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

                                   FORM 10-QSB

(Mark One)

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

               For the quarterly period ended March 31, 2006

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

               For the transition period from           to
                                             -----------  ------------
               Commission file number 333-118902


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


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

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

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



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

     As  of  May  12, 2006, 11,907,921 shares of Common Stock of the issuer were
outstanding  ("Common  Stock"),  which  amount  does  not  include 42,500 shares
issuable  to  our  Director,  Timothy  Peara, in connection with his May 1, 2006
exercise  of  certain  of  his  cashless warrants, which is described in greater
detail  below.

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

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM  1.  FINANCIAL  STATEMENTS













                           SIBERIAN ENERGY GROUP INC.
                          (A DEVELOPMENT STAGE COMPANY)

                             CONDENSED CONSOLIDATED
                               FINANCIAL STATEMENTS

                                 MARCH 31, 2006

















<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Stockholders
Siberian Energy Group Inc.


We  have  reviewed  the  accompanying  condensed  consolidated  balance sheet of
Siberian  Energy  Group Inc. (a development stage company) as of March 31, 2006,
and  the  related condensed consolidated statements of operations, stockholders'
equity,  and  cash flows for the three months ended March 31, 2006 and 2005, and
the  cumulative  period  of  development stage activity (January 1, 2003 through
March  31,  2006).   These  financial  statements  are the responsibility of the
Company's  management.

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

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

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


Lumsden & McCormick, LLP
Buffalo, New York
May 9, 2006

<PAGE>

<TABLE>
<CAPTION>

SIBERIAN ENERGY GROUP INC. (A Development Stage Company)

Condensed Consolidated Balance Sheets

                                                                   (Unaudited)
                                                                     March 31,       December 31,
                                                                       2006              2005
                                                                   ------------      ------------
<S>                                                                     <C>                <C>
Assets
Current assets:
  Cash                                                             $      1,285      $     11,551
  Management fee receivable                                             100,000            50,000
  Prepaid expenses and other                                                270               270
                                                                   ------------      ------------
                                                                        101,555            61,821
                                                                   ------------      ------------
Investment in joint venture                                                   -                 -

Property and equipment, net                                               1,459             1,539
                                                                   ------------      ------------
                                                                   $    103,014      $     63,360
                                                                   ============      ============
Liabilities and Stockholders' Equity
Current liabilities:
  Demand loan from individual, interest at 6.5%                    $     63,535      $     62,500
  Accounts payable:
      Related party - stockholders                                      365,041           328,376
      Related party - Baltic Petroleum                                   46,035            43,664
      Others                                                            220,400           117,230
  Accrued payroll                                                       313,764           304,341
                                                                   ------------      ------------
                                                                      1,008,775           856,111
                                                                   ------------      ------------
Stockholders' equity:
  Common stock - authorized 100,000,000 shares, $.001 par value,
    11,687,886 and 11,487,886 issued and outstanding                     11,688            11,488
  Additional paid-in capital                                          1,993,086         1,786,286
  Accumulated deficit
      Pre-development stage                                            (449,785)         (449,785)
      Development stage                                              (2,457,423)       (2,138,234)
  Accumulated other comprehensive income (loss)                          (3,327)           (2,506)
                                                                   ============      ============
                                                                       (905,761)         (792,751)
                                                                   ============      ============
                                                                   $    103,014      $     63,360
                                                                   ============      ============

</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-
                                                                           January 1, 2003
                                                                               through
                                                                              March 31,
For the three months ended March 31,                 2006         2005          2006
------------------------------------                 ----         ----          ----
<S>                                                  <C>           <C>           <C>


Revenues and other income:
   Management fees from joint venture            $   75,000     $        -    $    150,000
   Gain from entrance into joint venture                  -              -         364,479
   Other                                                  -              -           6,382
                                                 -----------------------------------------
                                                     75,000              -         520,861
                                                 -----------------------------------------

Expenses:
    Salaries                                         33,311         121,91       1,107,858
    Professional and consulting fees                155,716         38,348         732,644
    Rent and occupancy                                9,737         24,131         146,282
    Depreciation and amortization                        86          9,384         102,466
    Finance charges and interest                      3,848              -          51,455
    Marketing and other                              191,49         29,753         709,579
                                                 -----------------------------------------
      Total expenses                                394,189        223,534       2,850,284
                                                 -----------------------------------------

      Loss before income taxes                      319,189        223,534       2,329,423

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

       Net loss (development stage)              $  319,189     $  223,534    $  2,329,423
                                                 -----------------------------------------




Basic and diluted loss per common share          $    (0.03)    $    (0.02)   $      (0.29)
                                                 ------------------------------------------

Weighted average number of basic and diluted
  common shares outstanding                      11,621,219      9,402,886       8,010,192
                                                 -----------------------------------------

</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 March 31, 2006

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

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

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

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

Other                                      -             -       34,426            -                 -      34,426
                                   -------------------------------------------------------------------------------
   Balance, December 31, 2004      9,402,886         9,403    1,220,121   (1,705,868)          (53,120)   (529,464)
                                   -------------------------------------------------------------------------------
Loss for the year - 2005                   -             -            -     (882,151)         (882,151)

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

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

Warrants granted for
 Professional  services                    -             -      217,000            -                 -     217,000
                                  --------------------------------------------------------------------------------
    Balance, December 31, 2005    11,487,886        11,488    1,786,286   (2,588,019)           (2,506)   (792,751)
                                  --------------------------------------------------------------------------------
Loss for three months - 2006               -             -            -     (319,189)                -    (319,189)

Foreign currency
Translation adjustment                     -             -            -            -              (821)       (821)    $(320,010)
                                                                         -------------------------------------------------------
Shares issued for employee
Stock  option plan                   100,000           100       13,900            -                 -      14,000

Shares issued for
 Professional  services              100,000           100       64,900            -                 -      65,000

Warrants granted for
Professional services                      -             -      128,000            -                 -     128,000
                                  --------------------------------------------------------------------------------
                                  11,687,886     $  11,688   $1,993,086  $(2,907,208)       $   (3,327)  $(905,761)
                                  --------------------------------------------------------------------------------
</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-
                                                                                      January 1, 2003
                                                                                          through
                                                                                          March 31,
For the three months ended March 31,                           2006          2005           2006
------------------------------------                           ----          ----           ----
<S>                                                            <C>            <C>            <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss (development stage)                             $ (319,189)    $ (223,534)   $ (2,457,423)
   Depreciation and amortization                                    86          9,384         102,466
   Common stock and warrants issued
      for professional services and salaries                   193,000              -         771,250
   Gain from entrance into joint venture                             -              -        (364,479)
   Changes in other current assets and
      current liabilities:
        Prepaid expenses and other assets                      (50,000)       100,360        (253,662)
        Accounts payable and accrued expenses                  152,658        172,850       3,223,107
                                                               --------------------------------------
            NET CASH FLOWS FROM (FOR) OPERATING ACTIVITIES     (23,445)        59,060       1,021,259
                                                               --------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Expenditures for licenses and related                             -              -        (528,961)
   Expenditures for oil and gas properties                           -         (4,448)       (770,750)
   Expenditures for property and equipment                           -              -          (2,868)
   Cash received in acquisition                                      -              -               6
   Cash received from entrance into joint venture                    -              -         175,000
                                                            -----------------------------------------
            NET CASH FLOWS FOR INVESTING ACTIVITIES                  -         (4,448)     (1,127,573)
                                                            -----------------------------------------

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

Effect of exchange rates on cash                                  (821)         3,467          (3,327)
                                                            -----------------------------------------

            Net increase (decrease) in cash                    (10,266)        59,710           1,285

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

            Cash - ending                                   $    1,285     $   59,710    $      1,285
                                                            -----------------------------------------
</TABLE>



See accompanying notes.

<PAGE>

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

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

1.  BASIS  OF  PRESENTATION:

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

2.  THE  COMPANY  AND  DESCRIPTION  OF  BUSINESS:

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

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

<PAGE>

Accordingly,  BP  seeks  to  obtain  additional  capital  to  help  finance  the
operations  of  the  Joint  Venture  and  similar  projects.

Upon  signing  of  the Joint Venture agreement, BP, ZNG, and a financing company
wholly  owned  by  BP, entered into a deed of novation regarding a previous loan
made  to ZNG by BP and immediately thereafter the financing company entered into
a  loan  agreement  with  ZNG.  Under  the  loan agreement, the lender agreed to
provide  a  loan  of  $6,874,325  for  the purpose of research activities in the
Kurgan  region  in  2005  through  the  first  half  of  2006.

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

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

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

<PAGE>

Effective  October  14,  2005,  the  Company's  investment  in  Joint Venture is
recorded  on  the equity method of accounting.  Since cumulative losses of Joint
Venture exceed the Company's investment, the investment asset is carried at zero
value  as  of  March  31,  2006  and December 31, 2005.  Loan financing balances
outstanding  of Joint Venture to BP and BP's financing subsidiaries at March 31,
2006  totals  approximately  $3,000,000.  Activities of ZNG prior to October 14,
2005  are  otherwise included in the consolidated accounts of the Company in the
accompanying  financial  statements.

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

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


3.  INCOME  TAXES:

At  March  31,  2006,  the  Company  has  estimated  U.S. tax net operating loss
carryforwards  totaling  approximately  $2,100,000.  These  carryforwards may be
used  to  offset  future  taxable  income, and expire in varying amounts through
2006.  No  tax  benefit  has been reported in the financial statements, however,
because  the  Company  believes  there  is  at  least  a  50%  chance  that  the
carryforwards  will  expire  unused.  Accordingly,  the  $420,000  estimated
cumulative  tax  benefit of the loss carryforward has been offset by a valuation
allowance  of  the  same  amount.

<PAGE>

4.  LOSS  PER  COMMON  SHARE:

Basic  and  diluted loss per common share is computed using the weighted average
number  of  common  shares  outstanding  during the period.  Shares issuable for
common  stock  options  may have had a dilutive effect on earnings per share had
the  Company  generated  income  during  the  periods  through  March  31, 2006.


5.  GOING  CONCERN:

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

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

For  the  cumulative  period ended March 31, 2006, the Company has obtained cash
financing  from  organizing  stockholders  and  employees  in the form of loans,
advances,  and  deferred  salaries.  However,  there  can  be no certainty as to
availability of continued financing in the future.  Failure to obtain sufficient
financing may require the Company to reduce its operating activities.  A failure
to  continue  as a going concern would then require stated amounts of assets and
liabilities  be  reflected  on  a  liquidation basis which could differ form the
going  concern  basis.

<PAGE>

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

     CERTAIN  STATEMENTS  IN  THIS  QUARTERLY  REPORT ON FORM 10-QSB (THIS "FORM
10-QSB"),  CONSTITUTE "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION
27A  OF  THE  SECURITIES  ACT  OF  1934,  AS AMENDED, AND THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 (COLLECTIVELY, THE "REFORM ACT"). CERTAIN, BUT NOT
NECESSARILY ALL, OF SUCH FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE
OF  FORWARD-LOOKING  TERMINOLOGY SUCH AS "BELIEVES", "EXPECTS", "MAY", "SHOULD",
OR  "ANTICIPATES",  OR  THE  NEGATIVE  THEREOF  OR  OTHER  VARIATIONS THEREON OR
COMPARABLE  TERMINOLOGY,  OR  BY  DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND
UNCERTAINTIES.  SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES  AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE
OR  ACHIEVEMENTS OF SIBERIAN ENERGY GROUP INC. ("SIBERIAN", THE "COMPANY", "WE",
"US"  OR  "OUR") TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE
OR  ACHIEVEMENTS  EXPRESSED  OR  IMPLIED  BY  SUCH  FORWARD-LOOKING  STATEMENTS.
REFERENCES  IN THIS FORM 10-QSB, UNLESS ANOTHER DATE IS STATED, ARE TO MARCH 31,
2006.

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

BUSINESS  DEVELOPMENT

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

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

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

     On  May  9,  2003,  the  Company entered into an Acquisition Agreement (the
"Acquisition  Agreement")  by  and among the Company, Zaural Neftegaz, a Russian
corporation  ("ZNG"),  the  shareholders of ZNG and Oleg Zhuravlev, President of
ZNG.  Pursuant to the Acquisition Agreement, the Company acquired a 51% interest
in ZNG by issuing to ZNG 2,000,000 shares of the Company's Common Stock. In June

<PAGE>

2004,  the  Company purchased the remaining 49% of ZNG in exchange for 6,900,000
shares  of  the  Company's Common Stock, making ZNG a wholly owned subsidiary of
the  Company.  ZNG holds four (4) oil and gas licenses (see "Patents, Trademarks
and  Licenses"  below) for the rights to prospect, explore, drill and remove oil
and  gas  (the  "Exploration Rights") in the eastern parts of Kurgan Province in
Russia.  The Company had no affiliation with ZNG prior to the acquisition in May
2003.

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

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

BUSINESS  OPERATIONS

     We  are  a development stage investment and management company that intends
to  target  high potential long term investments in Russia. We intend 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. We
are  actively  evaluating  investment  opportunities  throughout  Russia.

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

DESCRIPTION OF ZNG

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

     After  analyzing  the  eight  available blocks suggested by the Ministry of
Natural  Resources  of  the  Russian  Federation  (the "Ministry"), 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. Upon expiration of the licenses,
the  company  will  have,  subject  to  the  signing of the Subsoil Legislation,
preferential  right  to apply for the full production license for the term of 25
years.  The  Mokrousovsky  license  is  the  largest  license  which  ZNG holds,

<PAGE>

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

     Following  detailed  data  collection,  survey and seismic testing ZNG will
proceed  with   development   of  the  most  prospective  licenses  first.  The
West-Suersky  block  was  chosen by ZNG as the most promising block, and ZNG has
already  started studies on this area. ZNG has performed gravimetric surveys and
the  2-dimensional seismic studies through experienced and reputable oil and gas
service  organizations  in  Russia,  "Bazhenov  Geophysical  Expedition" and JSC
"Bashneftegeofizika." "Bashneftegeofizika" has processed the data they collected
during  the  summer  of  2004,  analysis  and  interpretation  of which is being
completed  now. Scientific and technical analysis is being performed by the team
of  geologists,  which  includes  experts  from  Exploration Consultants Limited
(ECL),  one  of  the  leading  international  oil  and gas consulting firms, and
interpretation  specialists  from Geodata Consulting, the official supervisor of
the  seismic  survey  on  West-Suersky  block.  Analysis  is  anticipated  to be
completed  by the end of May 2006. Additionally, Bashneftegeofizika will provide
recommendations  for  further studies once the interpretation is complete, which
may  include  the  surface geo-chemical study of potential geological structures
and/or  planning  for  stable  parametric  and  prospecting  wells. ZNG has also
obtained  core  samples  from  parametric  wells  drilled  in prior years on the
licensed  areas  and  adjacent  territories in the Eastern part of Kurgan region
during  the initial search for oil and gas in the region, and performed analysis
of  the  data  provided  by  the  samples.

     A   seismic   tomography   study   on   the   Mokrousovsky,  Privolny  and
Orlovo-Pashkovsky  parcels,  has been approved by ZNG. ZNG has appointed Exotrad
Ltd.  as  a  subcontractor  to  perform  gas  seismotomography field work, which
commenced  on  May 10, 2006, and is scheduled to be completed in August 2006. We
believe that completion of the project allows ZNG to concentrate gravimetric and
seismic  studies  only on the most promising areas of the Mokrousovsky, Privolny
and  Orlovo-Pashkovsky  parcels  and  to  better determine the required scale of
these  works,  which  will  allow  fulfilling  the  pre-set  geological  tasks.

     After  originally  submitting  applications for seven licenses in 2005, ZNG
decided  to  participate  in  the auction for what it believes to be five of the
most  promising  of  the  originally  submitted applications for new exploration
licenses  in  the  Kurgan  Oblast,  Russia,  including:

     1.   Yuzhno-Voskresenski - total area 520 square kilometers
     2.   Zapadno-Petukhovski - total area 154 square kilometers
     3.   Lebyazhevski - total area 170 square kilometers
     4.   Orlovo-Pashkovsky-2  -  total  area  95 square  kilometers
     5.   Petukhovski - total area 840 square kilometers

     ZNG  believes  that  these  five  licenses are attractive for the following
reasons,  because ZNG believes such parcels have rock formations which present a
large  oil  generating  potential,  all  the  blocks  are  situated in the close
vicinity  to  the previously licensed blocks of ZNG, and because the blocks have
well-developed  infrastructure,  and there are existing prior geological data on
much  of  the  five  licensed  areas.  In  the  1980s,  Russia conducted initial
geological  works  on  the area including the five areas which ZNG is attempting

<PAGE>

to  license.  If  the  licenses  are  awarded  to  ZNG,  the  results  of  prior
conducted  seismic  surveys  will  be  available  to  ZNG through the Geological
Fund  of  the  Ministry.

     The  Ministry  of  Natural  Resources together with Rosnedra Federal Agency
(the  Governmental  agency  in  charge  of such auctions) have set the following
dates  for  the  auctions  in  Kurgan  region:

     o    On May  31,  2006  for  Yuzhno-Voskresensky  and  Petuhovsky  parcels.
          ZNG has already paid initial fees in full to confirm its participation
          in  the  auction  for  both  parcels.

     o    On June  14,  2006  for  Lebyazhevsky  parcel.  ZNG  has  already paid
          initial  fees  in  full  to  confirm  its  participation.

     Dates  for  auctions for Zapadno-Petukhovski and Orlovo-Pashkovsky-2 blocks
are  expected  to  occur  in  the  fourth  quarter  of  2006.

     The  price per license of the five licenses may vary significantly, however
similar parcels have been sold in the past from between $50,000 and $500,000 per
parcel and the licenses will be granted to the highest bidder at the auction. If
ZNG  is  successful in the acquisition of the licenses, of which there can be no
assurance,  it  will  pay for such licenses through the Joint Venture (described
below).  In  the  event  that ZNG wins any or all of the licenses at auction, of
which  there  can  be  no  assurance,  it will be in the legal position to start
geological  works  on  such licensed parcels within a few months from the end of
the  auction.

     Brief  characteristics  of  the  three blocks which ZNG hopes to acquire at
auction  in May and June 2006, of which there can be no assurance, are described
below:

YUZHNO-VOSKRESENSKI  BLOCK  (total  area  520  square  kilometers)
--------------------------

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

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

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

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

<PAGE>

PETUKHOVSKY  BLOCK  (total  area  840  square  kilometers)
------------------

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

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

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

LEBYAZHEVSKY  BLOCK  (total  area  170  square  kilometers)
-------------------

     The  Lebyazhevsky  block  is  located  in the Kurgan Region, 13 to 22 km to
     the  South-East  of  the  center of the administrative region of Lebyazhye,
     Russia.

     The  block  area  is  covered  by  a  general  geological survey (1:200,000
     scale),  a  gravimetric  survey  (1:100,000  scale), an aeromagnetic survey
     (1:50,000  scale)  and  partially by seismic surveys and seismic reflection
     method.  Additionally,  to  the north of the block is are two other seismic
     profiles. Two deep wells give an idea of geological structure of the block.

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

OPTION  AGREEMENT  WITH  BALTIC  PETROLEUM

     On  April  28,  2005,  the  Company  entered  into an Option Agreement (the
"Option")  with  Baltic  Petroleum  Limited  ("BP")  which  replaced  an  Option
Agreement and Memorandum of Understanding that the Company had entered into with
BP  on  January  24, 2005. Under the Option, the Company granted BP the right to
participate  with the Company in a joint venture company, Zauralneftegaz Limited
("ZNG,  Ltd.")  for,  among other things, the exploration and development of the
Company's  four  licenses  for  exploration in the Kurgan region of Siberia (the

<PAGE>

"Existing  Licenses").  BP  paid  the  Company  $100,000  in  March  2005,  in
consideration  for the granting of the Option, and BP later exercised the Option
and  subsequently  loaned the Company approximately $1,110,654 under the Initial
Loan  in  May  and  August,  2005.

     On  April  28,  2005,  also  in  connection  with the Option Agreement, ZNG
entered into the Loan Agreement with BP. Pursuant to the Loan Agreement, BP made
available  to  ZNG  a  loan facility of $1,267,860 (the "Commitment" or "Initial
Loan").  As of November 9, 2005, the date the Company entered into the New Loan,
as  defined and described below, ZNG had received $1,110,654 of the Initial Loan
from  BP,  and  certain  Deed  of Amendments, which amount has been spent by the
Company  in connection with monies previously owed. Upon completion of the Joint
Venture  (described  below),  BP,  ZNG, and a financing company, Caspian Finance
Limited ("Caspian") which is wholly owned by BP, entered into a Deed of Novation
regarding  the  Initial  Loan, whereby Caspian agreed to assume BP's obligations
under  the  Initial  Loan  made  to ZNG by BP and immediately thereafter Caspian
entered into a new Loan Agreement with ZNG (the "New Loan"). Under the New Loan,
the lender agreed to provide a loan of up to $6,859,396 representing the assumed
commitment under a previous loan and the new commitment, which will be available
to  ZNG  in  connection with operations in the Kurgan region in 2005 and through
the  first  half  of  2006.

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

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

     Moving  forward,  BP  will  be  responsible for the technical and financial
support  of  ZNG, Ltd. For these purposes, an initial "Work Program for ZNG Ltd.
in Kurgan region for the period of 2005 and first half of 2006" and an Operating
Budget  have  been  adopted.  Funding of ZNG will be provided through a new Loan
Agreement  entered  into  between  ZNG  and  Caspian  in October 2005 ("New Loan
Agreement"),  described  below.

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

<PAGE>

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

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

     Alternative  Energy  Finance  Ltd.,  of  which  Tim  Peara  is the Managing
Director as well as a Director of the Company, introduced the parties who formed
the  joint  venture. Pursuant to an agreement between Alternative Energy Finance
and  the Company, Alternative Energy Finance, will receive compensation based on
the  total  investment  made  by  Baltic in the Joint Venture. This compensation
includes  a  commission  of $18,024 (1% of Baltic's $1,802,441 investment in the
Joint  Venture  to  date), which amount has not been paid as of the date of this
filing,  and  50,068 options to purchase shares of our common stock at $0.63 per
share for 2006 and a commission of $6,673 (1% of Baltic's $667,313 investment in
the Joint Venture in the first quarter) and 17,561 options to purchase shares of
our  common  stock  at $0.67 per share for the first quarter of 2006, which were
granted  to  Mr.  Peara on March 6, 2006, and March 31, 2006 respectively, which
options  contain  a  cashless  exercise  provision.  Additionally, Mr. Peara has
already  received  options  to purchase 100,000 shares of our common stock at an
exercise price of $0.30 per share, described in greater detail above, and 15,000
shares of our restricted common stock in connection with his introduction of the
parties  to  the  Joint  Venture.


                               NEW LOAN AGREEMENT

     On  November  9,  2005,  ZNG entered into a New Loan with Caspian (the "New
Loan").  Under the loan agreement, Caspian Finance Limited ("Caspian") agreed to
provide  a  loan  of  up  to  approximately  $6,874,325 representing the assumed
commitment  under  the  Initial  Loan  of  $1,739,658, of which ZNG had received
$1,110,654  as  of November 9, 2005, and the new commitment of up to $5,134,667,
to  be  used  for  operations in the Kurgan region in 2005 and through the first
half  of  2006.

     On  November  9,  2005,  ZNG,  Ltd.  and  Caspian entered into a Guarantee,
whereby ZNG, Ltd. agreed to assume and guarantee ZNG's obligations under the New
Loan  Agreement.

     The New Loan provided that all amounts which were agreed to be loaned under
the  Initial Loan, and which were combined into the New Loan, will be subject to
the  terms  of  the  New Loan, and the Initial Loan was subsequently terminated.

     The New Loan is available to ZNG until the sixth anniversary of the date of
the  New  Loan,  or  November  9,  2011  (the  "Term").

<PAGE>

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

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

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

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


PAYMENT  OF  CERTAIN  DEBTS  OF  ZNG

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

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

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

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

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

<PAGE>

     In  addition  to  the amounts agreed to be loaned pursuant to the New Loan,
ZNG  Ltd.  agreed to lend $78,000 to the Company to pay for legal and consulting
services  in  connection  with  establishing  of  the Joint Venture. The Company
received  $29,000  of  this  amount in November 2005; and the additional $49,000
will  be  paid after ZNG submits a letter from the relevant license authority of
the Ministry of Natural resources of the Russian Federation confirming that five
new  licenses  were  awarded  to  ZNG,  of  which  there  can  be  no assurance.

       ADDITIONAL AGREEMENTS ENTERED INTO IN CONNECTION WITH THE NEW LOAN

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

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

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


          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. Research and development
activities  on  the  licensed blocks in the Kurgan Region were directly borne by
the  Company  up  to the time the Joint Venture was closed in October 2005. As a
result of the closing of the Joint Venture, these research and development costs
are  now  borne  by  ZNG,  Ltd.  (as  described above). ZNG previously conducted
gravimetric  and seismic works on the licensed areas, which are now held by ZNG,
Ltd.,  which  the  Company owns 50% of. Costs incurred by ZNG in connection with
these  studies  as  of  March  31,  2006  totaled  $909,000.

<PAGE>

EMPLOYEES

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

                                  RECENT EVENTS

     On  March  15,  2006,  the  Company  entered  into  an  agreement  with the
consulting  firm Business Standard. Pursuant to the agreement, Business Standard
will perform several services for the Company, including investigating financing
opportunities in private and public markets in Russia, assisting in negotiations
with   potential   investment   partners   and  strategic  partners  in  merger
opportunities,  assisting in acquisition by ZNG of new geological exploration or
production  licenses  in  the Western Siberia area of Russia, legal guidance and
consultations  throughout  the  entire process. In consideration of the services
provided by Business Standard, the Company will pay a consulting fee to Business
Standard  of  US $6,250 per month for one year. In addition to the cash payment,
the  Company  agreed  to  grant  Business  Standard  options to purchase 800,000
restricted  shares of the Company at $1.05 per share. On March 15, 2006, 200,000
options  vested, and the remaining 600,000 options will vest as follows, 200,000
options  on  June  30,  2006,  200,000 options on September 30, 2006 and 200,000
options on December 31, 2006. The options granted to Business Standard expire on
December  31,  2010.  In  the  event  of  a successful acquisition by ZNG of new
geological exploration or production licenses, Business Standard will be granted
an  additional  200,000  restricted shares of common stock for each successfully
acquired  license  in consideration for Business Standard's guidance and help in
securing  each  license,  if  any  that  ZNG  receives.

                                SUBSEQUENT EVENTS

     On  April  27, 2006, with an effective date of April 1, 2006, the Company's
Board  of  Directors  approved  the  award  of  400,000  options to Victor Repin
("Repin"),  a greater than 5% shareholder of the Company, to purchase restricted
common  stock  of  the  Company in consideration for his services to the Company
throughout  2006.  The  Board  of  Directors  approved  the issuance to Repin of
400,000  options  at  the  exercise  price  of  $1.05,  which will vest in equal
portions  of  100,000 shares on April 1, 2006, June 30, 2006, September 30, 2006
and  December  31,  2006.  Repin  is  serving  on  the board of directors of the
Company's  50%  owned  subsidiary,  ZNG,  Ltd.,  and plays a significant role in
liaising  between  ZNG,  Ltd. and its operating subsidiary ZNG. Additionally, he
assists  ZNG  in  communication  with  local  governmental  authorities  and
negotiations  with  subcontractors  performing  major  geological  works.  Repin
receives  no  other  consideration  from  the  Company,  ZNG,  Ltd.  or  ZNG.

     On  May  1,  2006,  our  Director,  Timothy  Peara  exercised his option to
purchase  50,000  shares of our common stock in accordance with the terms of his
Option agreement dated August 15, 2005. Mr. Peara elected a cashless exercise of
the  options  and  he will therefore receive the full number of shares exercised
(50,000), less the number of shares that totaled the aggregate exercise price of
the  50,000  shares  ($15,000  with each option exercisable at $0.30 per share),

<PAGE>

based  on  the  average market value of the common stock on the five (5) trading
days prior to Mr. Peara's exercise ($2.00), which is equal to 7,500 shares. As a
result,  Mr. Peara is to be issued 42,500 shares in connection with the exercise
of his options, which shares have not been issued as of the date of this report.

                               PLAN OF OPERATIONS

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

     Moving  forward,  we  anticipate  targeting  other  potential  long  term
investments  in  Russia,  separate  from  our  involvement in the Joint Venture.
Currently  we  are  evaluating  different  business  opportunities  in
135194822Russia135194822JSGJohn  S.  Gillies135194822What is the status of those
other  agreements? in the oil and gas industry, including both development stage
and  revenue-producing  enterprises.  As  of  the  filing of this report on Form
10-QSB,  the  Company  is  researching  two projects which involve the potential
purchase  of  oil  and  gas  interests  in  Western  Siberia,  Russia. No formal
agreements  or understandings have been entered into regarding these projects as
of  the  filing  date  of  this  report.

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

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

     In  the  past, we have obtained cash financing from organizing stockholders
in  the  form  of loans and advances, as a result, amounts totaling $365,041 and
$328,376  were payable to the stockholders as of March 31, 2006 and December 31,
2005  respectively. However, there can be no certainty as to the availability of
continued  financing  in  the future. Failure to obtain sufficient financing may
require  us to reduce our operating activities. A failure to continue as a going
concern  would  then  require  stated  amounts  of  assets and liabilities to be
reflected  on  a  liquidation  basis  which  could differ from the going concern
basis.

<PAGE>

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2006, COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2005

     We  had  revenues  and  other  income of $75,000 for the three months ended
March  31,  2006,  which  was  solely  due to $25,000 of monthly management fees
received  from  ZNG,  Ltd. We had $-0- of revenue and other income for the three
months  ended March 31, 2005. We have not generated any revenues to date through
the  sale  of  oil  and/or  gas.

     We  had  total  expenses  of  $394,189 for the three months ended March 31,
2006, compared to total expenses for the three months ended March 31, 2005, of $
223,534,  which  represented an increase in total expenses from the prior period
of  $170,655  or  76%.

     Total  expenses for the three months ended March 31, 2006, included $33,311
of  salaries, of which $5,356 was accrued for our Chief Financial Officer, Elena
Pochapski  and $27,955 was paid in respect to Ms. Pochapski's salary and payroll
related  funds;  $155,716 of professional and consulting fees, including amounts
paid  to our legal counsel and accountant in connection with the preparation and
filing  of  our  annual  report  on  Form  10-KSB,  and  warrants  granted  for
professional services during the three months ended March 31, 2006, as described
herein;  $9,737  in  rent  and  occupancy; $86 of depreciation and amortization;
$3,848  of  finance  charges  and interest, attributable to interest paid on the
advances  we  received from BP; and $191,491 of marketing and other expenses, in
connection with marketing and advertising in connection with road shows, various
general  and  administration  expenses  relating  to the Company, and travel and
hotel  expenses  in  connection  with  the  research  on  potential  business
acquisitions.  Our Chief Executive Officer, David Zaikin has agreed to waive his
salary and any accrual of his salary until such time as we have sufficient funds
to  pay  such  salary  to  Mr.  Zaikin.

     The  main  items  leading  to  the increase in total expenses for the three
months  ended March 31, 2006, compared to the three months ended March 31, 2005,
were  an  increase  of  $117,368 or 306% in professional and consulting fees, to
$155,716  for the three months ended March 31, 2006, compared to $38,348 for the
three months ended March 31, 2005, and an increase in other expenses of $161,738
or  544%  to  $191,491  for  the  three months ended March 31, 2006, compared to
$29,753  for the three months ended March 31, 2005. The increase in professional
and  consulting  fees  during the three months ended March 31, 2006, compared to
the  three  months  ended March 31, 2005, is largely attributable to the options
granted  to  Business  Standard  for consulting services valued at $128,000. The
increase  in  other expenses for the three months ended March 31, 2006, compared
to  the  three  months  ended  March 31, 2005, is largely attributable to shares
issued  for  investor  relations  services.

     We  had  a  net loss of $319,189 for the three months ended March 31, 2006,
compared to a net loss of $223,534 for the three months ended March 31, 2005, an
increase  in  net  loss of $95,655 or 43% from the prior period. The increase in
net  loss  was  mainly  attributable  to increases in total expenses, namely the
increases  in  professional  and  consulting  fees and other expenses, described
above, which were not sufficiently offset by the $75,000 increase in revenue for
the three months ended March 31, 2006, compared to $-0- of revenue for the three
months  ended  March  31,  2005.

LIQUIDITY  AND  CAPITAL  RESOURCES

     We had current assets of $101,555 as of March 31, 2006, which included cash
of $1,285; management fee receivable of $100,000; and prepaid expenses and other
of  $270. This represented an increase in current assets of $39,734 or 64%, from
$61,821  of  current  assets as of December 31, 2005, which was mainly due to an

<PAGE>

increase  of $50,000 in management fee receivable in connection with the $25,000
monthly  management  fee payable to the Company by ZNG, Ltd., which fee was owed
for  the months of December 2005 to March 2006. We subsequently received $40,000
from  ZNG,  Ltd.,  and  as a result, we are owed $85,000 in management fees from
ZNG,  Ltd.  as  of  the  date  of  this  report.

     We  had  total  assets  of  $103,014  as  of March 31, 2006, which included
current  assets  of  $101,555  and  long  term  assets of $1,459 relating to net
property and equipment. This represents an increase of $39,654 or 63% from total
assets  of  $63,360  as  of  December  31,  2005,  which  increase  was  mainly
attributable  to  the  increase  in  management  fee  receivable.

     We  had  total  liabilities  of $1,008,775 as of March 31, 2006, which were
solely  current  liabilities  and  which included $63,535 of demand loan from an
individual,  which  bears  interest  at  6.5%  per  annum,  which  is payable to
Alexander  Kogan,  in  connection  with  a  $62,500  loan made to the Company on
December  27,  2005, which loan is payable on demand within 10 days of notice of
such  demand  by  Mr.  Kogan;  $364,041  of  accounts  payable  to related party
stockholders  in  connection  with  those  shareholders  paying  certain  of our
expenses  from  the period between January 1, 2003 to March 31, 2006; $46,035 of
accounts  payable  to Baltic in connection with the $29,000 loan advanced to the
Company  from Baltic, as described above under "Payment of Certain Debts of ZNG"
and  certain  other travel expenses owed to Baltic; $220,400 of accounts payable
to  others,  including  $46,980  payable to our consultant, Aspen Management and
$33,107  owed  to  an  investor relations firm; and $313,764 of accrued payroll,
which  included  $112,500  payable to our Chief Executive Officer, David Zaikin,
$90,063  payable to our Chief Financial Officer, Elena Pochapski, and $69,241.97
of  accrued  salary payable to our former Chief Executive Officer, Shakeel Adam.
This  represented  an  increase  in  current liabilities of $152,664 or 18% from
total  current liabilities of $856,111 as of December 31, 2005. The main reasons
for  this  increase  were  an increase of $103,170 or 88% in accounts payable to
others,  in  connection  with  the  services  provided by our investor relations
company during the three months ended March 31, 2006, and an increase of $36,665
or  11%  in amounts owed to related party stockholders, which was due to certain
expenses  paid on the Company's behalf by the Company's Chief Executive Officer,
David  Zaikin.

     Because  our  cumulative  losses  associated  with  the  operations  of ZNG
exceeded  our  investment as of the date of the Joint Venture, ZNG is carried on
our  balance  sheet  at  $-0-  as  of March 31, 2006. Our investment in ZNG will
exceed  $-0- at such time as ZNG has cumulative earnings sufficient to repay all
loans  to  Baltic  as  provided  in  the  Joint  Venture.

     We had negative net working capital of $907,220 as of March 31, 2006, and a
total  accumulated  deficit of $2,907,208 representing our pre-development stage
and  development  stage  deficit  as  of  March  31,  2006.

     We  had  $23,445  of  net cash flows for operating activities for the three
months  ended  March  31,  2006,  which  included  $193,000  of common stock and
warrants  issued  for  professional  services and salaries, $152,658 of accounts
payable  and  accrued  expenses, and $86 of depreciation and amortization, which
was  offset  by  $319,189 of net loss; and $50,000 of prepaid expenses and other
assets.

     We had $-0- of net cash flows for investing activities for the three months
ended  March  31,  2006.

     We  had  $14,000  of net cash flows from financing activities for the three
months  ended  March  31,  2006, which was solely due to $14,000 of net proceeds
from  common  stock  issued  to  an  employee,  which was in connection with the
exercise  of  all 100,000 of our Chief Financial Officer Elena Pochapski's, 2003
stock  options,  at  an  exercise  price  of  $0.14  per share in February 2006.

<PAGE>

     Upon  entering  into  the  Joint Venture with ZNG, Ltd., Baltic released us
from  our  obligations  under the Guarantee and security interest given by us to
Baltic  in connection with the Initial Loan (described in greater detail above).
Additionally, BP entered into a deed of novation regarding the Initial Loan made
to  ZNG  by  BP and Caspian agreed to provide a loan of approximately $6,874,325
(which  included  $1,739,658  assumed  from  the  Initial Loan, of which ZNG had
received $1,110,624) to ZNG for the purpose of research activities in the Kurgan
Region  in  2005  and  the  first  half  of  2006.

     As  of  May  11,  2006, ZNG had received $882,719 pursuant to the New Loan,
which  had  a  total outstanding balance as of May 11, 2006 of $2,138,259, which
amount  includes  $1,110,624  assumed by ZNG in connection with the Initial Loan
and  $144,916  of  interest  accrued  on  this  loan  to  date.

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

     Under  the Joint Venture, we will receive $25,000 per month as a management
fee  from  ZNG, Ltd., however as of the filing of this report, ZNG, Ltd. owes us
$85,000,  representing approximately three and a half months of management fees.
However, we can make no assurance that $25,000 per month will be adequate to pay
our  upcoming  expenses  and  liabilities.

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

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

                                  RISK FACTORS

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

<PAGE>

RISK  OF  CONTINUING  OUR  BUSINESS  PLAN  WITHOUT  ADDITIONAL  FINANCING.

     We depend to a great degree on the ability to attract external financing in
order  to  conduct  future  exploratory  and development activities. The Company
believes  it  can  satisfy  its  cash requirements during the next twelve months
through funding provided by existing stockholders and with amounts received from
the Joint Venture (described above), including $25,000 a month which the Company
is  to  receive from ZNG, Ltd., pursuant to the Joint Venture. Additionally, ZNG
has  received  approximately  $1,110,654  from  BP  pursuant to the Initial Loan
(defined  above) and another $882,719 pursuant to the New Loan as of the date of
this  report,  which  has  been  spent  on  various  purposes,  including paying
consultants  for  services  performed  in  connection  with  surveys  previously
performed  on the licensed area. As the Joint Venture is now responsible for the
funding of the operations of ZNG, we believe our expenditures in connection with
ZNG  will  decrease  in  the  upcoming  periods.  If  we are unable to raise the
additional  funds  required  for the planned activities of the Joint Venture and
for  additional  activities, separate than the Joint Venture, our Company may be
forced to abandon its current business plan. If you invest in our Company and we
are  unable to raise the required funds, your investment could become worthless.

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

     Approximately $654,000 in loans, which ZNG is to receive in connection with
the  New  Loan are contingent upon ZNG obtaining rights to the five new licenses
applied  for  in  April,  August  and September 2005. The Russian government and
Ministry of Natural Recourses together with Rosnedra Federal Agency have set the
following  dates  for  the  auctions  in  Kurgan  region:

     o    On May  31  2006  for  the  Yuzhno-Voskresensky  and  Petuhovsky
          parcels.  ZNG  has  already  paid  initial fees in full to confirm its
          participation  in  the  auction  for  both  parcels.

     o    On June  14  2006  for  the  Lebyazhevsky, Pichuginski and Mihailovski
          parcels.  ZNG  has  already  paid  initial fees in full to confirm its
          participation  in  the  auction  for  the  Lebyazhevsky  parcel.

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

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

     The  Company  anticipates  the  need for approximately $15,000,000 prior to
ZNG's  expected generation of any revenues. Currently the Company has not raised
any of this financing and the Company can make no assurances that this financing
will  ever  be raised. The Company also does not expect to generate any revenues
through  the  operations  of  ZNG,  other  than the $25,000 a month that we will
receive  from  ZNG,  Ltd.,  until late 2006, of which there can be no assurance.
Therefore,  investors  should keep in mind that even if ZNG is able to raise the
substantial  amounts  of additional financing it requires for its operations, it
could  still be years before ZNG generates any revenue, if ever. If ZNG does not
raise  the $15,000,000 which it anticipates needing to generate revenues, which,
even if generated, will likely not be great enough to sustain ZNG if no revenues

<PAGE>

are generated and hydrocarbon reserves are located, ZNG may be forced to abandon
or  curtail  its current business plan. As the Company's only current operations
are  through  its 50% ownership of ZNG, Ltd., which in turn owns 100% of ZNG, if
ZNG  were  forced  to  abandon its business plan, the Company could be forced to
abandon or curtail its business plan as well, which could cause the value of the
Company's  common  stock  to  become  worthless.

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

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

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

     Our  Company  is  in  its  early  development  stage,  as planned principal
activities  have  not  begun. We have not generated any revenues since inception
and  have  incurred  substantial losses including a net loss of $319,189 for the
three months ended March 31, 2006, and a total accumulated deficit of $2,907,208
as  of  March 31, 2006. These factors among others indicate that the Company may
be  unable  to  continue  as  a going concern, particularly in the event that it
cannot  generate  sufficient  cash  flow to conduct its operations and/or obtain
additional  sources  of  capital  and  financing.

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

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

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

     As  a development stage company, we have no revenues or profits to date and
our net cumulative deficit attributable to our development stage as of March 31,
2006,  was  $2,457,423,  and  our total cumulative deficit was $2,907,208, which
included  $449,785  of pre-development stage deficit. We had $313,764 in accrued
and  unpaid  salaries  and a working capital deficit of $907,220 as of March 31,
2006.  The  Company  is  currently being funded by existing shareholders and the
$25,000  monthly  payments, which the Company receives from the Joint Venture in

<PAGE>

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

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

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

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

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

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

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

OUR  GROWTH  WILL  PLACE  SIGNIFICANT  STRAINS  ON  OUR  RESOURCES.

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

<PAGE>

the  growth  of  its  business.  If  the  Company  is  unable  to  manage growth
effectively,  the  Company's  business,  results  of  operations  and  financial
condition  will  be  adversely  affected.

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

     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.

CRITICAL  ACCOUNTING  POLICIES

     Our  discussion  and  analysis  of  our  financial condition and results of
Operations  is  based  upon  our  audited  financial statements, which have been
prepared  in  accordance  with  accounting  principals generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,  and  related  disclosure  of any contingent assets and
liabilities.  On  an  on-going basis, we evaluate our estimates, including those
related  to  uncollectible  receivable,  investment  values,  income  taxes, the
recapitalization and contingencies. We base our estimates on various assumptions

<PAGE>

that  we  believe to be reasonable under the circumstances, the results of which
form  the  basis  for  making  judgments  about  carrying  values  of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ  from  these  estimates  under  different  assumptions  or  conditions.

ITEM 3.   CONTROLS AND PROCEDURES

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

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

                           PART II - OTHER INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS

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

ITEM  2.  CHANGES  IN  SECURITIES

     On  February  13,  2006,  Elena  Pochapski,  the  Company's Chief Financial
Officer  and  a Director of the Company, exercised all 100,000 of her 2003 stock
options,  and  purchased 100,000 restricted shares of the Company's common stock
at an exercise price of $0.14 per share, for aggregate consideration of $14,000,
which  was  received  by the Company on February 14, 2006. The Company claims an
exemption  from  registration  afforded by Section 4(2) of the Securities Act of
1933 (the "Act") since the foregoing issuance did not involve a public offering,
the recipient took the shares for investment and not resale and the Company took
appropriate  measures  to  restrict  transfer.  No  underwriters  or agents were
involved  in the foregoing issuance and no underwriting discounts or commissions
were  paid  by  the  Company.

<PAGE>

     On  February  16,  2006, the Company issued 40,000 restricted shares of our
common  stock  to  Ann  L.  Stephenson  Group  Inc., in consideration for public
relations  services  previously  rendered  to the Company. The Company claims an
exemption  from  registration  afforded  by  Section  4(2)  of the Act since the
foregoing  issuance  did  not  involve a public offering, the recipient took the
shares  for  investment and not resale and the Company took appropriate measures
to  restrict  transfer. No underwriters or agents were involved in the foregoing
issuance  and no underwriting discounts or commissions were paid by the Company.

     Pursuant  to  an  agreement,  between  the  Company  and Alternative Energy
Finance,  whose managing Director is our Director, Timothy Peara, Mr. Peara will
receive  compensation  based on the total investment made by Baltic in the Joint
Venture.  This  compensation  includes  a  commission of $18,024 (1% of Baltic's
$1,802,441  investment  in  the  Joint  Venture  to  date) and 50,068 options to
purchase  shares of our common stock at $0.63 per share, as well as a commission
of  $6,673 (1% of Baltic's $667,313 investment in the Joint Venture in the first
quarter)  and 17,561 options to purchase shares of our common stock at $0.67 per
share  All  of  the  options  granted  to  Alternative Energy Finance under this
warrant  agreement  expire  if  unexercised on March 31, 2009. Additionally, Mr.
Peara  has  already  received  options  to purchase 100,000 shares of our common
stock  at  an  exercise  price  of  $0.30 per share, described in greater detail
below,  and  15,000 shares of our restricted common stock in connection with his
introduction  of  the  parties  to  the  Joint  Venture.  The  Company claims an
exemption  from  registration  afforded  by  Section  4(2)  of the Act since the
foregoing  issuance  did  not  involve a public offering, the recipient took the
options  and  shares  for  investment  and  not  resale  and  the  Company  took
appropriate  measures  to  restrict  transfer.  No  underwriters  or agents were
involved  in the foregoing issuance and no underwriting discounts or commissions
were  paid  by  the  Company.

     March  15,  2006, the Company entered into an agreement with the consulting
firm  Business  Standard.  Pursuant  to  the  agreement,  Business Standard will
perform  several  services  for  the  Company, including investigating financing
opportunities in private and public markets in Russia, assisting in negotiations
with  potential  investment  partners  and  strategic  partners  in  merger
opportunities,  assisting in acquisition by ZNG of new geological exploration or
production  licenses  in  the Western Siberia area of Russia, legal guidance and
consultations  throughout  the  entire process. In consideration of the services
provided by Business Standard, the Company will pay a consulting fee to Business
Standard  of  US $6,250 per month for one year. In addition to the cash payment,
the  Company  agreed  to  grant  Business  Standard  options to purchase 800,000
restricted  shares of the Company at $1.05 per share. On March 15, 2006, 200,000
options  vested, and the remaining 600,000 options will vest as follows, 200,000
options  on  June  30,  2006,  200,000 options on September 30, 2006 and 200,000
options on December 31, 2006. The options granted to Business Standard expire on
December  31,  2010.  In  the  event  of  a successful acquisition by ZNG of new
geological exploration or production licenses, Business Standard will be granted
an  additional  200,000  restricted shares of common stock for each successfully
acquired  license  in consideration for Business Standard's guidance and help in
securing  each  license,  if  any that ZNG receives. The Company claims and will
claim  an  exemption from registration afforded by Section 4(2) of the Act since
the  foregoing  issuances  did  and  will  not  involve  a  public offering, the
recipient  took  and  will take the shares for investment and not resale and the
Company  took  and  will  take  appropriate  measures  to  restrict transfer. No
underwriters  or  agents  were  involved  or  will  be involved in the foregoing
issuances and no underwriting discounts or commissions were paid or will be paid
by  the  Company.

<PAGE>

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

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

     On  April  27, 2006, with an effective date of April 1, 2006, the Company's
Board  of  Directors  approved  the  award  of  400,000  options to Victor Repin
("Repin"),  a greater than 5% shareholder of the Company, to purchase restricted
common  stock  of  the  Company in consideration for his services to the Company
throughout  2006.  Repin  will  receive 400,000 options at the exercise price of
$1.05,  which  will  vest  in equal portions of 100,000 shares on April 1, 2006,
June 30, 2006, September 30, 2006 and December 31, 2006. Repin is serving on the
board of directors of the Company's 50% owned subsidiary, ZNG, Ltd., and plays a
significant role in liaising between ZNG, Ltd. and its operating subsidiary ZNG,
additionally,  he  assists  ZNG  in  communication  with  local  governmental
authorities  and  negotiations  with  subcontractors performing major geological
works. Repin receives no other consideration from the Company, ZNG, Ltd. or ZNG.
The  Company  claims  an exemption from registration afforded by Section 4(2) of
the  Act  since  the  foregoing  issuance did not involve a public offering, the
recipient  took  the  shares  for investment and not resale and the Company took
appropriate  measures  to  restrict  transfer.  No  underwriters  or agents were
involved  in the foregoing issuance and no underwriting discounts or commissions
were  paid  by  the  Company.

     On  May  1,  2006,  our  Director,  Timothy  Peara  exercised his option to
purchase  50,000  shares of our common stock in accordance with the terms of his
Option  agreement entered into in consideration for consulting services rendered
in  2005.  Mr.  Peara  elected  a  cashless  exercise of the options and he will
therefore  receive the full number of shares exercised (50,000), less the number
of  shares  that  totaled  the  aggregate  exercise  price  of the 50,000 shares
($15,000  with each option exercisable at $0.30 per share), based on the average
market  value  of  the  common  stock  on the five (5) trading days prior to Mr.
Peara's exercise ($2.00), which is equal to 7,500 shares. As a result, Mr. Peara
is  to  be  issued 42,500 shares in connection with the exercise of his options,
which  shares  have  not  been  issued  as  of  the  date  of  this  Report.

<PAGE>

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

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


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

     None.


ITEM 5.  OTHER INFORMATION

     None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     a)     Exhibits

Exhibit No. Description

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

10.15(3)    Deed  of  Amendment  between  ZNG  and  BP

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

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

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

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

10.20(5)    Deed  of  Release

10.21(5)    Release  of  Pledge

10.22(5)    Guarantee

10.23(5)    Debenture

<PAGE>

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

10.25(5)    Sale  and  Purchase  Agreement

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

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

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

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

99.1(6)     Glossary

* Filed Herein.

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

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

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

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

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

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


b)     REPORTS ON FORM 8-K

     We  filed  one  report  on Form 8-K during the three months ended March 31,
2006,  on  February  28, 2006, to report that our Chief Financial Officer, Elena
Pochapski, exercised all 100,000 of her 2003 stock options, as well as to report
the  issuance  of  various shares of restricted common stock to various parties,
and  the  donation of restricted common stock by Ms. Pochapski and David Zaikin,
our  Chief Executive Officer, to the Jewish Russian Community Center of Toronto.

<PAGE>

                                   SIGNATURES

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

                                   SIBERIAN ENERGY GROUP INC.

DATED: May 18, 2006               By: /s/ David Zaikin
                                      ------------------------
                                      David Zaikin
                                      Chief Executive Officer

<PAGE>