           2004
-----------------------------------------------------------------------------------------------
<S>                                                                     <C>             <C>
ASSETS
CURRENT ASSETS:
  Cash                                                             $     21,714   $         -
  Prepaid expenses and other                                            154,944       135,052
                                                                     ----------    -----------
                                                                        176,658       135,052
                                                                     ----------    -----------
Geological data, net                                                    750,000       750,000

Oil and gas properties, unproved                                        770,674       734,218

Licenses, net                                                            90,417       108,499

License deposit                                                         248,032             -

Property and equipment, net                                               2,844         1,820
                                                                     ----------    -----------
                                                                   $  2,038,625   $ 1,729,589
                                                                     ----------    -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Loans payable                                                    $    982,191   $         -
  Accounts payable:

    Related party - stockholders                                        585,852       517,191
    Others                                                              490,641       968,338

  Accrued payroll                                                       919,278       773,524
  Option deposit                                                        100,000             -
                                                                     ----------    -----------
                                                                      3,077,962     2,259,053
                                                                     ----------    -----------

STOCKHOLDERS' EQUITY:
  Common stock - authorized 100,000,000 shares, $.001 par value,
  9,402,886 and 9,402,886 issued and outstanding                          9,403         9,403
  Additional paid-in capital                                          1,221,752     1,220,121
  Accumulated deficit
    Pre-development stage                                              (449,785)     (449,785)
    Development stage                                                (1,799,624)   (1,256,083)
  Accumulated other comprehensive income (loss)                         (21,083)      (53,120)
                                                                     (1,039,337)     (529,464)

                                                                   $  2,038,625   $ 1,729,589
-----------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes.

<PAGE>

<TABLE>
<CAPTION>

SIBERIAN ENERGY GROUP INC. (A Development Stage Company)
---------------------------------------------------------------------------------------------------------
                                                                                               For the
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                              cumulative
                                                                                             period of
                                                                                            development
                                                                                          Stage Activity-
                                               For the three              For the six     January 1, 2003
                                               months ended               months ended        through
                                        ----------------------------------------------------  June 30,
                                             JUNE 30,    June 30,      JUNE 30,    June 30,     2005
                                               2005        2004          2005         2004
---------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>          <C>           <C>        <C>
Revenues                                  $        -   $        -   $        -   $        -   $        -

Expenses:

  Salaries                                   126,806      148,857      248,724      274,559    1,016,892
  Professional and consulting fees            42,497       75,051       80,845       85,051      299,553
  Rent and occupancy                          18,499       14,532       42,630       24,353       98,644
  Depreciation and amortization                9,384        9,447       18,768       18,735       92,814
  Finance charges and interest                16,093            -       16,093            -       16,093
  Other                                      106,728       22,961      136,481       46,620      275,628
                                        -----------------------------------------------------------------
    Total expenses                           320,007      270,848      543,541      449,318    1,799,624
                                        -----------------------------------------------------------------

    Loss before income taxes                 320,007      270,848      543,541      449,318    1,799,624

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

    Net loss (development stage)          $  320,007   $  270,848   $  543,541   $  449,318  $ 1,799,624
---------------------------------------------------------------------------------------------------------



Basic and diluted loss per common share   $    (0.03)  $    (0.05)  $    (0.06)  $    (0.08)  $    (0.25)
                                        -----------------------------------------------------------------
Weighted average number of basic and

  diluted common shares outstanding        9,402,886    5,940,798    9,402,886    5,921,842    7,162,590
                                        -----------------------------------------------------------------
</TABLE>

See accompanying notes.

<PAGE>

<TABLE>
<CAPTION>

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

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the cumulative period of Development Stage Activity - January 1, 2003 through
June 30, 2005
-----------------------------------------------------------------------------------------------------------------------------------
                                                                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                4,902,886    $  4,903     $ 430,195     $ (449,785)    $       -    $ (14,687)
(pre-development stage)

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 six months - 2005                      -           -             -       (543,541)            -     (543,541)

Foreign currency translation adjustment         -           -             -              -        32,037       32,037    $ (511,504)

Other                                           -           -         1,631              -             -        1,631
                                      ---------------------------------------------------------------------------------------------
       Balance, June 30, 2005           9,402,886    $  9,403    $1,221,752    $(2,249,409)    $ (21,083) $(1,039,337)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


See accompanying notes.

<PAGE>

<TABLE>
<CAPTION>

SIBERIAN ENERGY GROUP INC. (A Development Stage Company)
--------------------------------------------------------
                                                                                     For the
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                     cumulative
                                                                                    period of
                                                                                   Development
                                                                                 Stage Activity-
                                                                For the six      January 1, 2003
                                                                months ended         through
                                                           ---------------------     June 30,
                                                           JUNE 30,     June 30,       2005
                                                            2005         2004
------------------------------------------------------------------------------------------------
<S>                                                          <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss (development stage)                            $(543,541)  $(449,318)  $(1,799,624)
  Depreciation and amortization                              18,768      18,735        92,814
  Common stock issued for professional services                   -           -        10,000
  Changes in other current assets and
    current liabilities:
        Prepaid expenses and other                          (19,892)     20,946      (149,640)
        Accounts payable and accrued expenses              (263,282)    845,665     1,973,391
        Option deposit                                      100,000           -       100,000
                                                          ----------  ----------  ------------
        NET CASH FLOWS FROM (FOR) OPERATING ACTIVITIES     (707,947)    436,028       226,941
                                                          ----------  ----------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Expenditures for licenses and related                    (248,032)          -      (428,856)
  Expenditures for oil and gas properties                   (36,456)   (433,444)     (770,674)
  Expenditures for property and equipment                    (1,710)          -        (2,868)
  Cash received in acquisition                                    -           -             6
                                                          ----------  ----------  ------------
        NET CASH FLOWS FOR INVESTING ACTIVITIES            (286,198)   (433,444)   (1,202,392)
                                                          ----------  ----------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from loans                                   982,191           -       982,191
  Additional paid-in capital                                  1,631      34,426        36,057
                                                          ----------  ----------  ------------
        NET CASH FLOWS FROM FINANCING ACTIVITIES            983,822      34,426     1,018,248
                                                          ----------  ----------  ------------
Effect of exchange rates on cash                             32,037           -       (21,083)
                                                          ----------  ----------  ------------
    Net increase in cash                                     21,714      37,010        21,714

Cash - beginning                                                  -          38             -
                                                          ----------  ----------  ------------
    Cash - ending                                         $  21,714   $  37,048   $    21,714
------------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes.

<PAGE>

1.  BASIS  OF  PRESENTATION:

The  accompanying unaudited consolidated financial statements of Siberian Energy
Group  Inc. (the Company) include the accounts of the Company and its 100% owned
subsidiaries.  These  financial  statements  have  been prepared pursuant to the
rules  of the Securities and Exchange Commission (SEC) interim reporting, and do
not  include  all  of the information and note disclosures required by generally
accepted  accounting  principles.  These  consolidated  financial statements and
notes  herein  are  unaudited, but in the opinion of management, include all the
adjustments  (consisting  of  only normal recurring adjustments) necessary for a
fair  presentation  of  the Company's financial position, results of operations,
and  cash  flows  for the periods presented.  Accounting policies used in fiscal
2005  are  consistent  with  those  used  in  2004  and  2003.  These  financial
statements should be read in conjunction with the Company's audited consolidated
financial  statements  and  notes  thereto.  Interim  operating  results are not
necessarily indicative of operating results for any future interim period or the
full  year.

2.  THE  COMPANY  AND  DESCRIPTION  OF  BUSINESS:

The  Company  exists  primarily  to  exploit and develop certain oil and gas and
other  petroleum  products  licenses  issued  by  Russia's  Kurgan  Provincial
Government  for  the  Eastern  part  of  Kurgan  Province.

The  Company  currently  operates  through  its  wholly  owned subsidiary Zaural
Neftegaz  (ZNG).  ZNG has its principal place of business in Kurgan City, Kurgan
province,  Russia,  and  it  is  the sole and exclusive owner of the exploration
licenses.  In  spring 2004, ZNG has begun geological and geophysical exploration
works on the licensed areas.

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

3.  ACQUISITIONS:

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

The  Company  is  taking  steps  to  perfect  the previous acquistion of the 51%
interest in ZNG in accordance with Russian law.

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

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

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

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

<PAGE>

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

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

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

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

4.  GOING  CONCERN:

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

Management  is  of  the  opinion that sufficient financing will be obtained from
external sources to provide the Company with the ability to continue the process
of  development  to  achieve  commercial  production  and  sales  of  products.
For  the  cumulative  period  ended June 30, 2005, the Company has obtained cash
financing  from  organizing  stockholders  and  employees  in the form of loans,
advances  and  deferred  salaries.  However,  there  can  be  no certainty as to
availability of continued financing in the future.  Failure to obtain sufficient
financing may require the Company to reduce its operating activities.  A failure
to  continue  as a going concern would then require stated amounts of assets and
liabilities  be  reflected  on  a  liquidation basis which could differ from the
going  concern  basis.

5.  Option Agreement

On January 24, 2005, the Company entered into an Option Agreement and Memorandum
of  Understanding with a third party (Party), which was subsequently replaced by
a  new  Option  Agreement,  entered  into on April 28, 2005 (Option).  Under the
Option,  the Company gave the Party the right to participate with the Company in
a  joint  venture  company for inter alia the exploration and development of the
Company's four (4) licenses for exploration in the Kurgan region of Siberia (the
Joint  Venture).  If  the  Party  chooses to exercise the Option and participate
with  the  Company  in  the Joint Venture, the Company will transfer 100% of the
Company's  ownership  interest in ZNG to the Joint Venture, and the Company will
transfer  50%  of  the Joint Venture interest to the Party for a nominal sum and
the  agreement  by  the  Party to provide future funding to the Joint Venture as
detailed  in  the  Option.  Pursuant  to  the  Option,  the  Party  is currently
conducting  due  diligence  on  the Company's licenses (the Due Diligence).  The
Party  has  paid  the Company $100,000 for the right to exercise the Option.  In
conjunction with the Option Agreement the party provided a loan facility to ZNG.
The  Loan  agreement for the total $1,267,860 was signed on April 28, 2005.  The
loaned  amounts  will  be  used  as  specified  in the agreement, which includes
payment  of outstanding amounts for geological works performed to date, salaries
of  employees  for  the  period  April  to  July  2005  and research work toward
potential  new fields.  The Company is acting as a guarantor to the issued loan.

6.  LOSS  PER  COMMON  SHARE:

Basic  and  diluted loss per common share is computed using the weighted average
number  of  common  shares  outstanding  during the period.  Shares issuable for
common  stock  options  may have had a dilutive effect on earnings per share had
the  Company  generated  income  during  the  periods  through  June  30,  2005.

<PAGE>

7.  STOCKHOLDERS'  EQUITY:

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

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

<PAGE>

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

OVERVIEW

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

     ZNG  aims  to  develop  an  oil  and  gas  industry in the Kurgan region of
South-West  Siberia,  Russia  by  discovering  new  hydrocarbon  fields. ZNG has
compiled  data  in  the  Eastern  part  of  the Kurgan region by analyzing prior
geological,  geophysical and lithographic exploration works in the region, data,
maps,  and  reports  from  12  test  wells  drilled  between  1979-1986, profile
sections,  correlation  schemes,  and  geographic  maps  of  the  region.

     After  analyzing  the  eight  available blocks suggested by the Ministry of
Natural Resources, ZNG chose to concentrate its activities on four areas located
in the Eastern part of the Kurgan region and applied for licenses covering these
areas.  Currently  ZNG holds four, 5-year exploration licenses expiring in March
2008,  for concessions covering a total territory of 643,000 acres. Mokrousovsky
is the largest, encompassing a total of 240,000 acres, followed by West Suersky,
which  covers  230,000  acres,  Privolny,  which  covers  123,000  acres,  and
Orlovo-Pashkovsky,  which  covers  50,000  acres.

<PAGE>

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

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

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

     The  Company has not started production and is not currently generating any
cash,  which  makes  it difficult for it to pay its maturing obligations, as the
Company's  assets  are  illiquid. However, the Company believes that in the long
run a number of trends will favorably affect its liquidity. These trends include
the  steady  trend  of  economic  growth  in Russia in the recent years which is
improving the liquidity of our potential customers, and may favorably impact the
Company's  debt  management  and the increasing overall credit rating in Russia,
which  the  Company  hopes  will lead to increased foreign investment in Russian
companies,  like  ZNG.

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


            RECENT EVENTS DURING THE THREE MONTHS ENDED JUNE 30, 2005

     In  April  2005,  the  Company  opened  an  office  in  Toronto,  Canada.

     On  April 12, 2005, the Company appointed Timothy G. Peara to the Company's
     board  of  directors.

     The  Company  filed  a  Certificate  of  Amendment  to  its  Articles  of
Incorporation  with the Secretary of State of Nevada, which became effective May
2,  2005.  The  Amendment  affected  a  1:2  reverse  stock split, re-authorized
100,000,000  shares  of common stock, par value $0.001 per share, and authorized
10,000,000  shares  of  preferred stock, par value $0.001 par value per share. A
majority of the Company's shareholders approved the Amendment by written consent
to  action  without  a  meeting  on  April 22, 2005. The number of shares of the
Company  outstanding  on  the date the written consent was signed was 18,805,771
pre 1:2 reverse split shares and the number of shares which voted to approve the
Amendment  was  approximately  13,542,692  pre  1:2  reverse split shares, which
represented a majority of the issued and outstanding shares of the Company. As a
result  of the Amendment, the Company's common stock began trading under the new
stock  symbol  "SIBN"  on  May  2,  2005.

<PAGE>

CONSULTING  AGREEMENT  AND  APPLICATION FOR ADDITIONAL LICENSES IN KURGAN OBLAST

     On  April  16,  2005, the Company entered into an agreement with Business -
Standard,  a  consulting firm (the "Consultant"), which was subsequently amended
by  a Supplementary Agreement on April 25, 2005 and by a Supplementary Agreement
N2  on August 16, 2005 (collectively the "Consulting Agreement") to identify the
potential  of detecting hydrocarbons on four additional fields in Kurgan oblast,
Russia  (as  described  below).  Under  the Consulting Agreement, the Consultant
provided  services to the Company for the period of three months, which services
included:

o     Collecting  and  studying  geological  information  pertaining to previous
      exploratory  activities  on  the  territory  of  Kurgan  oblast;
o     Conducting  an  interpretation  of  the  geological  materials and profile
      correlation  within  the  boundaries  of  the Vagay-Ishimskaya Basin, as
      well as identify  prospective  horizons  for  exploring  hydrocarbon
      reviews;
o     Performing  the  construction  of  structural-lithographic maps within the
      range  of  licensed  fields  offered  at  auction/tender;
o     Providing  legal  guidance  in  connection  with  the process of obtaining
      additional  licenses;  and
o     Providing  the  Company  with  geological  information  collected  while
      performing  services  under  the  Consulting  Agreement,  including
      reports, supplementary  notes,  maps,  explanation,  descriptions  and
      memoranda.

     The  Consulting  Agreement  provides  for the Company to pay Consultant the
aggregate sum of $500,000 for the three additional licenses and $170,000 for the
fourth  license.  The  Company has paid $250,000 to Consultant from the proceeds
received  from  BP  (as  described  below)  and  has agreed to pay Consultant an
additional  $100,000  upon submission of the application for the fourth license,
which  amount  the  Company  will receive from BP in connection with the Deed of
Amendment  to  the Loan Agreement and Deed of Amendment to the Option Agreement,
described  in  greater  detail  under  Item  5.  Other  Information,  below.
Additionally,  the  Company  has  agreed  to  pay  the  Consultant $250,000 upon
receiving  a  notary  certified  copy  of  a letter from the Ministry of Natural
Resources of the Russian Federation, confirming the Company's title to the three
licenses  the  Company is attempting to acquire (as described below) and $70,000
upon  receiving  a  confirmation  regarding  the  fourth license, of which there
can be no assurance.  The Company believes  that  these  funds  will come from
its JV CO with BP, if successfully formed, of which  there can be no assurance.

     In  April  2005,  the  Company  submitted  applications  to  the  Regional
Subsoil-use  Agency  of  Russian  Federation,  Ural department ("Uralnedra") for
three  new exploration licenses. The application for the new licenses covers the
following  areas  of  Kurgan  oblast,  Russia:

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

Additionally,  in August 2005, the Company plans to submit an application for a
fourth license  in  the  same  region:

     4.     Orlovo-Pashkovsky-2  -  total  area  92  square  kilometers

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

<PAGE>

In September 2005, Uralnedra will review applications submitted by approximately
five  candidates  for  the  new  licenses and will conduct an auction in October
2005. The price per license of the four licenses may vary significantly, however
similar parcels have been sold in the past from between $50,000 and $500,000 per
parcel  and  the  licenses will be granted to the highest bidder at the auction.
The  Company  is  planning  to  finance  the  acquisition of any new licenses it
obtains  through  a joint venture arrangement with a third party, of which there
can  be  no  assurance.  In  the  event  that the Company wins any or all of the
licenses at auction, of which there can be no assurance, it will be in the legal
position  to start geological works on such licensed parcels within a few months
of  the end of the auction. The Company does not currently have the cash on hand
to  purchase  such  licenses  if  won  at  auction,  nor  does  the Company have
sufficient cash on hand to begin geological activities on such licensed parcels,
if won by the Company at auction.

OPTION  AGREEMENT  WITH  BALTIC  PETROLEUM

     On  April  28,  2005,  the  Company  entered  into an Option Agreement (the
"Option")  with  Baltic  Petroleum  Limited  ("BP")  which  replaced  an  Option
Agreement and Memorandum of Understanding that the Company had entered into with
BP  on  January  24, 2005. Under the Option, the Company granted BP the right to
participate  with  the  Company  in a joint venture company ("JV CO") for, among
other things, the exploration and development of the Company's four licenses for
exploration  in  the  Kurgan region of Siberia (the "Existing Licenses"). BP has
paid  the  Company $967,940 under the Initial Loan and has exercised its Option.
Completion  of the purchase of the share capital of JV CO is conditioned upon BP
being  satisfied  with  any  due  diligence  investigations  that  it undertakes
relating  to  the Company, ZNG and JV CO and with the terms of the joint venture
documents;  JV  CO owning 100% of ZNG; the Company and ZNG having executed joint
venture  documents;  and  the  Company  and  BP  having complied in all material
respects  with their respective obligations under the Option (the "Completion").
Upon  Completion,  the  Company  will  transfer  100% of the Company's ownership
interest  in  OOO  Zauralneftegaz  ("ZNG") to the Joint Venture, and the Company
will  transfer  50%  of  the  JV  CO  interest  to  BP for a nominal sum and the
agreement  by  BP  to provide future funding to JV CO as detailed in the Option.
Pursuant  to  the  Option,  BP  is currently conducting due diligence, which the
Company anticipates being completed by the end of August 2005. In the event that
the Option terminates because any of the conditions for Completion have not been
satisfied  (other  than by reason of a breach by BP of its obligations under the
Option),  the  Company shall pay BP liquidated damages in the amount of $500,000
on  October  31,  2005,  and $500,000 on February 28, 2006. The Option Agreement
provides that BP will consider, at its discretion and in good faith, requests by
the  Company  for  additional  funding  required by ZNG prior to the Completion.
Following  Completion,  BP  will  be  responsible  for  funding  JV  CO.

     On  April  28, 2005, in connection with the Option, ZNG entered into a loan
agreement  (the  "Loan  Agreement")  with  BP.  The  Company  guaranteed  (the
"Guarantee")  the  obligations of ZNG to BP under the Loan Agreement and granted
BP  a  security  interest  and continuing lien (the "Security Agreement") on the
Company's  right,  title and interest in and to the Company's 100% participatory
interest  in  ZNG  to  secure ZNG's obligations under the Loan Agreement and the
Company's  obligations  under  the  Guarantee.  The  Company  also  agreed  to
subordinate  its  rights with respect to any debt obligations that ZNG currently
owes,  or  may owe, to the Company and any security interest to the rights of BP
with respect to ZNG's obligations under the Loan Agreement. On Completion, JV CO
will  assume liability for the Advances by BP making an additional loan to JV CO
equal to the outstanding Advances to enable ZNG to repay BP and the Company will
be  released  from  the  Guarantee  and  the  Security  Agreement.

     On  April  28, 2005, also in connection with the Option, ZNG entered into a
license  agreement  (the  "License  Agreement")  with  BP.  Under  the  License
Agreement,  ZNG  granted  BP  an  exclusive,  royalty-free, worldwide, perpetual

<PAGE>

license to use certain two-dimensional seismic, gravimetric and other geological
data  owned  by or to be acquired by ZNG (the "Data"). BP uses and will continue
to  use the Data to re-process it into amended formats (the "Results"). Pursuant
to  the  License  Agreement,  BP  granted  ZNG  a  non-exclusive,  royalty-free,
worldwide,  perpetual license to use the Results when they become available. ZNG
and  BP  retain  all  right, title to, and interest in the Data and the Results,
respectively. Neither ZNG nor BP has any right to grant sub-licenses without the
consent in writing of the other. BP undertook to keep the Data confidential with
limited  disclosure  only  when  necessary  to  its officers, employees, agents,
consultants  and  sub-contractors  to  the extent such disclosure is required to
re-process  the  Data  into  amended  formats. ZNG undertook to keep the Results
confidential with similar limited disclosure. In addition, ZNG agreed that while
any  amount  of the loan facility is outstanding, ZNG will not disclose the Data
to  any  third  party  except  with  the  prior  written  consent  of  BP.

     On  April  28,  2005,  in connection with the Option Agreement, ZNG entered
into  the  Loan  Agreement with BP. Pursuant to the Loan Agreement, BP will make
available  to ZNG a loan facility of US $1,267,860 (the "Commitment" or "Initial
Loan").  ZNG may drawdown the Commitment by requesting advances (the "Advances")
not  less than ten (10) days in advance of the date on which an Advance is to be
made. The Advances are to be used for the purpose of paying outstanding invoices
and  discharging  outstanding  amounts  due  by  ZNG, paying salaries of certain
employees  of  the  Company  and  ZNG  for April through July 2005, paying costs
associated  with obtaining additional exploration licenses in the Kurgan region,
and  making  a  deposit  consistent with Russian banking and currency regulation
requirements, as such purposes are specifically set forth in the Loan Agreement.
As  of June 30, 2005, the Company had received $967,940 of the Initial Loan from
BP,  which  amount has been spent by the Company in connection with monies owed,
as  described  under  "Liquidity  and  Capital  Resources,"  below, and plans to
receive  $102,041  in  connection  with  the Deed of Amendments described below,
subsequent  to  the filing of this report on Form 10-QSB. Upon Completion, which
the  Company  can  give no assurance will occur, BP agreed to make an additional
loan  to JV CO equal to the amount outstanding under the Initial Loan (currently
approximately  $967,940) to enable JV CO to make an inter-company loan to ZNG to
enable it to repay the Initial Loan. Additionally, the Company shall be released
from  its  obligations  under  the  Guarantee  and  Security Agreement following
Completion,  of  which  there  can  be  no  assurance.  Interest  accrues on the
outstanding  Advances  at  a  rate  of twelve percent (12%) per annum on a daily
basis  and  is  payable  on  October  31,  2005  ("Maturity"),  along  with  all
outstanding  Advances. ZNG may repay all or any part of the outstanding Advances
prior to Maturity upon ten (10) days written notice to BP; provided that, in the
case of a partial repayment, ZNG must pay an amount of not less than US $50,000.
For purposes of the Loan Agreement, the term "Event of Default" includes, but is
not  limited  to,  the appointment of a trustee in bankruptcy in respect of ZNG,
the  Company or any of their respective assets, an order or effective resolution
for the winding up of ZNG or the Company, a stop payment (or the announcement of
an  intention  to stop payment) by ZNG or the Company of all or any class of its
debt, a cessation (or the threat of a cessation) of the respective businesses of
ZNG  or  the  Company,  a  substantial  change in the nature of their respective
businesses,  the  appointment of a receiver in respect of any property of ZNG or
the  Company, a failure to pay any amount under the Loan Agreement when the same
becomes  due,  insolvency of either ZNG or the Company, a failure to comply with
any  of the covenants of the Loan Agreement, the application of an Advance for a
purpose  other  than  the applicable purposes specifically set forth in the Loan
Agreement,  the distribution of an Advance otherwise than in accordance with the
Loan  Agreement,  the  termination  of  the Option Agreement, the performance or
compliance  by  the  Company  under the Security Agreement becomes unlawful, any
obligations  thereunder  cease  to  be legal, valid, binding or enforceable, the
same  are  required  by  applicable  law  or  regulation  to be waived, amended,
modified  or  abandoned,  or the Security Agreement does not create the security
interest  it  purports  to  create. On or at any time after the occurrence of an
Event  of Default, BP may cancel the loan and/or declare that all or part of the
outstanding  Advances,  together  with  accrued  interest  and all other amounts
accrued  be  immediately  due and payable or that all or part of the outstanding
Advances are payable upon demand.

     In an Event of Default, any amounts that become immediately due and payable
or  payable upon demand will generally be payable within five (5) days of notice
or  demand,  whichever  is applicable. If an event of default occurs because BP,
acting  reasonably,  forms  an  opinion  that  any event or series of events has

<PAGE>

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

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

     As of the date of the filing of this quarterly report, BP has exercised its
option  to participate in the JV CO with the Company.  Additionally, at the time
BP  exercised  its options, it required that the Company complete the perfection
of  the  Company's  acquisition  of  ZNG  through  the  following  steps:

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

      To  satisfy these requirements On August 2, 2005, the Company entered into
a  Clarification  To  The  Contract Of Purchase and Sale of the Share In Charter
Capital  of LLC "Zauralneftegaz" Dated 25 May 2004, which clarified the terms of
the Company's original purchase of 49% of ZNG, for a price of $172 and 6,900,000
pre-reverse  split  restricted  shares of the Company's common stock.  As of the
filing of this quarterly report, the Company is working to finalize an agreement
to  perfect  its  51%  acquisition  of  ZNG,  which  was  affected  in May 2003.

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

<PAGE>

     On  August  16, 2005, ZNG entered into a Deed of Amendment with BP, whereby
BP  and ZNG changed the terms of the Loan Agreement to provide for an additional
loan  of  up  to $173,468 to be made to ZNG for the purpose of making additional
payments  to  Business Standard, in connection with the application for a fourth
license  (as  described  above).  The  Company  expects to receive approximately
$102,041  in connection with the Deed of Amendment in August 2005, subsequent to
the  filing  of  this  report  on  Form  10-QSB  (collectively  with the Deed of
Amendment above, the "Deed of Amendments").

PLAN  OF  OPERATIONS  FOR  THE  NEXT  TWELVE  MONTHS

     The  Company  believes it can satisfy its cash requirements during the next
twelve  months through funding provided by existing stockholders, of which there
can  be  no assurance, without committing to the scheduled program of oil fields
development in Russia. However, additional external funding is required in order
to  align  with  the  Company's  exploration  and  development  program.  It  is
anticipated  that  private  equity  from the current investor group will finance
initial  surveys  up  to  $1 million. The Company expects to finance a secondary
survey  and initial exploration to the point of establishing proven reserves, if
commercial  amounts  of  hydrocarbon  are  discovered, through equity financing,
conducted through institutional partners, and/or debt. This cost is estimated at
approximately  $5  million  and  includes  drilling  of  an  exploratory  and  a
prospecting  well,  followed  if  necessary by additional geological research to
quantify  the  deposits.  Future  exploration  and development is expected to be
financed  through  debt  which  SEG believes will be forthcoming if reserves are
proven.  However,  the  Company  can  give no assurances that it will be able to
continue  its  business  operations  until hydrocarbon reserves are found, if at
all.

     The  following  actions  are  planned  for  the  next twelve months: office
analysis of field materials projected onto gravimetric diagrams (1:50,000 scale)
and  seismic  works  and  interpretation  with the subsequent recommendation for
placing  exploratory  wells.  Drilling  is  projected to begin during the fourth
quarter  of  2005 and results on the initial wells are expected as early as June
2006.

     The  Company  currently  has  no  plans to purchase any plant facilities or
significant equipment within the next 12 months. The Company does not expect any
significant  changes  in  the  number  of  employees  during the next 12 months.

     In  the  past,  the  Company  has  obtained  cash financing from organizing
stockholders  in  the  form  of  loans  and  advances.  However, there can be no
certainty  as  to the availability of continued financing in the future. Failure
to  obtain sufficient financing may require the Company to reduce or abandon its
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.

ESTIMATE  OF  AMOUNT  OF  TIME  SPENT  ON  RESEARCH  AND  DEVELOPMENT

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

     CRITICAL  ACCOUNTING  POLICIES  AND  ESTIMATES

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

<PAGE>

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

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

     The  Company's  financial  statements  have been prepared assuming that the
Company  will  continue  as  a  going  concern;  however, since inception of its
current  endeavors  in  2003,  the  Company  has  not earned any revenues and is
considered  to be in the development stage, which raises substantial doubt about
its  ability  to continue as a going concern. The Company is of the opinion that
sufficient  financing  will  be  obtained  from  external sources to provide the
Company  with  the  ability  to  continue  the process of development to achieve
commercial  production  and  sales  of products. For the cumulative period ended
June  30,  2005,  the  Company  has  obtained  cash  financing  from  organizing
stockholders and employees in the form of loans, advances and deferred salaries.
As  discussed  elsewhere  in  this  report,  the Company obtained debt financing
subsequent  to  June  30,  2005. There can be no certainty as to availability of
continued  financing  in  the future. Failure to obtain sufficient financing may
require the Company to reduce its operating activities. A failure to continue as
a  going  concern  would  require stated amounts of assets and liabilities to be
reflected  on  a  liquidation  basis  which  could differ from the going concern
basis.

RESULTS  OF  OPERATIONS

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

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

     Total  expenses increased $49,159 or 18.2% to $320,007 for the three months
ended  June  30,  2005, compared to $270,848 for the three months ended June 30,
2004.  This increase was due to an increase in other expenses of $83,767 or 365%
to $106,728 for the three months ended June 30, 2005, from $22,961 for the three
months  ended  June  30,  2004,  an  increase in finance charges and interest of
$16,093  to  $16,093 for the three months ended June 30, 2005, from $-0- for the
three  months  ended  June  30,  2004,  and an increase in rent and occupancy of
$3,967  to $18,499 for the three months ended June 30, 2005, compared to $14,532
for  the  three  months  ended  June 30, 2004; which was offset by a decrease of
$22,051  or  14.8%  in salaries, to $126,806 for the three months ended June 30,
2005, compared to salaries of $148,857 for the three months ended June 30, 2004,
a  decrease  in  professional and consulting fees of $32,554 or 43.4% to $42,497
for  the  three  months  ended  June  30,  2005,  compared  to  professional and
consulting  fees  of  $75,051  for  the  three  months ended June 30, 2004 and a
decrease  in  depreciation  and  amortization  of $63 or 0.7%, to $9,384 for the
three  months  ended  June  30, 2005, as compared to $9,447 for the three months
ended  June  30,  2004.

     The  $106,728  in  other  expenses for the three months ended June 30, 2005
included  $64,902  in  travel  expenses  including  the  cost  of  hotel  stays,
transportation  between  New York, London and Russia, business lunches, and auto
expenses;  $14,182  in  marketing  and  advertising costs; $10,625 in filing and
transfer  agent fees; and $17,019 in other miscellaneous business operation fees
and  expenses.

<PAGE>

     Net  loss  for the three months ended June 30, 2005 increased by $49,159 or
18.2% from $270,848 for the three months ended June 30, 2004 to $320,007 for the
three months ended June 30, 2005. Although net loss increased, basic and diluted
loss per common share decreased by $0.02 from $(0.05) for the three months ended
June  30, 2004 to $(0.03) for the three months ended June 30, 2005. The decrease
in basic and diluted loss per common share was due to the issuance of additional
shares during the third and fourth quarters of 2004, which resulted in a greater
number  of shares issued and outstanding as of June 30, 2005 than as of June 30,
2004.

Six  Months  ended  June  30,  2005  Compared  to Six Months Ended June 30, 2004
--------------------------------------------------------------------------------

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

     Total  expenses  increased  $94,223 or 20.1% to $543,541 for the six months
ended  June  30, 2005, compared to total expenses of $449,318 for the six months
ended  June 30, 2004.  The increase in total expenses was mainly attributable to
an  increase  in  rent  and occupancy of $18,277 or 75.1% to $42,630 for the six
months  ended  June  30, 2005, compared to $24,353 for the six months ended June
30,  2004,  which was mainly attributable to the Company's rent for its Toronto,
Ontario, Canada office, which rent began in January 2005, an increase in finance
charges  and  interest  of  $16,093 to $16,093 for the six months ended June 30,
2005,  compared  to  $-0- for the six months ended June 30, 2004, an increase in
depreciation  and  amortization  expense  of $33 or 0.18% to $18,768 for the six
months  ended  June  30, 2005, compared to $18,735 for the six months ended June
30,  2004 and an increase in other expenses of $89,861 or 192.8% to $136,481 for
the  six  months  ended June 30, 2005, as compared to $46,620 for the six months
ended  June  30,  2004,  which  was  offset  by a decrease of $25,835 or 9.4% in
salaries,  to  $248,724  for  the six months ended June 30, 2005, as compared to
salaries  of  $274,559  for the six months ended June 30, 2004 and a decrease in
professional and consulting fees of $4,206 or 4.9% to $80,845 for the six months
ended  June 30, 2005, as compared to professional and consulting fees of $85,051
for  the  six  months  ended June 30, 2004.  Total expenses increased because of
additional  costs  associated  with our status as a public company, the lease of
office  space in Russia and Canada that began in January 2005, and other factors
such  as  an  increase  in  our  efforts  to  raise  capital.

     The  $136,481  in  other  expenses  for  the six months ended June 30, 2005
included  $90,999  in  travel  expenses  including  the  cost  of  hotel  stays,
transportation  between  New York, London and Russia, business lunches, and auto
expenses;  $14,182  in  marketing  and  advertising costs; $10,625 in filing and
transfer  agent fees; and $20,675 in other miscellaneous business operation fees
and  expenses.

     Net  loss  for  the  six months ended June 30, 2005 increased by $94,223 or
21%,  to  $543,541  for  the  three  months  ended June 30, 2005, as compared to
$449,318  for the three months ended June 30, 2004. Although net loss increased,
basic  and diluted loss per common share decreased by $0.02 from $(0.08) for the
six  months  ended  June  30,  2004 to $(0.06) for the six months ended June 30,
2005.  The  decrease  in  basic and diluted loss per common share was due to the
issuance  of  additional  shares  during  the third and fourth quarters of 2004,
which  resulted  in a greater number of shares issued and outstanding as of June
30,  2005  than  as  of  June  30,  2004.

LIQUIDITY  AND  CAPITAL  RESOURCES

     As  of  June  30,  2005,  the Company's current assets were $176,658, which
consisted  of  cash of $21,714 and prepaid expenses and other of $154,944. Total
assets  for  the  Company  as  of  June  30,  2005 were $2,038,625. Total assets
consisted  of  $750,000 of net geological data, $770,674 of unproved oil and gas
properties,  $90,417  of net licenses, $248,032 of license deposit and $2,844 of
net property and equipment. The $750,000 of geological data includes, data, maps
and  reports  from  the  12  test  wells  drilled between 1979-1986, including a
lithologic description of rock, summaries of geophysical research of well shafts
and  a  laboratory  analysis of rock age; profile sections; correlation schemes;
geological  and  set  maps;  and  an  independent  geological  evaluation of oil
reserves  on  the  licensed  areas  performed  in  2004, and $176,558 of current
assets.

<PAGE>

     As  of  June  30,  2005, the Company had current liabilities of $3,077,962.
This  was  due  to  $982,191  of  loans payable, $585,852 of accounts payable to
related  parties,  $490,641  of  accounts payable to others, $919,278 of accrued
payroll,  and  $100,000  of  option  deposit  from  BP.  The $919,278 of accrued
payroll  included approximately $501,185 of accrued salaries of our officers and
directors.  The  $585,852  of  accounts  payable  to  related  parties  included
$180,790.66  which  is  payable to our Chief Executive Officer, David Zaikin and
$164,393.12  payable  to  our  Director,  Sergey  Potapov,  which  amounts  were
previously loaned to the Company and bear no interest.  Mr. Potapov has two loan
agreements with the Company, whereby he agreed to loan an aggregate of 4 million
rubles  (approximately  US  $140,746  as  of  the  filing of this Report on Form
10-QSB)  to  the  Company for an indefinite period of time.  The loan agreements
also  provide  that  the  Company  will repay Mr. Potapov within seven days of a
claim  made to the Company to return the monies loaned.  This agreement bears no
interest  and  the Company owed Mr. Potapov approximately $164,393 in connection
with  the  loan agreements as of June 30, 2005.  Additionally, the Company has a
loan  agreement in place with a shareholder of the Company, which loan agreement
provides  for  the  shareholder  to  loan  an  aggregate  of  5,152,225  rubles
(approximately  US  $181,289  as of the filing of this Report on Form 10-QSB) to
the  Company  for an indefinite period of time.  The loan agreement provides for
Company to repay the shareholder upon seven days of a claim from the shareholder
to  return  the  amounts  owed  under  the  loans.  The  loaned  amounts bear no
interest,  and  the Company owed the shareholder approximately $177,951 was owed
to  the  shareholder  under  the  loan  agreement  on  June  30,  2005.

     As  of  June  30,  2005,  the  Company  had  negative  working  capital  of
$1,039,337.

     For  the  six  months  ended June 30, 2005, the Company had $707,947 in net
cash  flows  for  operating  activities.  This  was  attributable to net loss of
$543,541,  depreciation  and amortization of $18,768, prepaid expenses and other
of $19,892, accounts payable and accrued expenses of $263,282 and option deposit
of  $100,000.

     The  Company  spent $286,198 in net cash flows for investing activities for
the  six months ended June 30, 2005, which consisted of $248,032 of expenditures
for licenses and related, $36,456 of expenditures for oil and gas properties and
$1,710  of  expenditures  for  property  and  equipment.

     The  Company  had  $983,822 of net cash flows from financing activities for
the  six months ended June 30, 2005, which consisted of $982,191 of net proceeds
from  loans  and  $1,631  of  additional  paid  in  capital.

     The  Company received $100,000 from Baltic Petroleum Limited ("BP") for the
option  that  the  Company gave to BP to participate with the Company in a joint
venture  company for, among other things, the exploration and development of the
Company's  four  licenses  for  exploration in the Kurgan region of Siberia.  In
conjunction  with the Option, BP provided ZNG with a loan facility of $1,267,860
for  specific  purposes  which  include  the payment for outstanding amounts for
geological  works, salaries to employees for the period from April to July 2005,
and research work toward potential new fields, of which the Company had received
and  spent  $967,940  as  of  June  30, 2005.  The Company spent the $967,940 as
follows,  $375,000  towards  amounts  due  to  Basneftegeofizika and $178,524 to
Bazhenov  Expedition for services rendered in connection with surveys which were
performed; $250,000 to Business Standard in connection with services rendered in
connection with the gathering of data and information on various new exploration
licenses;  $126,000  for  salaries  for certain employees of the Company for the
months of April, May and June; $15,148 to pay amounts owed to Geodata Consulting
for  services  performed  for  the  Company  in  its  role  as  supervisor  over
gravimetric  and  seismic surveys which were performed on the Company's licensed
blocks;  $3,313  to  JSC  Central  Geophysical  Expedition  for  preparation and
estimates  of  costs  for the Company's seismic works; with the remaining amount
being  placed  in  a  special  deposit  account  to  satisfy Russian banking and
currency  control  regulations.  Additionally,  in  connection  with the Deed of
Amendments described above, the Company expects to receive an additional
$102,041 from BP, which amount the Company will use to pay Business Standard and

<PAGE>

use to satisfy Russian banking  and currency control regulations in connection
with the application for a  fourth  application  for  a  license  in the Kurgan
region (as  described above).

     The  Company has guaranteed the loan facility and has granted BP a security
interest  and  continuing lien on the Company's right, title and interest to the
Company's  100%  participatory interest in ZNG. The Company is taking additional
steps  in  an attempt to raise equity capital and/or to borrow additional funds.
There  can be no assurance that any new capital will be available to the Company
or  that adequate funds for the Company's operations, whether from the Company's
financial  markets,  or  other  arrangements will be available when needed or on
terms  satisfactory  to the Company. The Company has no further commitments from
officers, directors or affiliates to provide funding. The failure of the Company
to  obtain  adequate  additional  financing  may  require  the Company to delay,
curtail  or  scale  back some or all of its operations. Any additional financing
may involve dilution to the Company's 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:


WE  MAY  BE  REQUIRED  TO  PAY  LIQUIDATED DAMAGES, AND WOULD BE FORCED TO REPAY
SUBSTANTIAL  AMOUNTS RECEIVED, TO BALTIC PETROLEUM LIMITED IN THE EVENT THAT THE
OPTION  TERMINATES

     In  the  event that the Option terminates because any of the conditions for
Completion (as described above) have not been satisfied (other than by reason of
a  breach  by  BP of its obligations under the Option), the Company shall pay BP
liquidated  damages  in the amount of $500,000 on October 31, 2005, and $500,000
on February 28, 2006. Additionally, if the option were to terminate, the Company
would  owe  the  full  amount  of  approximately  $967,940  received  from BP in
connection with the Loan Agreement, which amount will be repaid by the JV CO, if
the  joint  venture  with  BP  is  completed.  The  Company's  operations do not
currently generate any revenues and the Company spent the $967,940 received from
BP  as  of  June  30, 2005 and the $102,041 which the Company expects to receive
from  BP in connection with the Deed of Amendments in August 2005, subsequent to
the  filing  of  this report on Form 10-QSB. The Company does not currently have
sufficient cash on hand and/or current assets to pay the aggregate of $1,000,000
in liquidated damages and the approximately $1,069,981 which the Company expects
to  be  owed  to  BP,  after the receipt of money in connection with the Deed of
Amendments. If the Company is forced to pay the $1,000,000 in liquidated damages
and/or  the  $1,069,981  owed to BP, it may be forced to sell off some or all of
its  exploration licenses, oil and gas properties and/or geological data and may
be forced to curtail or abandon its business plan.

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, without committing to the
scheduled  program  of  oil  fields development in Russia. Additionally, we have
received  approximately $1 million from BP, which we have since spent on various
purposes,  including paying our consultants for services performed in connection
with  surveys  previously performed on our licensed area.  An issue of shares is
expected  to  finance a secondary survey and initial exploration to the point of
establishing  proven  reserves,  if  commercial  amounts  of  hydrocarbon  are
discovered.  This  cost  is  estimated  at approximately $5 million and includes
drilling  of  an  exploratory  and  a prospecting well, followed if necessary by
additional  geological research to quantify the deposits. Future exploration and
development  is  expected to be financed through debt which the Company believes
will  be  forthcoming  if  reserves are proven. However, the Company can give no
assurances that it will be successful in finding hydrocarbon reserves. If we are
unable  to  raise  the  additional  funds  required  for planned exploration and
extraction activities, 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.

<PAGE>

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

     The Company anticipates the need for approximately $15,000,000 prior to the
Company's  expected  generation  of  any revenues. Currently the Company has not
raised  any  of  this financing and the Company can make no assurances that this
financing  will ever be raised. The Company also does not expect to generate any
revenues  until  at least 2006, assuming the $15,000,000 can be raised, of which
there can be no assurance. Therefore, investors should keep in mind that even if
the  Company is able to raise the substantial amounts of additional financing it
requires,  it  could still be years before the Company generates any revenue, if
ever. If the Company does not raise the $15,000,000 which it anticipates needing
to  generate revenues, which, even if generated, will likely not be great enough
to sustain the Company if no revenues are generated and hydrocarbon reserves are
located,  the  Company  may be forced to abandon or curtail its current business
plan.

WE MAY BE UNABLE TO CLOSE OUR PLANNED JOINT VENTURE AGREEMENT, WHICH COULD FORCE
US  TO  ABANDON  OUR  BUSINESS  PLAN

     On  April  28,  2005,  we  entered  into  an  Option  Agreement with Baltic
Petroleum  Limited  ("BP"),  which gave BP the right to participate with us in a
joint  venture  company  ("JV CO"). Subsequently, BP has raised concerns with us
over  our  acquisition  of  ZNG, and we are currently working through perfecting
that  acquisition.  If  we  are  unable to perfect the acquisition of ZNG, it is
likely  that BP will not enter into the JV CO with us and we will be responsible
for  the  $967,940  received  in  connection  with  a loan which we have already
received  from  BP  and  the $102,041 we expect to receive from BP in connection
with  the  Deed  of  Amendments, subsequent to the filing of this report on Form
10-QSB.  Additionally, we are currently working with BP to finalize the terms of
the JV CO, and if the JV CO is not finalized, we will continue to be responsible
for the $967,940 loan and $102,041 which we expect to receive in connection with
the  Deed of Amendments (as described above), which may be assumed by the JV CO,
assuming  it  is formed. As a result, we may be forced to abandon or curtail our
business  operations as a result of BP not entering into the JV CO with us or if
we are unable to finalize the terms of the JV CO.

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

     Our  Company  is  in  its  early  development  stage,  as planned principal
activities  have  not  begun. We have not generated any revenues since inception
and  have  incurred substantial losses. These factors among others indicate that
the  Company  may  be unable to continue as a going concern, particularly in the
event  that  it  cannot  generate sufficient cash flow to conduct its operations
and/or  obtain  additional  sources  of  capital  and  financing.

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

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

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

<PAGE>

     As  a development stage company, we have no revenues or profits to date and
our  net cumulative deficit attributable to our development stage as of December
31, 2004, was $1,256,083, and the total cumulative deficit was $1,705,868, which
included  $449,785  of  pre-development  stage deficit. As of June 30, 2005, our
development  stage  deficit was $1,799,624 and our pre-development stage deficit
was  $449,785  and  we  had  a  total  cumulative  deficit of $2,249,409. We had
$919,278  in  accrued  and  unpaid  salaries as of June 30, 2005. The Company is
currently  being  funded by existing shareholders but it will need an additional
$1,000,000 to complete geological works which are underway. There is a risk that
we will never begin production and our Company will never generate any revenues.
If  throughout  our  oil  exploration we find no viable wells, we will likely be
forced  to curtail or abandon our business plan. If this happens, you could lose
your investment in our Company. If we are unable to generate profits, we will be
forced  to  rely  on  external  financing,  of  which  there is no guarantee, to
continue  with  our  business  plan.

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

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

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

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

OUR  DRILLING  LICENSES  MAY  NOT BE EXTENDED OR WE MAY NOT GAIN THE APPROVAL OF
FEDERAL  AND  STATE GOVERNMENT AGENCIES TO CONVERT OUR EXPLORATION LICENSES INTO
PRODUCTION  LICENSES.

     The  Company holds four (4) exploration licenses acquired on March 7, 2003,
to  explore  four  individual properties in the Kurgan province of Russia. These
licenses require the Company to conduct seismic surveys on the properties and to
report  any  discoveries  to the regional government. The licenses are currently
classified  as  5-year  exploration  licenses  and  are convertible into 25-year
production licenses upon discovery of hydrocarbon reserves, of which there is no
assurance. Additionally, the Company can request and may be granted an extension
if  the  Company  can  show  initiative to continue and finalize all exploratory
activities  on  the  licensed  areas.  Therefore,  under the Russian Ministry of
Natural  Resources  ("Ministry")  current  policies,  the  Company's exploration
licenses may be extended indefinitely as long as all of the terms and conditions
of  the  licenses are met. The Ministry may not withdraw the licenses at the end
of  the  initial  five-year period, or thereafter, if the exploration activities
are ongoing and privately funded. However, there is a risk that the Company will
not  have  the financial resources on March 7, 2008, at the end of the five-year
license  term,  to conduct exploration activities which will satisfy the license
agreement  and  allow the Company to extend the term of the license until viable
resources  are  discovered,  if  ever,  and  the  licenses can be converted into
production  licenses,  of  which  there  can be no assurances. Additionally, the
Company  may  require  the approval of federal and state government agencies for
conversion  of its exploration licenses to production licenses, which may not be
granted. If the Company's exploration licenses expire because the Company cannot
show  the  initiative to continue and finalize exploration activities at the end
of  the initial five-year term of the licenses, or the government does not allow
the  Company's exploration licenses to be converted into production licenses, it
would  cause  the  Company's revenues to decrease, which in turn would lead to a
decrease  in  the  value  of  any  securities  held by investors in the Company.

<PAGE>

IF  WE  DO  PRODUCE  OIL,  WE  WILL  BE  REQUIRED  TO  SELL 70% OF OUR CRUDE OIL
PRODUCTION  IN  THE  DOMESTIC  RUSSIAN MARKET, LEAVING ONLY 30% OF OUR CRUDE OIL
PRODUCTION  TO  BE  SOLD  IN  THE  MORE  LUCRATIVE  FOREIGN  MARKETS.

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

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

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

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

     We  rely  on  the  Company's  Chief  Executive  Officer and Chief Financial
Officer,  David  Zaikin and Elena Pochapski respectively, as well as ZNG's Chief
Executive Officer and Technical Director, Oleg V. Zhuravlev and Vladimir V. Eret
respectively,  for  the  success  of our Company, all of whom are employed under
contracts. Their experience and input create the foundation for our business and
they  are  responsible  for  the  directorship  and  control  over the Company's
development  activities. The Company does not hold "key man" insurance on any of
these  individuals.  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 Messrs.
Zhuravlev and Eret with other suitably trained geologists and geophysicists from
within  Russia or other oil bearing nations such as USA, Canada, Norway, UK, and
Kazakhstan,  the  Company  may  be  forced to scale back or curtail its business
plan.  As  a result of this, any securities you hold in our Company could become
devalued.

OUR  PROJECTIONS,  ESTIMATES  AND  STATISTICAL  ANALYSIS  MAY  BE  INACCURATE OR
SUBSTANTIALLY  WRONG,  WHICH  MAY  PREVENT  US  FROM EXECUTING OUR BUSINESS PLAN

     Risks  from these factors are intertwined with the risky nature inherent in
the  oil  and  gas industry. Projections on future revenues as well as costs and
required  capital  expenditures  are  based  on  estimates. Business statistical
analysis  is  used  in projection of drilling success ratios, average production
costs, world oil price fluctuations and their correspondence to Russian domestic
market,  etc.  If  our  projections  or  estimates  are wrong or our statistical
analysis faulty, our revenues may be adversely affected which could keep us from
executing our business strategy. As an investor, if this happens your securities
in our Company could be adversely affected and you could lose your investment in
our  Company.

<PAGE>

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

     Since  our  Common  Stock  is  listed  on  the OTC Bulletin Board under the
trading  symbol  "SIBN,",  it  is  subject  to  the requirements of Rule 15(g)9,
promulgated  under the Securities Exchange Act, and will be as long as the price
of  our  Common  Stock is below $5.00 per share. Under such rule, broker-dealers
who  recommend low-priced securities to persons other than established customers
and  accredited  investors  must  satisfy  special  sales practice requirements,
including  a  requirement  that  they make an individualized written suitability
determination for the purchaser and receive the purchaser's consent prior to the
transaction.  The  Securities Enforcement Remedies and Penny Stock Reform Act of
1990,  also  requires  additional  disclosure  in  connection  with  any  trades
involving  a stock defined as a penny stock. Generally, the Commission defines a
penny stock as any equity security not traded on an exchange or quoted on NASDAQ
that  has  a market price of less than $5.00 per share. The required penny stock
disclosures  include  the  delivery,  prior  to any transaction, of a disclosure
schedule  explaining  the  penny  stock market and the risks associated with it.
Such  requirements  could  severely limit the market liquidity of the securities
and  the ability of purchasers to sell their securities in the secondary market.

ITEM  3.     CONTROLS  AND  PROCEDURES.

     Evaluation  of  disclosure  controls  and  procedures.  Our Chief Executive
Officer  and  Chief 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  (the  "Evaluation Date"), have concluded that as of the
Evaluation  Date,  our  disclosure  controls  and  procedures  were  effective.

     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 are reasonably likely to
materially  affect,  our  internal  control  over  financial  reporting.

                          PART II - OTHER INFORMATION

ITEM  1.     LEGAL  PROCEEDINGS.

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

ITEM  2.     UNREGISTERED  SALES  OF  EQUITY  SECURITIES  AND  USE  OF  PROCEEDS

     On  April  1,  2005, the Registrant agreed to issue 30,000 shares of common
stock  to  Timothy G. Peara, which shares have not been issued as of the date of
this  report,  in  consideration for consulting services. Also on April 1, 2005,
the  Registrant  agreed  to issue options to Mr. Peara as a bonus to purchase an
aggregate  of  100,000  shares  of  the Registrant's common stock at an exercise
price  of  $0.30  per share. The option agreement covering the options described
below  is  currently  in  the  process of being finalized by the Company and Mr.
Peara,  and  as  such,  the  information  listed below is not final as no option
agreement has been signed by the parties.


     The  options  expire  on May 1, 2006 with respect to 500,000 shares, and on
May  1,  2007  with  respect  to the remaining 50,000 shares. Mr. Peara became a
director  of  the  Registrant  on April 12, 2005, and the Registrant proposed an
option  plan  for Mr. Peara in consideration for his services as a director. The
options will be granted as follows:

          2005 - 100,000 shares at $0.60 per share;
          2006 - 100,000 shares at $0.60 per share; and
          2007 - 100,000  shares  at  an  exercise price of 110% of the average
                 closingprices for the three monthsprior to each grant date.

     These  options  are  exercisable  within  a  period  of  4  years  from the
applicable  grant  date or within 3 months from termination of directorship. The
Registrant claims an exemption from registration afforded by Section 4(2) of the
Securities  Act  of 1933 since the foregoing issuances will not involve a public
offering,  Mr.  Peara will take the securities for investment and not resale and
the  Registrant  will  take  appropriate  measures  to  restrict  transfer.

     On  April  4, 2005, ZNG entered into an agreement effective March 29, 2005,
whereby  ZNG  agreed  to transfer 2,000,000 shares of the Company's common stock
held  by  ZNG  to  an  individual for 50,000 Russian rubles (or approximately US
$1,798  based  on  the  exchange rate on March 29, 2005). The Company originally
issued  the  shares  to  ZNG in connection with the Company's acquisition of ZNG
which  occurred  on  May 29, 2003, with respect to 51% of ZNG, and May 24, 2004,
with  respect  to  the  remaining 49% of ZNG, with the intention that the shares
would  be  distributed and not maintained by ZNG.   While this agreement remains
in  effect,  the Company is currently taking steps to perfect the acquisition of
the  51%  interest  in  ZNG, which it hopes to accomplish by canceling the prior
agreements  regarding  the  sale  of  the  51%  in  ZNG  and entering into a new
agreement  for  the  purchase  of  a  51%  interest  in  ZNG  for 50,000 rubles.

<PAGE>

ITEM  3.     DEFAULTS  UPON  SENIOR  SECURITIES.

     None.

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

     On  April 22, 2005, an amendment to the Company's Articles of Incorporation
was approved by written consent to action without a meeting of a majority of the
Company's shareholders ("Amendment").  The Amendment, which became effective May
2, 2005, affected a 1:2 reverse stock split, re-authorized 100,000,000 shares of
common  stock,  par  value $0.001 per share, and authorized 10,000,000 shares of
preferred  stock,  par  value  $0.001  par  value  per  share. A majority of the
Company's  shareholder  approved  the  Amendment  by  written  consent to action
without  a  meeting  on  April  22,  2005.  The  number of shares of the Company
outstanding  on  the  date the written consent was signed was 18,805,771 pre 1:2
reverse  split  shares  and  the  number  of  shares  which voted to approve the
Amendment  was  approximately  13,542,692  pre  1:2  reverse split shares, which
represented a majority of the issued and outstanding shares of the Company. As a
result  of the Amendment, the Company's common stock began trading under the new
stock  symbol  "SIBN"  on  May  2,  2005.

ITEM  5.     OTHER  INFORMATION.

     CONSULTING  AGREEMENT  AND  APPLICATION  FOR  ADDITIONAL  LICENSES
     IN  KURGAN  OBLAST

     On  April  16,  2005, the Company entered into an agreement with Business -
Standard,  a  consulting firm (the "Consultant"), which was subsequently amended
by  a Supplementary Agreement on April 25, 2005 and by a Supplementary Agreement
N2  on August 16, 2005 (collectively the "Consulting Agreement") to identify the
potential  of detecting hydrocarbons on four additional fields in Kurgan oblast,
Russia  (as  described  below).  Under  the Consulting Agreement, the Consultant
provided  services to the Company for the period of three months, which services
included:

<PAGE>

     o    Collecting  and  studying  geological  information  pertaining  to
          previous exploratory activities on the territory of Kurgan oblast;
     o    Conducting  an  interpretation  of  the  geological  materials  and
          profile  correlation  within  the  boundaries  of the Vagay-Ishimskaya
          Basin,  as  well  as  identify  prospective  horizons  for  exploring
          hydrocarbon reviews;
     o    Performing  the  construction  of  structural-lithographic  maps
          within the range of licensed fields offered at auction/tender;
     o    Providing  legal  guidance  in  connection  with  the  process  of
          obtaining additional licenses; and
     o    Providing  the  Company  with  geological  information collected while
          performing services under the Consulting Agreement, including reports,
          supplementary notes, maps, explanation, descriptions and memoranda.

     The  Consulting  Agreement  provides  for the Company to pay Consultant the
aggregate sum of $500,000 for the three additional licenses and $170,000 for the
fourth  license.  The  Company has paid $250,000 to Consultant from the proceeds
received  from  BP  (as  described  below)  and  has agreed to pay Consultant an
additional  $100,000  upon submission of the application for the fourth license,
which  amount  the  Company  will receive from BP in connection with the Deed of
Amendment  to  the Loan Agreement and Deed of Amendment to the Option Agreement,
described  in  greater  detail  under  Item  5.  Other  Information,  below.
Additionally,  the  Company  has  agreed  to  pay  the  Consultant $250,000 upon
receiving  a  notary  certified  copy  of  a letter from the Ministry of Natural
Resources of the Russian Federation, confirming the Company's title to the three
licenses  the  Company is attempting to acquire (as described below) and $70,000
upon receiving a confirmation regarding the fourth license. The Company hopes to
obtain  these  funds through its JV CO which it is currently forming with BP, of
which  there  can  be  no  assurance.


     In  April  2005,  the  Company  submitted  applications  to  the  Regional
Subsoil-use  Agency  of  Russian  Federation,  Ural department ("Uralnedra") for
three  new exploration licenses. The application for the new licenses covers the
following  areas  of  Kurgan  oblast,  Russia:

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

     In  August  2005, the Company plans to submit an application for a fourth
     license in  the  same  region:

     4.     Orlovo-Pashkovsky-2  -  total  area  92  square  kilometers

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

     In  September  2005,  Uralnedra  will  review  applications  submitted  by
approximately  five  candidates for the new licenses and will conduct an auction
in  October  2005.  The  price  per license of the four licenses may  vary
significantly, however similar parcels have been sold in the  past  from between
$50,000 and $500,000 per parcel and the licenses will be granted  to the highest
bidder  at  the  auction.  The Company is planning to finance the acquisition of
any new licenses it obtains through its joint venture arrangement with BP, if
successfully formed, of which there can be no assurance.

<PAGE>

In  the  event  that  the Company wins any or all of the licenses at auction, of
which  there  can  be  no  assurance,  it will be in the legal position to start
geological  works on such licensed parcels within a few months of the end of the
auction.  The  Company does not currently have the cash on hand to purchase such
licenses if won at auction, nor does the Company have sufficient cash on hand to
begin  geological  activities on such licensed parcels, if won by the Company at
auction.


     RELATED  PARTY  TRANSACTIONS

     Oleg  V.  Zhuravlev,  Chief  Executive  Officer  of  ZNG,  entered  into an
employment  agreement on January 1, 2004, which will be in effect until December
31,  2008.  Additionally,  Mr.  Zhuravlev  entered  into  a stock option plan on
January  1,  2003. Under that plan, 200,000 options vested to him in 2004, at an
exercise  price  of  $0.10  per  share.  As of June 30, 2005, 110,000 additional
options  had  vested  to  him  at  an  exercise  price  of  $.30  per  share.

     Vladimir  V.  Eret,  Chief  Operating  Officer of ZNG, signed an employment
agreement  with  the  Company  on January 1, 2003, which will be in effect until
December  31,  2008.  Mr.  Eret  also  entered into a stock option plan with the
Company  on  January  1, 2004. Under the stock option plan, Mr. Eret was granted
168,000 options in 2004, exercisable at $0.10 per share. As of June 30, 2005, he
had  been  granted  98,000  additional  options  exercisable  at $.30 per share.

     Sergey Potapov, Vice President of ZNG, entered into an employment agreement
with the Company on January 1, 2003 which will be valid until December 31, 2008.
He  also  entered  into  a  stock option plan at the same time as his employment
agreement.  Under his stock option plan, Mr. Potapov was granted 168,000 options
in  2004,  exercisable  at  $0.10  per  share.  As of June 30, 2005, he had been
granted  98,000  additional  options  exercisable  at  $.30  per  share.

     David  Zaikin,  the  Company's  Chief  Executive  Officer,  entered into an
employment agreement and a stock option agreement with the Company on January 1,
2003,  which will be in effect until December 31, 2008. In 2003, 200,000 options
vested  to Mr. Zaikin under his stock option agreement, exercisable at $0.07 per
share.  In  2004,  200,000  options vested to Mr. Zaikin under this stock option
agreement,  exercisable  at  $0.10  per  share.  As  of  June  30, 2005, 110,000
additional  options  had  vested  to him at an exercise price of $.30 per share.

     Elena  Pochapski,  the  Company's  Chief Financial Officer, entered into an
employment  agreement and a stock option agreement with the Company on August 1,
2003,  which will be valid until December 31, 2008. Under her stock option plan,
Mrs.  Pochapski  vested 200,000 options in 2003, exercisable at $0.07 per share,
and an additional 200,000 options in 2004, exercisable at $0.10 per share. As of
June 30, 2005, 110,000 additional options had vested to her at an exercise price
of  $.30  per  share.

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

     CHANGES  IN  OFFICERS  AND  DIRECTORS




     On April 12, 2005, the Registrant appointed Timothy G. Peara as a director.
Mr.  Peara  will receive $35,000 per year and join the Registrant's option plan.

     The option agreement covering the options described below is currently in
the process of being  finalized  by  the  Company  and  Mr. Peara, and as such,
the  information  listed  below  is  not  final as no option agreement has been
signed by the parties.

According  to  this  plan  Mr.  Peara  will  be  granted  the following options:

            2005  -  100,000  shares  at  $0.60  per  share;
            2006  -  100,000  shares  at  $0.60  per  share;  and
            2007  -  100,000  shares at an exercise price of 110% of the average
                     closing prices for the three months prior to each grant
                     date.

<PAGE>

     These  options  are  exercisable  within  a  period  of  4  years  from the
applicable  grant  date or within 3 months from termination of directorship. Mr.
Peara  provided  consulting  services to the Registrant on strategic matters and
introduced  the  Registrant  to  BP.  On April 1, 2005, the Registrant agreed to
issue  Mr. Peara 30,000 shares, which shares have not been issued as of the date
of  this  report,  as  consideration  for  his  consulting  services  and  the
introduction.  Also  on April 1, 2005, the Registrant agreed to issue options to
Mr.  Peara  as  a  bonus  to  purchase  an  aggregate  of  100,000 shares of the
Registrant's  common  stock at an exercise price of $0.30 per share. The options
expire  on  May  1,  2006 with respect to 50,000 shares, and on May 1, 2007 with
respect to the remaining 50,000 shares.

     Mr. Peara has not been named to any committees of the Registrant's Board of
Directors,  and  any  committees of the Registrant's Board of Directors to which
Mr.  Peara  may  be  named  have  not  been determined, as of the filing of this
report.

     RECENT  EVENTS

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

     On  August  16,  2005,  the ZNG entered into a Deed of Amendment with BP,
whereby  BP  and  ZNG  changed the terms of the Loan Agreement to provide for an
additional  loan  of  $173,468  to  be  made  to  ZNG  for the purpose of making
additional payments to Business Standard, in connection with the application for
a  fourth  license  (as  described  above).


ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

10.15*      Deed of Amendment between ZNG and BP

10.16*      Deed of Amendment between the Company and BP

<PAGE>

REPIN AND POTAPOV LOANS AND PEARA OPTION

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

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

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

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

*     Filed  herein.

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

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

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

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

REPORTS ON FORM 8-K

         The Company filed the following reports on Form 8-K with the Commission
during the quarter for which  this report is filed:

     The Company filed a Report  on  Form  8-K  on May 2, 2005, to report an
amendment to the Company's  Articles  of  Incorporation to affect a 1:2 reverse
stock split, re-authorize 100,000,000 shares of common stock, par value $0.001
per share, and authorize 10,000,000 shares of preferred stock, par value $0.001
par value per share.

     The Company filed a Report on Form 8-K with the Commission on May 20, 2005
to report the Company's entry into an Option Agreement, Loan  Agreement,
License  Agreement, and Security Agreement  with  Baltic  Petroleum  Limited
and  our  Guarantee.

                                   SIGNATURES

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

                                        SIBERIAN  ENERGY  GROUP,  INC.
                                        ------------------------------

                                        By:    /s/  David  Zaikin
                                               ---------------------------
                                        Name:  David  Zaikin
                                               ---------------------------
                                        Title: Chief  Executive  Officer
                                               ---------------------------
                                        Date:  August  22,  2005
                                               ---------------------------

<PAGE>