Document:

amalgapixsb2a2ex101

  

  Exhibit 10.1 

AVERY PACK

  2132 Mears Parkway

  Margate, Florida 33063

                                                                                                                  October 14, 2005

Amalgamated Pictures Corp.

  2132 Mears Parkway

  Margate, Florida 33063

  

  To the Board of Directors:

            In order to pursue our business plan, if we are unable to raise sufficient funds from our public offering or other financing to satisfy our minimum cash requirements to initiate operations and produce our first film property,   I agree to lend such funds to Amalgamated Pictures Corp. up to $75,000.

            I will be willing to lend those funds for a minimum period of 12 months at an interest rate equal to the prime rate of Citibank N.A.

            Please accept this letter as my formal personal commitment, as an individual and not as an officer and director of Amalgamated Pictures Corp.

                                                                                                                  Very truly yours,

                                                                                                                  /s/ Avery Pack

                                                                                                                  Avery PackExhibit 10.1

                            DATED       OCTOBER 14, 2005

                       (1)  BALTIC PETROLEUM (E&P) LIMITED

                                       and

                         (2)  SIBERIAN ENERGY GROUP INC.

                                       and

                           (3)  ZAURALNEFTEGAZ LIMITED

                      JOINT VENTURE SHAREHOLDERS' AGREEMENT

                               COVINGTON & BURLING

               REGISTERED FOREIGN LAWYERS AND SOLICITORS - LONDON
                                   265 STRAND
                                 LONDON WC2R 1BH

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                                TABLE OF CONTENTS

        CLAUSE                                                     PAGE

1.      INTERPRETATION                                              1

2.      CONDITIONS AND COMPLETION                                   5

3.      ESTABLISHMENT OF THE COMPANY                                6

4.      CONDUCT PRIOR TO COMPLETION                                 8

5.      WARRANTIES AND INDEMNITIES                                  9

6.      THE BUSINESS OF THE COMPANY                                12

7.      DIRECTORS AND MANAGEMENT                                   13

8.      RESERVED MATTERS                                           15

9.      BUDGETS AND FINANCIAL INFORMATION                          17

10.     DISTRIBUTION POLICY AND MANAGEMENT FEES                    17

11.     FINANCE FOR THE COMPANY                                    18

12.     TRANSFERS OF SHARES                                        19

13.     DEADLOCK                                                   22

14.     DEFAULT                                                    25

15.     DETERMINATION OF FAIR VALUE                                28

16.     TERMS AND CONSEQUENCES OF TRANSFERS OF SHARES              29

17.     ENFORCEMENT OF RIGHTS                                      32

18.     COMPETITION WITH THE BUSINESS                              32

19.     PUBLIC ANNOUNCEMENTS                                       35

20.     INFORMATION, INSURANCE, RECORDS, LICENCES                  35

21.     CONSORTIUM TAX RELIEF                                      36

22.     DURATION AND TERMINATION                                   36

23.     CONFIDENTIALITY                                            37

24.     NOTICES                                                    38

25.     WHOLE AGREEMENT AND REMEDIES                               39

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26.     GENERAL                                                    39

27.     CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999               42

28.     GOVERNING LAW AND SUBMISSION TO JURISDICTION               42

29.     AUTHORITY TO DELIVER                                       42

SCHEDULE 1                                                         44

AGREED TERMS DOCUMENTS                                             44

SCHEDULE 2                                                         45

DEED OF ADHERENCE                                                  45

SCHEDULE 3                                                         46

WARRANTIES                                                         46

SCHEDULE 4                                                         57

DISCLOSURE SCHEDULE                                                57

SCHEDULE 5                                                         58

PARTIES' DETAILS                                                   58

SCHEDULE 6                                                         59

NEW LICENCES                                                       59

<PAGE>

THIS  AGREEMENT  is  made  on  14th  October  2005

BETWEEN:

(1)     BALTIC  PETROLEUM (E&P) LIMITED, a company incorporated in England under
company  number  05303991  and  whose  registered  office  is  at  c/o Gilchrist
Solicitors,  18b  Charles  Street,  London  W1J  5DU,  United  Kingdom  ("BP");

(2)     SIBERIAN ENERGY GROUP INC., a corporation incorporated under the laws of
the  State  of Nevada, United States and whose principal place of business is at
275  Madison  Avenue,  6th Floor, New York, NY 10016, United States ("SEG"); and

(3)     ZAURALNEFTEGAZ  LIMITED,  a  company registered in England under company
number  05525360  whose  registered  office  is at c/o Gilchrist Solicitors, 18b
Charles  Street,  London  W1J  5DU,  United  Kingdom  (the  "COMPANY").

RECITALS:

(A)  Pursuant  to  the  terms  of  an  option agreement between Baltic Petroleum
     Limited  ("BALTIC")  and  SEG  dated 28 April 2005, as amended (the "OPTION
     AGREEMENT"), Baltic and SEG agreed, inter alia, to establish the Company as
     a  joint  venture  company  to carry on the Business and to enter into this
     Agreement for the purposes of regulating their relationship with each other
     and the Company;

(B)  The  Company  was  incorporated  in  England  on 2 August 2005 with company
     number  05525360  As  at  the  date of this Agreement, it has an authorised
     share  capital of 100 divided into 100 ordinary shares of 1 each ("ORDINARY
     SHARES"  and  each an "ORDINARY SHARE"). 2 Ordinary Shares have been issued
     at  a  subscription price of 1 per share. BP holds 1 Ordinary Share and SEG
     holds 1 Ordinary Share.

(C)  SEG  is  the  holder  of  all  of  the  participatory  interests  in  OOO
     Zauralneftegaz, a Russian limited liability company ("ZNG"). SEG has agreed
     to  contribute  all  of  such  participatory  interests  in  ZNG  (the "ZNG
     INTERESTS")  to  the  Company  as  consideration  for  the subscription for
     further  Ordinary  Shares on the terms and conditions of this Agreement. BP
     has  agreed to procure the provision of certain loans to the Company and to
     subscribe  for  further Ordinary Shares in consideration for the payment of
     $75,000, in each case on the terms and conditions of this Agreement.

IT  IS  AGREED  as  follows:

1.   INTERPRETATION

     In this Agreement (including the Recitals):

1.1  DEFINITIONS

     "ACT" means the Companies Act 1985 as amended;

     "A  DIRECTOR"  means  a  director  appointed  by  the  A  Shareholder  in
     accordance  with  the  Articles  and  "A  DIRECTORS"  shall  be  construed
     accordingly;

<PAGE>

"AGREED TERMS" means those documents in the terms agreed between the parties and
signed for identification by or on behalf of the parties, a list of which is set
out  in  Schedule  1;

"AREA"  means  the  Western  Siberian  region  of the Russian Federation and the
Former  Soviet  Union;

"ARTICLES"  means the proposed new articles of association of the Company in the
agreed  terms;

"A  SHAREHOLDER"  means  the  registered  holder(s)  of  the  A  Shares;

"A  SHARES"  means  the Ordinary Shares designated as A Shares in the capital of
the  Company;

"ASSOCIATE"  shall  be  as  defined  in  Section  52  of the Companies Act 1989;

"ASSOCIATED  COMPANY"  means,  in  relation  to  a  Shareholder  (that is a body
corporate),  any  holding  company of which the Shareholder is a subsidiary or a
subsidiary of the Shareholder or of any holding company of which the Shareholder
is  a  subsidiary;

"AUDITED  ACCOUNTS"  means the report and audited accounts of the Company and of
each  Group  Company  and the audited consolidated accounts of the Group for the
financial  period  ending  on  the  relevant  balance  sheet  date;

"AUDITORS" means such firm of Chartered Accountants appointed as auditors of the
Company  pursuant  to  the  terms  of  this  Agreement  from  time  to  time;

"B  DIRECTOR" means a director appointed by the B Shareholder in accordance with
the  Articles  and  "B  DIRECTORS"  shall  be  construed  accordingly;

"B  SHAREHOLDER"  means  the  registered  holder(s)  of  the  B  Shares;

"B  SHARES"  means  the Ordinary Shares designated as B Shares in the capital of
the  Company;

"LEND CO" means Caspian Finance Limited, a wholly-owned subsidiary of BP,
incorporated in England under company number 05530897;

"BOARD"  means  the  board  of  directors  of  the  Company;

"BUDGET"  means  the  budget  for the Group in the agreed terms, as updated from
time  to  time  in  accordance  with  Clause  9.2;

"BUSINESS"  means  the  business of exploration for, and development, production
and  sale  of,  oil  and  gas  assets  in the Area, together with associated and
ancillary  activities;

"BUSINESS DAY" means a day which is not a Saturday or Sunday or a bank or public
holiday  in  England  and  Wales  or  New  York,  New  York,  United  States;

<PAGE>

"BUSINESS  PLAN"  means  the business plan for the Group in the agreed terms, as
amended  by  agreement  between the parties, prepared annually in respect of the
forthcoming  one  year  period  setting  out  details  of  the Group's strategic
planning  in  respect of, inter alia, exploration, development and production of
oil  and  gas,  customers,  capital expenditure, financing, tax, competitors and
contingency  planning;

"CEO"  means  the  chief  executive  officer  of  the Company from time to time;

"CHAIRMAN"  means  the  chairman  of  the  Board  from  time  to  time;

"COMPLETION"  means the performance by the parties of the obligations assumed by
them  respectively  pursuant  to  Clause  3;

"COMPLETION  DATE"  means  the  date on which Completion takes place pursuant to
Clause  2.5;

"CONTROL" means, in relation to a Shareholder, where a person (or persons acting
in concert) acquires or agrees to acquire or has options over direct or indirect
control  (1)  of  the  affairs of that Shareholder, or (2) over more than 50 per
cent.  of  the  total  voting  rights  conferred by all the issued shares in the
capital  of that Shareholder which are ordinarily exercisable in general meeting
or  (3) of the composition of the main board of directors of a Shareholder.  For
these  purposes  "PERSONS  ACTING IN CONCERT", in relation to a Shareholder, are
persons  which  actively co-operate through the acquisition by them of shares in
that  Shareholder,  pursuant to an agreement or understanding (whether formal or
informal) with a view to obtaining or consolidating Control of that Shareholder;

"DEED  OF  ADHERENCE"  means  a  deed  in  the  form  set  out  in  Schedule  2;

"DIRECTORS"  means the A Directors and the B Directors, and "DIRECTOR" means any
one  of  them;

"ENCUMBRANCE"  means  and  includes  any  interest  or  equity  of  any  person
(including,  without  limitation,  any  right  to  acquire,  option,  right  of
pre-emption  or  right  of  conversion)  or  any mortgage, charge, pledge, lien,
assignment  or  any  other  encumbrance,  priority  or  security  interest  or
arrangement  of  whatever  nature  over  or  in  the  relevant  property;

"EXISTING  SECURITY"  means the security interest over the ZNG Interests granted
by SEG in favour over Baltic pursuant to the pledge and security agreement dated
28  April  2005;

"FAIR  VALUE" means the value of the Shares calculated in accordance with Clause
15;

"GROUP" means the Company and its subsidiaries and "GROUP COMPANY" means any one
of  them;

"GUARANTEE"  means  the guarantee to be given by the Company in respect of ZNG's
obligations  under  the  Loans  in  the  agreed  terms;

"LOAN  AGREEMENT" means the agreement to be entered into between Lend Co and ZNG
pursuant  to  which  Lend  Co  shall  make  the  Loans  to  ZNG;

<PAGE>

"LOAN PERIOD" means the period commencing on the date hereof and ending when all
amounts  under  the  Loan  Agreement  and under the loans to be made pursuant to
Clause  11.1.2  (including  interest  and  costs)  have  been  repaid  in  full;

"LOANS"  means  the loans to be made by Lend Co to ZNG under the Loan Agreement;

"OPTION  AGREEMENT"  shall  be  as  defined  in  the  Recitals;

"ORDINARY  SHARES"  shall  be  as  defined  in  the  Recitals;

"PERMITTED  CONDITION"  means  a  bona  fide  consent,  clearance,  approval  or
permission  necessary  to  enable  the  relevant person to be able to complete a
transfer  of  Shares  under  (1)  its  constitutional documents (2) the rules or
regulations of any stock exchange on which it or its parent company is quoted or
(3)  any governmental, statutory or regulatory body in those jurisdictions where
that  person  carries  on  business;

"SECURITY  DOCUMENTS"  means the debenture and the pledge over the ZNG Interests
to  be  granted  by  the  Company  in  the  agreed  terms;

"SHAREHOLDERS"  means  the  A  Shareholder  and  the  B  Shareholder;

"SHARES"  means  the  A  Shares  and  the  B Shares and (1) any shares issued in
exchange  for  those  shares or by way of conversion or reclassification and (2)
any shares representing or deriving from those shares as a result of an increase
in,  reorganisation  or  variation  of  the  capital  of  the  Company;

"US$"  means  United  States  Dollars;

"WARRANTIES"  means the warranties, representations and undertakings to be given
by  SEG  and  BP  under Clause 5, and "WARRANTY" shall be construed accordingly;

"ZNG"  shall  be  as  defined  in  the  Recitals;

"ZNG  INTERESTS"  shall  be  as  defined  in  the  Recitals;  and

"ZNG WARRANTIES" means the Warranties given by SEG in relation to ZNG as set out
in  Section  A  of  Part  I  of  Schedule  3.

1.2  The  Interpretation  Act  1978  shall  apply  to this Agreement in the same
     way as it applies to an enactment.

1.3  References  to  a  statutory  provision  include  any  subordinate
     legislation made from time to time under that provision.

1.4  References  to  a  statute  or  statutory provision include that statute or
     provision  as  from  time  to  time  modified or re-enacted or consolidated
     whether  before  or  after  the  date  of  this  Agreement  so  far as such
     modification  or  re-enactment  or  consolidation  applies or is capable of
     applying to any transactions entered into in accordance with this Agreement
     and  (so  far as liability thereunder may exist or can arise) shall include
     also  any  past  statutory  provision  (as  from  time  to time modified or
     re-enacted or consolidated) which such provision has directly or indirectly
     replaced.

<PAGE>

1.5  The  expressions  "holding  company"  and  "subsidiary" shall have the same
     meanings in this Agreement as their respective definitions in the Act.

1.6  References  to  this  Agreement  include  any  Recitals and Schedules to it
     and  this  Agreement as from time to time amended and references to Clauses
     and Schedules are to Clauses of and Schedules to this Agreement.

1.7  Headings shall be ignored in construing this Agreement.

1.8  Any  provision  of  this  Agreement  which  is  expressed to bind more than
     one  person  shall,  save  where  inconsistent  with the context, bind them
     jointly and each of them severally.

1.9  References  to  time  of  day  are  to  London,  United Kingdom time unless
     otherwise stated.

1.10 References  to  the  winding-up  of  a  person  include  the  amalgamation,
     reconstruction,  reorganisation,  administration, dissolution, liquidation,
     merger  or  consolidation  of  such  person and any equivalent or analogous
     procedure  under  the  law  of  any  jurisdiction  in  which that person is
     incorporated, domiciled or resident or carries on business or has assets.

1.11 Any  reference  to  books,  records  or  other  information  means  books,
     records  or  other  information in any form including paper, electronically
     stored data, magnetic media, film and microfilm.

1.12 Any  reference  to  any  English  legal  term or concept (including for any
     action,  remedy,  method  of  judicial  proceeding, document, legal status,
     statute,  court,  official  governmental  authority  or  agency)  shall, in
     respect  of any jurisdiction other than England, be interpreted to mean the
     nearest  and  most  appropriate  analogous  term to the English term in the
     legal  language  in that jurisdiction as the context reasonably requires so
     as  to  produce  as  nearly as possible the same effect in relation to that
     jurisdiction as would be the case in relation to England.

2.   CONDITIONS  AND  COMPLETION

2.1  CONDITIONS  PRECEDENT

     Completion  of  this  Agreement  is  conditional  on satisfaction or waiver
     by BP of the following conditions:

     2.1.1 completion  of  the  transfer  by  SEG  to  the  Company  of  the ZNG
          Interests  in  accordance  with  the  terms  of  the sale and purchase
          agreement relating to the ZNG Interests between SEG and the Company of
          even date herewith, as evidenced by filing an original notification of
          such  transfer  with  ZNG  and  delivery  of  a notarised copy of such
          notification to BP;

     2.1.2 adoption  by  ZNG  of  the  amended  Charter  in the agreed terms and
          registration  of  the  same  with  the  appropriate  Russian corporate
          authorities to the full satisfaction of BP and its legal counsel; and

<PAGE>

     2.1.3 SEG  shall  have  demonstrated  to  BP  to its absolute satisfaction,
          which  shall  include  providing appropriate documentary evidence, its
          full and unfettered title to the ZNG Interests.

2.2  RESPONSIBILITY  OF  THE  PARTIES

     SEG  undertakes  to  procure  that  the  conditions  in  Clause  2.1  are
     satisfied  by  31 October 2005. SEG shall procure that the Company acquires
     good  title  to  the ZNG Interests, free from any Encumbrance (save for the
     Existing  Security which shall be released at Completion in accordance with
     Clause 3.2.8 below).

2.3  NON-SATISFACTION

     SEG  shall  promptly  give  notice  to  BP  of  the  satisfaction  of  the
     conditions above within two Business Days of becoming aware of the same. If
     any  of  the conditions in Clause 2.1 are not satisfied or waived by BP (in
     its  absolute discretion) on or before 30 November 2005 (or such later date
     as BP may determine) this Agreement shall lapse and no party shall have any
     claim  against any other in respect of this Agreement, except for any prior
     breach  of  the  terms  of  this  Agreement  and  except  for  Clauses  2.4
     (Liquidated Damages) 5.11 (Indemnification), 24 (Notices) and 28 (Governing
     Law  and  Submission to Jurisdiction), which shall remain in full force and
     effect.

2.4  LIQUIDATED  DAMAGES

     In  the  event  the  Agreement  terminates in accordance with Clause 2.3 or
     is rescinded pursuant to Clause 3.3.3 in circumstances where SEG has failed
     to  satisfy  its  obligations  under  Clause  3.2,  SEG shall pay to BP the
     following sums:

     2.4.1   US$500,000 on 31 December 2005; and

     2.4.2   US$500,000 on 30 April 2006.

     SEG  acknowledges  that  the  above  sums  consist  of  liquidated  damages
     that  represent  a  genuine  pre-estimate of the loss (including its costs,
     expenses  and  loss  of  profit) that would be suffered by BP if Completion
     does not occur due to SEG's failure to satisfy the conditions in Clause 2.1
     or  its obligations under Clause 3.2 and are fair and reasonable in all the
     circumstances.  SEG  waives  any  right  which it may have to challenge the
     validity at law of any obligation to pay the liquidated damages.

2.5  COMPLETION

     Completion  shall  take  place  at  the  registered  office  of  BP  two
     Business  Days  following fulfilment or waiver of the conditions set out in
     Clause  2.1,  or at such other place or on such other date as may be agreed
     between the BP and SEG.

3.   ESTABLISHMENT  OF  THE  COMPANY

3.1  WRITTEN  RESOLUTIONS  OF  THE  COMPANY

     On  the  Completion  Date,  BP  and  SEG shall sign the written resolutions
     of the Company in the agreed terms for the purposes of:

<PAGE>

     3.1.1 adopting  the  Articles  in  substitution  for  the existing articles
          of association of the Company;

     3.1.2 re-designating  the  issued  Ordinary  Share  in  the  capital of the
          Company  registered in the name of BP as an A Share and re-designating
          the  issued Ordinary Share in the capital of the Company registered in
          the name of SEG as a B Share;

     3.1.3 re-designating  the  98  unissued  Ordinary  Shares in the capital of
          the Company as 49 A Shares and 49 B Shares; and

     3.1.4 authorising  the  Directors  to  issue  and  allot 49 A Shares and 49
          B Shares to the Shareholders in accordance with this Agreement.

3.2  COMPLETION  OBLIGATIONS

     Once the resolutions in Clause 3.1 have been passed:

     3.2.1 BP and SEG shall subscribe for new Ordinary Shares as follows:

          (a)  BP  shall  subscribe  in  cash  the  sum  of  $75,000  for  49  A
               Shares; and

          (b)  SEG  shall,  in  consideration  for  the  transfer to the Company
               of the ZNG Interests, subscribe for 49 B Shares;

     3.2.2 BP  and  SEG  shall  procure  that  a Board meeting of the Company is
          convened and resolutions in the agreed terms are passed:

          (a)  approving  the  Shareholders'  applications  for  the  numbers of
               A Shares and B Shares set out above and allotting those Shares;

          (b)  adopting  31  December  as  the  Company's  accounting  reference
               date;

          (c)  adopting the Business Plan and the Budget; and

          (d)  appointing Coutts & Co. as its bankers;

     3.2.3 the  Company  shall  allot  and  issue  49  A  Shares  to BP and 49 B
          Shares  to  SEG,  in  each  case  credited  as  fully  paid,  and  the
          Shareholders shall procure that the names of BP and SEG are entered in
          the  Company's  register  of members as the respective holders of such
          shares;

     3.2.4 BP  shall  appoint  its  first  A  Directors pursuant to the Articles
          and this Agreement;

     3.2.5 SEG  shall  appoint  its  first  B Directors pursuant to the Articles
          and this Agreement;

     3.2.6 Baltic,  ZNG  and  Lend  Co  shall  enter  into a deed of novation in
          the agreed terms in relation to the loan agreement dated 28 April 2005
          and  immediately  thereafter BP shall procure that Lend Co shall enter
          into the Loan Agreement in accordance with Clause 11.1;

<PAGE>

     3.2.7 the  Company  shall  enter  into  the  Guarantee  and  Security
          Documents in accordance with Clause 11.2;

     3.2.8 BP  shall  procure  that  Baltic  releases  SEG  from its obligations
          under  the guarantee given by SEG to Baltic dated 28 April 2005 and in
          respect  of  the  Existing  Security  by executing the releases in the
          agreed terms;

     3.2.9 SEG  shall  confirm  that  it  has no claims against ZNG by executing
          the letter of acknowledgement in the agreed terms;

     3.2.10 SEG  shall  provide  to  the  Company  the  waiver  letters  in  the
          agreed terms signed by the shareholders and creditors of SEG;

     3.2.11 BP  shall  pay  to  the  Company  the sum of $75,000 as the proceeds
          for the subscription for Shares referred to at Clause 3.2.1(a);

     3.2.12 the  Company  shall  pay  to  SEG  the  sum  of  $75,000  as
          consideration for the transfer to it of the ZNG Interests;

     3.2.13 SEG  shall  procure  that  the  employment  agreements for all staff
          of  ZNG  and  those between SEG and Messrs Eret, Potapov and Zhuravlev
          are terminated and provide to BP written evidence of the same; and

     3.2.14 SEG  shall  provide  to  the  Company  and  BP written confirmations
          from  its  9  largest  shareholders  in  the  agreed terms agreeing to
          observe the restrictions in Clause 18.1.1.

<PAGE>

3.3  FAILURE  TO  PERFORM  OBLIGATIONS

     If  any  of  the  requirements  under  this  Clause 3 are not complied with
     on  the  date  fixed  for  Completion  the  Shareholder  not in default may
     (without  prejudice to its other rights and remedies including the right to
     claim damages for the breach):

     3.3.1 defer  Completion  to  a  date  not more than 30 days after such date
          (and  so  that the provisions of this Clause 3 (apart from this Clause
          3.3) shall apply to Completion as so deferred);

     3.3.2 proceed  to  Completion  so  far  as  practicable  (without prejudice
          to its rights under this Agreement);

     3.3.3 rescind  this  Agreement  without  liability  to  the  other
          Shareholder (otherwise than pursuant to Clause 2.4); or

     3.3.4 waive all or any of the obligations in question of the Shareholder in
     default.

4.   CONDUCT  PRIOR  TO  COMPLETION

4.1  BP  and  SEG  each  undertake  to procure that until Completion the Company
     remains a non-trading dormant company and neither of them shall transfer or
     otherwise  dispose  of  any interest in or create an Encumbrance over their
     respective Ordinary Shares.

<PAGE>

4.2  SEG  undertakes  to  regularly  consult  with BP about the conduct of ZNG's
     business  between  the  date  of  this  Agreement  and Completion and shall
     procure  that  such business is carried out in the usual course of business
     consistent  with  past  practice  so as to maintain the same as an on-going
     concern  and  that  no  transaction outside the usual course of business is
     carried out without the prior written consent of the BP. In particular, SEG
     shall  procure  that until Completion unless with the prior written consent
     of BP:

     4.2.1 no  further  participatory  interests  in  ZNG  will  be  created  or
          issued  and,  other  than  as  required by Clause 2.1.1, SEG shall not
          transfer  or  otherwise  dispose  of  any  interest  in, or create any
          Encumbrance over, the participatory interests in ZNG;

     4.2.2 other  than  as  referred  to  in  Clause  2.1.2,  no  alteration  or
          amendment  shall  be  made  to  the  Charter  or  the  operating,
          organisational or constitutional documents of ZNG;

     4.2.3 ZNG  shall  not  make  any  change  in  the  nature  or  scope of its
          business  as  carried  on  at the date of this Agreement, nor shall it
          deal  in any way with its existing oil and gas exploration licenses or
          the proposed new oil and gas exploration licences detailed in Schedule
          6  (including  (without  limitation)  any  amendment  to the terms of,
          nature  or  scope  of such licenses or the work programmes attached to
          them);

     4.2.4 ZNG  shall  not  enter  into  any  transaction,  contract  or
          arrangement  that  is  not  in  the  normal  or ordinary course of its
          business  as  carried  on  at  the  date  hereof  nor  enter  into any
          transaction  which  is  not  on  arm's  length  terms  nor  effect any
          acquisitions or disposals of any material assets;

     4.2.5 ZNG  shall  not  borrow  any  money  or  incur  any  material
          indebtedness;

     4.2.6 ZNG  shall  not  appoint  or  terminate,  or  alter  the  terms  of
          employment of, any employees or personnel in a managerial capacity;

     4.2.7 ZNG shall not create any Encumbrance over any of its assets;

     4.2.8 ZNG  shall  not  institute  or  settle any legal proceedings nor take
          any  steps to wind itself up or commence any insolvency proceedings in
          relation to itself; and

     4.2.9 ZNG  shall  not  declare  or  pay any dividend, or otherwise make any
          other form of distribution to its members.

5.   WARRANTIES  AND  INDEMNITIES

5.1  SEG  WARRANTIES

     SEG  warrants  and  represents  to,  and  undertakes  with, BP and JV Co in
     the terms of Part I of Schedule 3.

5.2  BP  WARRANTIES

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     BP  warrants  and  represents  to,  and  undertakes  with, SEG in the terms
     of Part II of Schedule 3.

5.3  REPETITION  OF  WARRANTIES

     SEG  shall  be  deemed  to  warrant,  represent and undertake to BP and the
     Company  in  the  terms of the ZNG Warranties at all times up to Completion
     with  reference to the facts and circumstances then subsisting (save that a
     reference to any fact, matter, event or circumstance existing, occurring or
     having  occurred  at  or  before  the  date of this Agreement shall also be
     construed  as  a reference to its existing, occurring or having occurred at
     or  before  such  time.  SEG undertakes (except only as may be necessary to
     give  effect  to this Agreement or except with the prior written consent of
     BP)  that  it  will  not  and  will  procure that ZNG will not do, allow or
     procure  any  act  or  omission  before Completion which would constitute a
     breach  of  or would be inconsistent with any of the Warranties if given at
     any time prior to Completion.

5.4  TERMINATION

     SEG  shall  immediately  disclose  to  BP  in  writing any of the following
     which  may  become  known to it after the date of this Agreement and before
     Completion:

     5.4.1 any material breach of any of the ZNG Warranties;

     5.4.2 anything  occurring  which  has,  or  would  be  likely to have after
          Completion,  a  material  adverse  effect  on  the business of ZNG (as
          presently carried on) including, without limitation, any litigation or
          arbitration  proceedings  being instituted or threatened by or against
          ZNG.

     If  any  such  disclosure  shall  be made, or if BP otherwise becomes aware
     of  any  such  matter  or  thing,  BP may at any time before Completion, by
     written notice to SEG, rescind this Agreement. A breach or claim or adverse
     effect  shall,  for the purposes of this Clause, be treated as material if,
     in the reasonable opinion of BP, when taken together with any other breach,
     claim  or  adverse  effect  of  the  nature  described in this Clause, such
     breach,  claim or adverse effect causes or is reasonably likely to cause or
     would  have  caused  or  would  be reasonably likely to have caused BP, the
     Company or ZNG damage or loss in aggregate in excess of US$20,000.

5.5  DISCLOSURE

     The  ZNG  Warranties  are  given  subject  to  the  matters  disclosed  in
     Schedule  4  (the  "DISCLOSURE  SCHEDULE"). Save to the extent it is fully,
     fairly and accurately disclosed in such Schedule, no fact, matter, event or
     circumstance of which a person seeking to make a claim under the Warranties
     (actual,  imputed  or  constructive) shall prejudice any such claim made by
     such person or operate to reduce any amount recoverable.

5.6  SEG'S  KNOWLEDGE

     Where  any  statement  in  the  Warranties  is  qualified by the expression
     "to the best of the knowledge, information and belief of SEG" or "so far as
     SEG  is  aware"  or  any  similar  expression,  SEG shall be deemed to have
     knowledge of anything of which ZNG has knowledge or anything of which it or

<PAGE>

     ZNG  would  have  had  knowledge  had  either  of them made due and careful
     enquiry  of  their  respective  officers  and  employees immediately before
     giving the Warranties.

5.7  RELIANCE

     The  parties  acknowledge  that  each  of  them  is  entering  into  this
     Agreement in reliance on those Warranties which are being given to them.

5.8  EFFECT  OF  COMPLETION

     Subject  to  any  other  terms  of  this  Agreement,  the  Warranties shall
     continue in full force and effect notwithstanding Completion.

5.9  CONSTRUCTION

     Each  of  the  Warranties  shall  be  construed  separately and none of the
     Warranties shall limit or govern the extent, application or construction of
     any other of the Warranties.

5.10 NOTIFICATION

     Each  party  giving  the  Warranties  agrees  to  notify  in  writing  the
     party/parties  to  whom  they  are  being  given,  as  soon  as  reasonably
     practicable  after it becomes aware of the same, all details of which it is
     aware  of  any fact or circumstance which renders or might render untrue or
     misleading any of the Warranties it has given.

5.11 INDEMNIFICATION

     Each  of  the  parties  (the  "INDEMNIFYING  PARTY")  undertakes  to
     indemnify,  and  to  keep  indemnified,  each of the other parties (each an
     "INDEMNIFIED  PARTY"  and  together  the "INDEMNIFIED PARTIES") against all
     losses  or  liabilities  (including,  without  limitation,  any  direct  or
     indirect consequential losses, loss of profit, loss of reputation, damages,
     claims,  demands, proceedings, costs, legal and other professional fees and
     costs,  penalties and expenses) which may be suffered or incurred by any of
     the  Indemnified  Parties  and  which  arise  directly  or  indirectly  in
     connection  with  (1)  a  breach  of  any  of  the  Warranties given by the
     Indemnifying  Party  to  any  of  the Indemnified Parties and (2) a default
     under or breach of any of the terms of this Agreement.

5.12 LIMITATIONS

     Except  in  the  case  of  case  of  fraud, dishonesty or wilful misconduct
     or  concealment, SEG shall not be liable for any claim under ZNG Warranties
     unless  written  notice of such claim giving reasonable details thereof has
     been  given to it by or on behalf of BP or the Company, as the case may be,
     in  respect  of  a  claim  under  paragraph  13  of the ZNG Warranties (Tax
     Matters),  on or before the tenth anniversary of the date of this Agreement
     and  in respect of any other claim, on or before the date which is eighteen
     months from the date of this Agreement.

5.13 GROSS-UP

     If  a  payment  due  from  an  Indemnifying  Party  to an Indemnified Party
     under Clause 5.11 is subject to tax (whether by way of direct assessment or
     withholding  at  its  source),  the  Indemnified Party shall be entitled to
     receive  from  the  Indemnifying Party such amounts as will ensure that the

<PAGE>

     net  receipt, after tax, to the Indemnified Party in respect of the payment
     is the same as it would have been were the payment not subject to tax.

6.   THE  BUSINESS  OF  THE  COMPANY

6.1  CONDUCT  OF  THE  BUSINESS

     The  Shareholders  agree  that  their  respective  rights  in  the  Company
     shall be regulated by this Agreement and the Articles. The Shareholders and
     the  Company  agree  to  be bound by and comply with the provisions of this
     Agreement  which  relate to them and all provisions of the Articles will be
     enforceable  by  the  parties  between themselves in whatever capacity. The
     Shareholders shall:

     6.1.1 promote the best interests of the Company;

     6.1.2 (so  far  as  they  lawfully  can)  ensure  that the Company performs
          and  complies with all of its obligations under this Agreement and the
          Articles; and

     6.1.3 ensure  that  the  Business  is  conducted  in  accordance with sound
          and good business practice and the highest ethical standards.

6.2  PROMOTION  OF  THE  BUSINESS

     6.2.1 Subject  to  Clause  8.2.1,  the  business  of  the  Company shall be
          confined to the Business.

     6.2.2 The  Shareholders  shall  procure  that  the  Company  and  any Group
          Company  shall  have  complete independence in operations and that any
          expansion,  development  or  evolution  of the Business (whether to be
          conducted as part of or in connection with the Company's main business
          or  ancillary  to  it)  will only be effected through the Company or a
          wholly-owned subsidiary. If such consent is obtained, all Shareholders
          shall be entitled to participate in any firm or company formed for the
          purpose  of such expansion, development or evolution pro rata to their
          holdings of Shares unless all the Shareholders shall otherwise agree.

     6.2.3 The  Company  and  any  Group  Company  shall  use all reasonable and
          proper  means  to  maintain,  improve  and  extend  the  Business  in
          accordance with the Business Plan.

6.3  HEAD  OFFICE

     The  head  office  of  the  Company  shall  be  situated  in  the  London,
     England.

6.4  OPERATING  AGREEMENT

     The  parties  shall  procure  that  prior to production and drilling of any
     oil  and  gas  reserves by ZNG, ZNG shall enter into an operating agreement
     with  BP  on  terms  to be agreed by the Board of the Company (on behalf of
     ZNG) and BP pursuant to which BP shall be engaged to provide production and
     drilling and related services to ZNG.

<PAGE>

7.   DIRECTORS  AND  MANAGEMENT

7.1  A DIRECTORS

     7.1.1 The A Shareholder may appoint three A Directors.

     7.1.2 Simon Escott and James Pockney are the first A Directors.

     7.1.3 Any  A  Director  may  be  removed by the A Shareholder in accordance
          with  the  Articles  and  in such event the Shareholders shall procure
          that  the  Company  promptly removes the A Director from his position.
          The A Shareholder can appoint another A Director in his place.

7.2  B  DIRECTORS

     7.2.1 The B Shareholder may appoint three persons as B Directors.

     7.2.2 David Zaikin and Victor Repin are the first B Directors.

     7.2.3 Any  B  Director  may  be  removed by the B Shareholder in accordance
          with  the  Articles  and  in such event the Shareholders shall procure
          that  the  Company  promptly removes the B Director from his position.
          The B Shareholder can appoint another B Director in his place.

     7.2.4 The  B  Shareholder  shall  consult  with  the A Shareholder prior to
          appointing  any person as a B Director for the purposes of determining
          whether  such  person  is a suitable candidate to be a director of the
          Company  and  shall  take  into account the A Shareholder's reasonable
          representations in relation thereto.

7.3  CHAIRMAN  AND  CEO

     7.3.1 The  Chairman  of  the  Board  shall  be  appointed  by the Board and
          shall initially be David Zaikin. If the Chairman is not present at any
          Board  meeting,  the  Directors  present  may appoint any one of their
          number to act as Chairman for the purpose of the meeting.

     7.3.2 The  CEO  shall  be  appointed  by  BP.  The first CEO shall be Simon
          Escott.

7.4  SECRETARY

     The  Board  shall  appoint  the  secretary  of  the  Company.  The  first
     secretary shall be Mark Gilchrist.

7.5  BOARD  MEETINGS

     7.5.1 Board  meetings  shall  be  held  at  least  four times a year and at
          not  more  than  three  monthly  intervals.  At  least ten clear days'
          written  notice  shall  be given to each of the Directors of all Board
          meetings  (except  if  there  are  exceptional  circumstances  or  the
          majority  of both the A Directors and the B Directors agree to shorter
          notice).

     7.5.2 Each notice of meeting shall:

<PAGE>

          (a)  specify a reasonably detailed agenda;

          (b)  be accompanied by any relevant papers; and

          (c)  be  sent  by  courier,  facsimile  transmission  or email if sent
               to an address outside the United Kingdom.

     7.5.3 The  quorum  at  a  Board  meeting  shall be one A Director and one B
          Director present at the time when the relevant business is transacted.
          If  a  quorum is not present within half an hour of the time appointed
          for the meeting or ceases to be present, the Director(s) present shall
          adjourn  the meeting to a specified place and time three Business Days
          after  the  original  date.  Notice  of the adjourned meeting shall be
          given by the secretary of the Company.

     7.5.4 Board  meetings  shall  be  chaired  by the Chairman. If the Chairman
          is  absent  from  any Board meeting, the Directors present may appoint
          any one of their number to act as Chairman for the meeting.

     7.5.5 At  any  Board  meeting  every  A Director and every B Director shall
          have  one vote. If the number of A Directors or B Directors present is
          not  equal,  the  number  of votes exercisable by the A Directors or B
          Directors  shall be increased so that each class of Directors can cast
          the same number of votes.

     7.5.6 All  business  arising  at  any  Board meeting shall be determined by
          resolution  passed  by  a  majority of Directors present. The Chairman
          shall  not  be  entitled  to a second or casting vote. The A Directors
          shall at all times together have an additional casting vote.

     7.5.7 Any  Director  may  vote  on  a  matter and be taken into account for
          the purposes of a quorum even if he is interested in that matter.

     7.5.8 The  Shareholders  shall  use  their  reasonable endeavours to ensure
          that at least one Director appointed by them attends Board meetings.

7.6  SENIOR  MANAGEMENT

     7.6.1 The  A  Shareholder  shall  at  all  times  be  entitled  to  appoint
          persons  to the following positions or roles within the Company or any
          Group Company:

          (a)  subject to Clause 7.6.2, the Finance Controller;

          (b)  the Reservoir Engineer;

          (c)  the Drilling Supervisor; and

          (d)  the Logistic and Procurement Supervisor.

     7.6.2 The  A  Shareholder  shall  consult  with  the B Shareholder prior to
          appointing  any  person  to  the  position  of  Finance  Controller as
          referred to in Clause 7.6.1(a) above.

<PAGE>

8.   RESERVED  MATTERS

8.1  MATTERS  RESERVED  TO  THE  BOARD

     The  Board  shall  be  responsible  for  the following matters in so far as
     they relate to any Group Company:

     8.1.1 the appointment and removal of the Auditors;

     8.1.2 any  change  to  the  accounting  reference  date  or  accounting
          policies;

     8.1.3 the  entry  into  of  any  joint  venture, partnership, consortium or
          other similar arrangement;

     8.1.4 the  appointment,  removal  and  conditions  of  employment  of  any
          director  or  senior executive, including the General Director of ZNG,
          (other  than the appointment or removal of Directors and/or members of
          senior management pursuant to Clause 7.6);

     8.1.5 the  appointment,  discharge,  remuneration  and  conditions  of
          employment of employees;

     8.1.6 without  prejudice  to  Clause  8.2.10,  the adoption of any bonus or
          profit-sharing  scheme,  any share option or share incentive scheme or
          employee  share  trust  or  share ownership plan or retirement benefit
          scheme for employees;

     8.1.7 the cessation of any business operation;

     8.1.8 the  entry into of any contract or commitment not provided for in the
          Budget;

     8.1.9 any  material  transaction  with  a  Shareholder  or  any  of  its
          Associated  Companies not in the ordinary course of business or not on
          arms' length commercial terms;

     8.1.10 the  acquisition  of  any  assets  or  property  (other  than in the
          ordinary course of business);

     8.1.11 the sale or disposition of any fixed assets;

     8.1.12 making  borrowings  or  creating  indebtedness  in  the  nature  of
          borrowings,  or  the creation of any charge or other security over any
          assets or property;

     8.1.13 subject  to  Clause  10,  the  payment  or  declaration  of  any
          dividend or other distribution on account of shares in its capital;

     8.1.14 the  commencement  or  settlement  of  any  litigation,  arbitration
          or other proceedings;

     8.1.15 the  incorporation  of  new  subsidiary  undertakings  or  the
          acquisition  of  any  share  capital  or  other securities of any body
          corporate;

<PAGE>

     8.1.16 the  giving  of  any  guarantee  or  indemnity  other  than  in  the
          normal course of its business; and

     8.1.17 the  making  of  any  loan  or  advance  to  any  person, firm, body
          corporate or other business.

8.2  SHAREHOLDER  RESERVED  MATTERS  -  LIMITATIONS  ON  THE  BOARD

     The  Shareholders  shall  procure  that  no  action  is taken or resolution
     passed  by  the  Company  or  any Group Company in respect of the following
     matters  or  their  nearest  equivalent  in  the  case  of  a Group Company
     ("SHAREHOLDER  RESERVED MATTERS"), without the prior written consent of all
     of the Shareholders:

     8.2.1 any  material  change  to  the  nature  of  the  Business  or
          geographical  area  in which the Business operates, or carrying on any
          business other than the Business;

     8.2.2 any change to its memorandum and Articles;

     8.2.3 any change of name;

     8.2.4 the  sale  of  any  Group  Company  or  any  consolidation  or
          amalgamation with any other company;

     8.2.5 the  disposal  of  or  dilution  of the Company's interests, directly
          or indirectly, in any Group Company;

     8.2.6 the adoption of the Audited Accounts;

     8.2.7 any  increase  in  the  Company's  authorised or issued share capital
          (except as provided for in Clause 3);

     8.2.8 any reduction in the Company's share capital;

     8.2.9 any reclassification of the Company's share capital;

     8.2.10 the  grant  of  any  option  or  other  interest  (in  the  form  of
          convertible  securities or in any other form) over or in the Company's
          share capital;

     8.2.11 the  redemption  or  purchase  of  any  of  the Company's own shares
          or any other reorganisation of its share capital; and

     8.2.12 any  resolution  for  the  winding  of  the  Company or presentation
          of  any  petition  for  its  administration  (unless  it  has  become
          insolvent).

<PAGE>

8.3  RELATED  TRANSACTIONS

     A  series  of  related  transactions  shall  be  construed  as  a  single
     transaction,  and any amounts involved in the related transactions shall be
     aggregated, to determine whether a matter is a Shareholder Reserved Matter.

9.   BUDGETS  AND  FINANCIAL  INFORMATION

9.1  INFORMATION  TO  BE  PREPARED

     The  Company  shall  prepare  and  submit to the Board and the Shareholders
     the  following  information  as  soon  as  possible  and  no later than the
     dates/times set out below:

     9.1.1 the  unaudited  results  of  the  Company  and each Group Company for
          the previous financial year within 25 Business Days of the end of each
          financial year;

     9.1.2 Audited  Accounts  for  the  previous  financial  year  within  three
          months of the end of each financial year;

     9.1.3 a  draft  Business  Plan  for  the  Group  for the following one year
          period two months before the end of each financial year;

     9.1.4 a  detailed  draft  Budget  for  the  Group  for  the  following
          financial  year  two  months  before  the  end  of each financial year
          (including  estimated major items of revenue and capital expenditure).
          The  Budget  shall  be broken down on a monthly basis, shall contain a
          cash  flow forecast and a balance sheet showing the projected position
          of the Group as at the end of the following financial year;

     9.1.5 monthly  unaudited  management  accounts  for  each  Group  Company
          including  (1)  a  detailed profit and loss account, balance sheet and
          cash  flow  statement and cash flow forecast for the next three months
          and  (2)  a review of the Budget including a reconciliation of results
          with revenue and capital budgets within 20 Business Days after the end
          of each month; and

     9.1.6 such  further  information  as  any  Shareholder  may  reasonably
          require relating to the Business or financial condition of the Company
          or of any Group Company.

9.2  APPROVAL  OF  BUDGETS  AND  BUSINESS  PLANS

     The  Shareholders  shall  approve  the  draft  Budget  and  Business  Plan
     within  30  Business  Days of receiving them, subject to such amendments as
     they  agree  are appropriate. The Shareholders shall procure that the Board
     shall  review  the  Budget  regularly  and  may  propose  changes  to  the
     Shareholders.  The  Shareholders  shall  reply  to such proposals within 30
     Business Days of receiving them.

10.  DISTRIBUTION  POLICY  AND  MANAGEMENT  FEES

10.1 RESTRICTION  ON  DISTRIBUTION  OF  NET  PROFIT

     The  Company  shall  not  make  any  distributions  during  the Loan Period
     and  BP  and  SEG  shall  ensure  that all revenues of the Company shall be
     applied  towards  discharging the Loans or any loans made to the Company by
     Lend Co pursuant to clause 11.1.2.

<PAGE>

10.2 DISTRIBUTION  OF  NET  PROFIT

     10.2.1 Subject  to  Clause  10.1,  the  Company  shall  distribute  to  the
          Shareholders  such percentage as the Board determines of the Company's
          profits  lawfully  available  for distribution in each financial year,
          and  the  Board  shall  determine the amount of available profits that
          each  Group  Company  shall  distribute  to  its  shareholders in each
          financial  year.  All  distributions  shall  be  apportioned  and paid
          proportionately on the Shares.

     10.2.2 The  annual  general  meeting  of  the  Company  at  which  Audited
          Accounts  are laid before the Shareholders must be held not later than
          three months after the end of the relevant financial year.

     10.2.3 The  Auditors  shall  be  instructed  to  report  (at the expense of
          the  Company)  the amount of the profits available for distribution by
          the  Company at the same time as they sign their report on the Audited
          Accounts.

10.3 MANAGEMENT  FEES

     The  Company  shall  pay  to  the  A  Shareholder and the B Shareholder the
     following  monthly fees (exclusive of VAT, if any) in consideration for the
     provision  of  the  services  of  the  A  Directors  and  the  B  Directors
     respectively:

     10.3.1 $35,000 to the A Shareholder; and

     10.3.2 $25,000 to the B Shareholder.

     The  parties  shall  as  soon  as  reasonably  practicable  following
     Completion  agree  in  good  faith  such  arrangements  as are necessary to
     minimise  the amount of tax and VAT to be paid by the parties in respect of
     such  fees.  In particular, BP and SEG shall each enter into agreements for
     management  services  with the Company on terms to be agreed by the parties
     and  the  parties  shall  procure  that  the  Company  shall  enter into an
     agreement  for  consultancy services with ZNG and shall register for United
     Kingdom VAT.

11.  FINANCE  FOR  THE  COMPANY

11.1 THE  LOANS

     11.1.1 BP  shall  procure  that  Lend  Co  shall  enter  into  the  Loan
          Agreement at Completion for the purposes of making the Loans to ZNG.

     11.1.2 BP  shall  procure  that  Lend  Co  shall  provide  loans  to  the
          Company,  on terms to be agreed between Lend Co and the Company (which
          shall  be  on  terms similar to the terms on which the Loans are to be
          made  to  ZNG  under  the  Loan  Agreement)  to  enable  it to pay the
          management  fees  referred to in Clause 10.3 above (including any VAT)
          until  such  time  that  the  Company  has  sufficient  revenue  from
          distributions made by ZNG to fund such fees.

<PAGE>

11.2 SECURITY

     The  Company  shall  on  Completion  enter  into  the  Guarantee  for  the
     purposes  of  guaranteeing  and  providing  security  in  respect  of  the
     obligations  of  ZNG  to  Lend  Co in respect of the Loans and the Security
     Documents for the purposes of securing its obligations to Lend Co under the
     Guarantee, the loans to be made under Clause 11.1.2 and otherwise.

11.3 DRAW  DOWNS

     The  Board's  prior  approval  shall  be  required for any draw downs to be
     made by ZNG under the Loans.

11.4 FURTHER  FUNDING

     Other  than  the  Loans  and  the  loans  to  be  made under Clause 11.1.2,
     neither  Shareholder  shall  be  obliged  to  contribute  further  funds or
     participate  in  any  guarantee  or  similar  undertaking  for  the Group's
     benefit. Notwithstanding the foregoing, on completion of the Work Programme
     (as such term in defined in the Loan Agreement) to the satisfaction of Lend
     Co,  the  parties  shall  consult  with  each other whether further amounts
     should  be  advanced to ZNG under the Loan Agreement, provided that neither
     BP  nor  Lend  Co  shall  be  under  any obligation to provide such further
     funding.

12.  TRANSFERS  OF  SHARES

12.1 GENERAL  PROHIBITION  AGAINST  SHARE  TRANSFERS

     No  Shareholder  can  do,  or  agree  to  do,  any of the following without
     the  prior  written consent of the other Shareholder unless it is permitted
     by this Clause or Clause 13:

     12.1.1 create any Encumbrance over any of its Shares;

     12.1.2 sell,  transfer  or  otherwise  dispose  of,  or  grant  any  option
          over, any of its Shares or any interest in its Shares; or

     12.1.3 enter  into  any  agreement  in  respect  of  the  votes attached to
          any of its Shares.

12.2 TRANSFERS  TO  ASSOCIATED  COMPANIES

     12.2.1 Any  Shareholder  may  transfer  all  of its Shares to an Associated
          Company  on  giving  prior written notice to the other Shareholder. An
          Associated  Company  must  be  under  an obligation to re-transfer its
          Shares  to  the  Shareholder  or  another  Associated  Company of that
          Shareholder immediately if it ceases to be an Associated Company.

     12.2.2 Following  a  transfer  of  Shares  to  an  Associated  Company, the
          original  transferring Shareholder (but not a subsequent transferor in
          a  series  of transfers to Associated Companies) shall remain party to
          this  Agreement  and  shall  be  jointly and severally liable with the
          transferee  under  this  Agreement  as a Shareholder in respect of the
          transferred Shares.

<PAGE>

12.3 RESTRICTIONS  DURING  LOAN  PERIOD

     12.3.1 Shares  may  not  during  the  Loan  Period  be transferred by the B
          Shareholder to any third party other than an Associated Company.

     12.3.2 The  A  Shareholder  shall  not  be  prevented  from  creating  an
          Encumbrance over the A Shares during the Loan Period.

12.4 THIRD  PARTY  OFFERS

     Subject  to  Clause  12.3,  a  Shareholder  may  transfer  its  Shares to a
     third party only if it receives an offer (the "OFFER"):

     12.4.1 which is a bona fide Offer in writing;

     12.4.2 from  a  third  party  which  has  its  own  financial  resources to
          meet  its  obligations  under  the  Offer  or has an unconditional and
          legally binding commitment from a lender(s) for that finance;

     12.4.3 which  is  irrevocable  and  unconditional (except for any Permitted
     Condition);

     12.4.4 which is governed by English law;

     12.4.5 which  is  for  cash  consideration  in  US$  only  and which is for
          all of the Shares of the selling Shareholder; and

     12.4.6 which  contains  all  material  terms  and conditions (including the
          price and the intended completion date of the Offer).

12.5 NOTICE  OF  OFFERS

     If  a  Shareholder  receives  an  Offer  which it wishes to accept, it must
     immediately  give  written  notice  (the  "TRANSFER  NOTICE")  to the other
     Shareholder  (the  "REMAINING  SHAREHOLDER")  offering to sell those Shares
     which  are  the  subject  of the Offer to the other Shareholder at the same
     cash  price  as  set out in the Offer or for a price per Share equal to its
     Fair  Value,  whichever  is  the  lower,  and  on  terms  which are no less
     favourable than those contained in the Offer. The Transfer Notice must also
     state:

     12.5.1 the  period  within  which  the  offer  to  sell  the  Shares to the
          Remaining  Shareholder  shall  remain open to be accepted. This period
          must be at least 24 Business Days from the date of the Transfer Notice
          (the "ACCEPTANCE PERIOD"); and

     12.5.2 full details of all other terms and conditions of the Offer.

12.6 OPTIONS  OF  REMAINING  SHAREHOLDER

     Once  the  Remaining  Shareholder  has  received  a  Transfer Notice it may
     either:

     12.6.1 send  a  written  notice  to  the  selling  Shareholder  (an
          "ACCEPTANCE  NOTICE") within the Acceptance Period accepting the offer
          set out in the Transfer Notice;

<PAGE>

     12.6.2 send  a  written  notice  to  the  selling  Shareholder  within  the
          Acceptance  Period declining the offer set out in the Transfer Notice;
          or

     12.6.3 neither  send  an  Acceptance  Notice  nor  reply  to  the  Transfer
          Notice  within  the  Acceptance  Period.  In  this case, the Remaining
          Shareholder  shall be deemed not to have accepted the offer set out in
          the Transfer Notice.

12.7 CONSEQUENCES  OF  TRANSFER  NOTICE

     12.7.1 If  the  offer  set  out  in  the  Transfer  Notice is accepted, the
          selling Shareholder must sell its Shares to the Remaining Shareholder.

     12.7.2 If  the  offer  set  out  in  the Transfer Notice is not accepted or
          not  deemed  to have been accepted, the selling Shareholder may accept
          the  Offer  and sell its Shares to the third party making the Offer on
          the terms and conditions of the Offer.

12.8 COMPLETION  OF  TRANSFER

     The  sale  of  the  Shares  in accordance with this Clause shall be made on
     the following terms:

     12.8.1 if  any  of  the  Permitted  Conditions  to the Acceptance Notice or
          the Offer is not satisfied or waived 60 Business Days (or, in the case
          of  a  regulatory  approval,  120  Business Days) after service of the
          Acceptance Notice or acceptance of the Offer, then that Notice or that
          Offer,  as  appropriate,  shall  lapse.  Otherwise,  completion of the
          transfer  of  the  Shares shall be completed seven Business Days after
          the  date  of  expiry  of  the  Acceptance  Period  or  the  date  of
          satisfaction  or  waiver of all Permitted Conditions (whichever is the
          later)  (the "TRANSFER DATE") and at such reasonable time and place as
          the  Shareholders agree or, failing which, at the registered office of
          the Company;

     12.8.2 the  selling  Shareholder  must  deliver  to the buyer in respect of
          the Shares which it is selling on or before the Transfer Date:

          (a)  duly executed share transfer forms;

          (b)  the relevant share certificates; and

          (c)  a  power  of  attorney  in  such  form  and  in  favour  of  such
               person  as the buyer may nominate to enable the buyer to exercise
               all  rights  of  ownership  in  respect  of the Shares to be sold
               including voting rights;

     12.8.3 the  buyer  must  pay  the  total  consideration  due for the Shares
          to the selling Shareholder by telegraphic transfer to the bank account
          of  the  selling  Shareholder  notified  to  it for the purpose on the
          Transfer Date;

     12.8.4 completion  of  the  sale  of  the  Shares  of  all  selling
          Shareholders must take place simultaneously; and

     12.8.5 in accordance with Clause 16.

<PAGE>

12.9 FAILURE  TO  COMPLETE  SALE

     12.9.1 If  the  selling  Shareholder  fails  or  refuses to comply with its
          obligations  in  this  Clause,  the  Company may authorise a person to
          execute  and deliver the necessary transfer on its behalf. The Company
          may  receive  the  purchase money in trust for the selling Shareholder
          and cause the buyer to be registered as the holder of the Shares being
          sold.  The  receipt  of  the Company for the purchase money shall be a
          good  discharge  to  the  buyer  (who shall not be bound to see to the
          application  of  those moneys). After the buyer has been registered as
          holder  of the Shares being sold in purported exercise of these powers
          the validity of the proceedings shall not be questioned by any person.

     12.9.2 If  any  selling  Shareholder  fails  or  refuses  to  transfer  any
          Shares in accordance with this Clause the buyer, or where the buyer is
          not a party, the Company on its behalf and acting on its instructions,
          may  serve a default notice. Within five Business Days of service of a
          default  notice  (unless  such  non-compliance  has  previously  been
          remedied  to the reasonable satisfaction of the buyer), the defaulting
          selling  Shareholder shall not exercise any of its powers or rights in
          relation  to  management  of, and participation in the profits of, the
          Company under this Agreement, the Articles or otherwise. The Directors
          appointed by the defaulting seller (or its predecessor in title) shall
          not:

          (a)  be entitled to vote at any Board meeting;

          (b)  be  required  to  attend  any  meeting  of  Directors in order to
               constitute a quorum; or

          (c)  be  entitled  to  receive  or  request  any  information from the
               Company.

     12.9.3 If  the  third  party  making  the  Offer  fails  to  purchase  the
          Shares  in accordance with the Offer, the Shareholders shall endeavour
          to find another third party to purchase their Shares.

12.10 GENERAL

     12.10.1 The  Shareholders  shall  keep  the  Company  informed,  at  all
          times, of the issue and contents of any notice served pursuant to this
          Clause and any election or acceptance relating to those notices.

     12.10.2 The  Shareholders  waive  their  pre-emption  rights  to  the
          transfer of Shares contained in this Agreement and the Articles to the
          extent necessary to give effect to this Clause.

     12.10.3 For  the  purposes  of  Article  27(c)  of  the  Articles  the
          Shareholders  hereby  consent  to  the  transfer  of  any  Shares made
          pursuant  to  and  in  accordance  with  this  Clause  12, which shall
          therefore  be  a  "PERMITTED  TRANSFER"  as  such  term is used in the
          Articles.

13.  DEADLOCK

13.1 ESCALATION  PROCEDURE

     13.1.1 If  the  Board  cannot  reach  agreement on any resolution before it
          within  14  Business Days of such resolution first being tabled at the

<PAGE>

          Board  meeting  or  two  or  more consecutive Board meetings have been
          dissolved  because  a  quorum  is not present, the subject of any such
          resolution  before  them  shall  be  referred  immediately  to  the
          Shareholders.

     13.1.2 If  the  Shareholders  cannot  reach  agreement  on  any  matter
          referred  to  them under Clause 13.1.1 within 14 Business Days of that
          matter  being referred to them (a "DEADLOCK MATTER"), the Shareholders
          shall  refer  the  Deadlock  Matter  to  their respective chairmen for
          resolution.  Either  chairman  of  a  Shareholder  may  nominate  an
          independent  third  party  acceptable  to the other chairman to act as
          mediator to assist them to resolve the Deadlock Matter.

13.2 "RUSSIAN  ROULETTE"

     If  the  Deadlock  Matter  cannot  be  resolved  by  the chairmen within 30
     Business  Days  of  the  matter  being referred to them and any Shareholder
     considers  that  the  Deadlock Matter may materially adversely effect their
     interests  or  the  interests  of  the  Company,  then any Shareholder (the
     "INITIATOR")  may  serve  a  notice  (a  "DEADLOCK  NOTICE")  on  the other
     Shareholder (the "RESPONDER"):

     13.2.1 offering  to  sell  all  of  the  Shares  that  it  holds  (the
          "INITIATOR'S SHARES"); and

     13.2.2 failing  that,  offering  to  buy  all  of  the  Shares  that  the
          Responder holds (the "RESPONDER'S SHARES").

     If  each  Shareholder  receives  a  properly delivered Deadlock Notice, the
     first  notice  to  be properly delivered shall prevail. If Deadlock Notices
     have  been  deemed  to have been served simultaneously, the Deadlock Notice
     which states the higher Deadlock Price (as defined below) shall prevail.

13.3 DEADLOCK  NOTICE

     The Deadlock Notice shall:

     13.3.1 set  out  a  simple  cash  price per Share at which the Initiator is
          prepared  to sell the Initiator's Shares or buy the Responder's Shares
          (the  "DEADLOCK PRICE") but must not contain any other condition other
          than a Permitted Condition;

     13.3.2 be  irrevocable  without  the  written  consent  of  all  the
           Shareholders;

     13.3.3 constitute  an  offer  by  the  Initiator  to  sell  all  of  the
          Initiator's  Shares to the Responder at the Deadlock Price. This offer
          is  open for acceptance by the Responder for 28 Business Days from the
          date of service of the Deadlock Notice (the "OFFER PERIOD"); and

     13.3.4 if  the  Responder  does  not  elect  to  buy the Initiator's Shares
          before the end of the Offer Period, constitute an alternative offer by
          the  Initiator  to  buy  all of the Responder's Shares at the Deadlock
          Price.

13.4 CONSEQUENCES  OF  DEADLOCK  NOTICE

     13.4.1 At  any  time  before  the  expiry of the Offer Period the Responder
          may  give written notice to the Initiator that it shall buy all of the
          Initiator's  Shares  at  the Deadlock Price and otherwise on the terms

<PAGE>

          set  out  in this Clause (a "RESPONSE NOTICE"). The Response Notice is
          irrevocable  and must not contain any condition other than a Permitted
          Condition.  Upon service of a Response Notice, the Initiator must sell
          (upon  payment of the Deadlock Price), and the Responder must buy, all
          the Initiator's Shares at the Deadlock Price.

     13.4.2 If  a  Response  Notice  is  not  served  before  the  expiry of the
          Offer Period, the Responder shall be deemed to have declined the offer
          by the Initiator in the Deadlock Notice to sell the Initiator's Shares
          and  the Responder must sell (upon payment of the Deadlock Price), and
          the Initiator must buy (at the Deadlock Price), all of the Responder's
          Shares.

13.5 COMPLETION  OF  TRANSFER

     The  sale  of  the  Shares  in accordance with this Clause shall be made on
     the following terms:

     13.5.1 if  any  of  the  Permitted  Conditions  to  the  Deadlock Notice or
          Response  Notice  is  not satisfied or waived 60 Business Days (or, in
          the case of a regulatory approval, 120 Business Days) after service of
          that Notice then that Notice shall lapse. Otherwise, completion of the
          transfer  of  the  Shares shall be completed seven Business Days after
          the  end  of the Offer Period or the date of satisfaction or waiver of
          all  Permitted  Conditions  (whichever  is  the  later) (the "TRANSFER
          DATE") and at such reasonable time and place as the Shareholders agree
          or, failing which, at the registered office of the Company;

     13.5.2 the  selling  Shareholder  shall  deliver  to  the  buyer in respect
          of the Shares it is selling on or before the Transfer Date:

          (a)  duly executed share transfer forms;

          (b)  the relevant share certificates; and

          (c)  a  power  of  attorney  in  such  form  and  in  favour  of  such
               person  as the buyer may nominate to enable the buyer to exercise
               all  rights  of  ownership  in  respect  of the Shares to be sold
               including voting rights;

     13.5.3 the  buyer  shall  pay  the  Deadlock  Price  to  the  selling
          Shareholder by telegraphic transfer to the Bank account of the selling
          Shareholder notified to it for the purpose on the Transfer Date; and

     13.5.4 in accordance with Clause 16.

13.6 FAILURE  TO  TRANSFER

     13.6.1 If  the  selling  Shareholder  fails  or  refuses to comply with its
          obligations  in  this  Clause,  the  Company may authorise a person to
          execute  and deliver the necessary transfer on its behalf. The Company
          may  receive  the  purchase money in trust for the selling Shareholder
          and cause the buyer to be registered as the holder of the Shares being
          sold.  The  receipt  of  the Company for the purchase money shall be a
          good  discharge  to  the  buyer  (who shall not be bound to see to the
          application  of  those moneys). After the buyer has been registered as

<PAGE>

          the  holder  of  the  shares being sold in purported exercise of these
          powers  the validity of the proceedings shall not be questioned by any
          person.

     13.6.2 If  any  selling  Shareholder  fails  or  refuses  to  transfer  any
          Shares  in  accordance  with this Clause the buyer may serve a default
          notice.  Within  five  Business  Days  of  service of a default notice
          (unless  such  non-compliance  has  previously  been  remedied  to the
          reasonable  satisfaction  of  the  buyer),  the  defaulting  selling
          Shareholder shall not exercise any of its powers or rights in relation
          to  management  of,  and  participation in the profits of, the Company
          under  this  Agreement,  the  Articles  or  otherwise.  The  Directors
          appointed by the defaulting seller (or its predecessor in title) shall
          not:

          (a)  be entitled to vote at any Board meeting;

          (b)  be  required  to  attend  any  meeting  of  Directors in order to
               constitute a quorum; or

          (c)  be  entitled  to  receive  or  request  any  information from the
               Company.

13.7 GENERAL

     13.7.1 The  Shareholders  shall  keep  the  Company informed, at all times,
          of the issue and contents of any notice served pursuant to this Clause
          and any election or acceptance relating to those notices.

     13.7.2 The  Shareholders  waive  their  pre-emption  rights to the transfer
          of  Shares  contained in this Agreement and the Articles to the extent
          necessary to give effect to this Clause.

     13.7.3 For  the  purposes  of  Article  27(c)  of  the  Articles  the
          Shareholders  hereby  consent  to  the  transfer  of  any  Shares made
          pursuant  to  and  in  accordance  with  this  Clause  13, which shall
          therefore  be  a  "PERMITTED  TRANSFER"  as  such  term is used in the
          Articles.

14.  DEFAULT

14.1 EVENTS  OF  DEFAULT

     A  Shareholder  (the  "DEFAULTING  SHAREHOLDER")  suffers  an  Event  of
     Default where:

     14.1.1 it  commits  a  material  breach  of  this  Agreement and either (1)
          the  breach  is  not  capable  of being remedied or (2) the Defaulting
          Shareholder does not remedy that breach within 20 Business Days of the
          other  Shareholder  sending  it  written notice requiring it to remedy
          that breach;

     14.1.2 it  is  unable  or  admits  inability  to pay its debts as they fall
          due,  suspends  making  payments  on any of its debts or, by reason of
          actual  or  anticipated financial difficulties, commences negotiations
          with  one  or more of its creditors with a view to rescheduling any of
          its indebtedness;

     14.1.3 the  value  of  its  assets  is  less  than  its liabilities (taking
          into account contingent and prospective liabilities);

<PAGE>

     14.1.4 a moratorium is declared in respect of any of its indebtedness;

     14.1.5 any  corporate  action,  legal  proceedings  or  other  procedure or
          step  is  taken  (or  any  analogous procedure or step is taken in any
          jurisdiction) in relation to:

          (a)  the  suspension  of  payments,  a  moratorium  of  any
               indebtedness,  winding-up,  dissolution,  administration  or
               reorganisation  (by  way  of  voluntary  arrangement,  scheme  of
               arrangement  or  otherwise)  other  than a solvent liquidation or
               reorganisation of any of its Associated Companies;

          (b)  a composition, assignment or arrangement with any creditor;

          (c)  the  appointment  of  a  liquidator  (other  than in respect of a
               solvent  liquidation  of  any  of  its  Associated  Companies),
               receiver,  administrator,  administrative  receiver,  compulsory
               manager or other similar officer in respect of any of its assets;
               or

          (d)  enforcement of any security over any of its assets.

     14.1.6 it  is  subject  to  any  change  of Control (provided that, for the
          avoidance  of  doubt,  there  shall  not  be  a change of Control with
          respect  to  BP  if  any  of  the  shareholders  of Baltic, its parent
          company, as at the date hereof should acquire Control of Baltic); or

     14.1.7 any  of  the  events  above  occurs  in  relation  to  its  holding
     company.

14.2 DEFAULT  UNDER  THE  LOANS

     The  B  Shareholder  shall  be  deemed to have suffered an Event of Default
     for  the purposes of Clause 14.1 where an event of default occurs under the
     terms of the Loan Agreement.

14.3 NOTICE  OF  DEFAULT

     If  an  Event  of  Default  occurs, the Defaulting Shareholder shall notify
     the other Shareholder in writing as soon as reasonably practicable.

14.4 DEFAULT  NOTICE

     Following  an  Event  of  Default,  the non-defaulting Shareholder may give
     written notice (a "DEFAULT NOTICE") to the Defaulting Shareholder within 60
     Business  Days  of  receiving notification of the Event of Default from the
     Defaulting  Shareholder  or  of  it becoming aware of the Event of Default,
     whichever is the earlier, requiring the Defaulting Shareholder either:

     14.4.1 to  sell  all  of  the  Shares  held  by  the Defaulting Shareholder
          (the  "SALE  SHARES") to the non-defaulting Shareholder at a price per
          Share equal to 80 per cent of the Fair Value of the Sale Shares; or

     14.4.2 to  purchase  all  of  the  Shares  held  by  the  non-defaulting
          Shareholder (also "SALE SHARES") at a price equal to the Fair Value of
          the Sale Shares.

<PAGE>

14.5 COMPLETION  OF  TRANSFER

     The  sale  and  purchase  of  the  Sale  Shares  in  accordance  with  this
     Clause shall be made on the following terms:

     14.5.1 if  any  of  the  Permitted  Conditions to the Default Notice is not
          satisfied  or waived 60 Business Days (or, in the case of a regulatory
          approval, 120 Business Days) after service of that Default Notice then
          that Default Notice shall lapse. Otherwise, completion of the transfer
          of  the  Sale  Shares  shall  be  completed  seven Business Days after
          written  notice  of  the  determination  of the Fair Value of the Sale
          Shares  or  the  date  of  satisfaction  or  waiver  of  all Permitted
          Conditions  (whichever  is  the  later)  (the "TRANSFER DATE") at such
          reasonable  time  and  place  that  the Shareholders agree or, failing
          which, at the registered office of the Company;

     14.5.2 the  selling  Shareholder  shall  deliver  to  the  buyer in respect
          of the Sale Shares on or before the Transfer Date:

          (a)  duly executed share transfer forms;

          (b)  the relevant share certificates; and

          (c)  a  power  of  attorney  in  such  form  and  in  favour  of  such
               person  as the buyer may nominate to enable the buyer to exercise
               all  rights of ownership in respect of the Sale Shares including,
               without limitation, the voting rights;

     14.5.3 the  buyer  shall  pay  the  consideration  for  the  Sale Shares to
          the selling Shareholder by telegraphic transfer to the bank account of
          the selling Shareholder notified to it for the purpose on the Transfer
          Date  PROVIDED  THAT the buyer may set off the amount of any liability
          of  the selling Shareholder to it and/or the Company under Clause 5.11
          against the amount of such consideration; and

     14.5.4 in accordance with Clause 16.

14.6 FAILURE  TO  TRANSFER

     14.6.1 If  the  Defaulting  Shareholder  does  not  comply  with  its
          obligations  in  this  Clause,  the  Company may authorise a person to
          execute  and deliver the necessary transfer on its behalf. The Company
          may  receive  the  purchase money in trust for the selling Shareholder
          and  cause the buyer to be registered as the holder of the Shares. The
          receipt by the Company of the purchase money shall be a good discharge
          to  the  buyer  (who  shall  not be bound to see to the application of
          those  moneys).  After  the buyer has been registered as holder of the
          Sale  Shares in purported exercise of these powers the validity of the
          proceedings shall not be questioned by any person.

     14.6.2 If  the  selling  Shareholder  fails  or  refuses  to  transfer  any
          Shares  in  accordance  with this Clause the buyer may serve a default
          notice.  Within  five  Business  Days  of  service of a default notice
          (unless  such  non-compliance  has  previously  been  remedied  to the
          reasonable satisfaction of the buyer), the defaulting seller shall not

<PAGE>

          exercise any of its powers or rights in relation to management of, and
          participation in the profits of, the Company under this Agreement, the
          Articles  or  otherwise.  The  Directors  appointed  by the defaulting
          seller (or its predecessor in title) shall not:

          (a)  be entitled to vote at any Board meeting;

          (b)  be  required  to  attend  any  meeting  of  Directors in order to
               constitute a quorum; or

          (c)  be  entitled  to  receive  or  request  any  information from the
               Company.

14.7 GENERAL

     14.7.1 The  Shareholders  shall  keep  the  Company  informed  at all times
          of the issue and contents of any notice served pursuant to this Clause
          and any election or acceptance relating to those notices.

     14.7.2 The  Shareholders  waive  their  pre-emption  rights on the transfer
          of  Shares  contained in this Agreement and the Articles to the extent
          necessary to give effect to this Clause.

     14.7.3 For  the  purposes  of  Article  27(c)  of  the  Articles  the
          Shareholders  hereby  consent  to  the  transfer  of  any  Shares made
          pursuant  to  and  in  accordance  with  this  Clause  14, which shall
          therefore  be  a  "PERMITTED  TRANSFER"  as  such  term is used in the
          Articles.

     14.7.4 The  Shareholders  shall  do  all  things  within  their  power  to
          ensure  that  the  Business  is continued to be run as a going concern
          during  the  period  between the service of the Default Notice and the
          completion of the transfer of the Sale Shares.

15.  DETERMINATION  OF  FAIR  VALUE

15.1 APPOINTMENT  OF  EXPERT

     The  "FAIR  VALUE"  of  the  Shares  for the purposes of this Agreement and
     the Articles shall be determined by the Auditors within 30 Business Days of
     the  date of the Transfer Notice or Default Notice, as the case may be. Any
     determination  of  Fair Value pursuant to this Clause shall be treated as a
     price  agreed between all the members for the purposes of the definition of
     "Prescribed Price" in Article 26 of the Articles.

15.2 METHOD  AND  ADJUSTMENTS

     15.2.1 The  Auditors  shall  determine  the  Fair Value of the Shares to be
          sold as at the date of the relevant Transfer Notice or Default Notice,
          as appropriate, and on the following valuations and bases:

          (a)  valuing  the  Shares  to  be  sold  as  on  an  arm's length sale
               between a willing seller and a willing buyer;

<PAGE>

          (b)  if  any  Group  Company  is  then carrying on business as a going
               concern, on the assumption that it will continue to do so;

          (c)  that  the  Shares  to  be  sold  are capable of being transferred
               without restriction;

          (d)  valuing  the  Shares  to  be  sold  as  a  rateable proportion of
               the  total  value of all the issued shares of the Company without
               any  premium  or  discount being attributable to the class of the
               Shares  to  be sold or the percentage of the issued share capital
               of the Company which they represent; and

          (e)  by  valuing  the  proven  and  probable  oil  and  gas  (if  any)
               reserves  of  the  Group at the relevant time at a value of Brent
               Light  Crude  price  averaged over the previous six months (using
               the  definitions  of  such  terms  as  employed by the Society of
               Petroleum  Engineers)  and  after  deducting  all  actual  and
               contingent liabilities, debts and obligations of the Company.5

     15.2.2 The  Auditors  shall  determine  the  Fair  Value  to  reflect  any
          other  factors  which  the Auditors reasonably believe should be taken
          into account.

     15.2.3 If  any  difficulty  arises  in  applying  any  of these assumptions
          or  bases  then  the  Auditors  shall  resolve that difficulty in such
          manner as they shall in their absolute discretion think fit.

15.3 DETERMINATION,  ETC

     15.3.1 The  Auditors  must  determine  the  Fair  Value  within 45 Business
          Days  of  their appointment and shall notify the Shareholders of their
          determination. The fees of the Auditors shall be borne as follows:

          (a)  in  the  case  of  a  determination  pursuant  to  the issue of a
               Transfer Notice, by the selling Shareholder; and

          (b)  in  the  case  of  a  determination  pursuant  to  the issue of a
               Default Notice, by the Defaulting Shareholder.

     15.3.2 The  Auditors  shall  act  as  experts  and  not  as arbitrators and
          their  determination shall be final and binding on the parties (in the
          absence of fraud or manifest error).

     15.3.3 The  Auditors  may  have  access  to all accounting records or other
          relevant  documents  of  the  Company,  subject to any confidentiality
          provisions.

16.  TERMS  AND  CONSEQUENCES  OF  TRANSFERS  OF  SHARES

16.1 TRANSFER  TERMS

     Any  sale  and/or  transfer  of  Shares pursuant to this Agreement shall be
     on terms that those Shares:

<PAGE>

     16.1.1 are transferred free from all Encumbrances; and

     16.1.2 are  transferred  with  the  benefit  of  all  rights  attaching  to
          them  as  at the date of the relevant Deadlock Notice, Transfer Notice
          or Default Notice as appropriate.

16.2 REGISTRATION

     The  parties  shall  procure  that  a  transfer  of  Shares is not approved
     for  registration  unless  this  Agreement  and Articles have been complied
     with.  The  Company  shall procure that each share certificate issued by it
     shall carry the following statement:

     "Any  disposition,  transfer,  charge  of  or  dealing  in any other manner
     in  the  Shares  represented  by  this  certificate  is  restricted  by  a
     Shareholders'  Agreement  dated  [ ] 2005 and made between Baltic Petroleum
     (E&P) Limited, Siberian Energy Group Inc. and Zauralneftegaz Limited".

16.3 FURTHER  ASSURANCE

     Each  party  shall  do  all  things  and  carry  out  all  acts  which  are
     reasonably  necessary  to  effect  the transfer of the shares in accordance
     with the terms of this Agreement in a timely fashion.

16.4 RETURN  OF  DOCUMENTS,  ETC.

     On  ceasing  to  be  a  Shareholder,  a  Shareholder  must hand over to the
     Company  material  correspondence,  Budgets,  Business  Plans,  schedules,
     documents  and records relating to the Business held by it or an Associated
     Company  or  any  third  party  which has acquired such matter through that
     Shareholder and shall not keep any copies.

16.5 LOANS,  BORROWINGS,  GUARANTEES  AND  INDEMNITIES

     16.5.1 Upon a transfer of all the Shares held by a Shareholder:

          (a)  the  continuing  Shareholder  shall  procure  that  all  loans,
               borrowings  and  indebtedness  in  the  nature  of  borrowings
               outstanding  owed  by  any  Group  Company  to  a  transferring
               Shareholder  or  to  an  Associated  Company  of  a  transferring
               Shareholder  (together  with  any  accrued  interest)  are either
               assigned  to  the continuing Shareholder for such value as may be
               agreed  in  writing  between the transferring Shareholder and the
               continuing  Shareholder, or failing agreement with the continuing
               Shareholder, are repaid by the relevant Group Company;

          (b)  all  loans,  borrowings  and  indebtedness  in  the  nature  of
               borrowings  outstanding  owed by that transferring Shareholder to
               any Group Company shall be repaid; and

          (c)  the  continuing  Shareholder  shall  use  all  reasonable
               endeavours (but without involving any financial obligation on its
               part)  to  procure  the  release  of any guarantees, indemnities,
               security  or  other comfort given by the transferring Shareholder
               to or in respect of the Company or its Business and, pending such
               release,  shall indemnify the transferring Shareholder in respect
               of them.

<PAGE>

     16.5.2 Any  assumption  of  the  obligations  of a transferring Shareholder
          by the continuing Shareholder is without prejudice to the right of the
          continuing  Shareholder  and/or  the  Company  to  claim  from  the
          transferring  Shareholder  in  respect of liabilities arising prior to
          the completion date of the transfer of Shares.

16.6 ASSUMPTION  OF  OBLIGATIONS

     The  parties  shall  procure  that  no  person  other  than  an  existing
     Shareholder  acquires  any Shares unless it enters into a Deed of Adherence
     in  a  form  reasonably  acceptable to the other Shareholder agreeing to be
     bound  by  this  Agreement  as  a  Shareholder  and any other agreements in
     connection with the Business as a Shareholder.

16.7 REMOVAL  OF  APPOINTEES

     16.7.1 If  a  Shareholder  ceases  to  be  a  Shareholder  it  shall
          immediately upon transfer of its Shares procure the resignation of all
          its appointees to the Board as Director, Chairman and CEO, as the case
          may  be,  and  to the Board of directors of each Group Company. If the
          continuing  Shareholders request, it shall do all such things and sign
          all  such  documents  as  may  otherwise  be  necessary to procure the
          resignation  or  dismissal of such persons from such appointments in a
          timely manner.

     16.7.2 Those  resignations  shall  take  effect  without any liabilities on
          the Company for compensation for loss of office or otherwise except to
          the extent that the liability arises in relation to a service contract
          with  a  Director  who  was  acting  in  an  executive  capacity.  Any
          Shareholder  removing a Director appointed by it shall fully indemnify
          and  hold  harmless  the  other  Shareholder  and the Company from and
          against any claim for unfair or wrongful dismissal arising out of such
          removal.

16.8 POWER  OF  ATTORNEY

     16.8.1 Each  of  the  Shareholders  irrevocably  appoints  the  other
          Shareholder by way of security for the performance of their respective
          obligations  under  Clauses  12,  13  and 14, its attorney to execute,
          deliver  and/or  issue  any necessary document, agreement, certificate
          and  instrument  required to be executed by it under the provisions of
          Clauses  12,  13  and  14  including  any  transfer of shares or other
          documents  which  may  be  necessary  to  transfer title to the Shares
          required by Clauses 12, 13 and 14.

     16.8.2 The  purchase  monies  shall,  to  the  extent  that  they  are  not
          delivered to the selling party on or before the appropriate completion
          date,  bear interest against the purchasing party at the rate of 2 per
          cent over the base lending rate from time to time of Barclays Bank plc
          calculated  on a daily basis from such date until the selling party is
          reimbursed by the other party.

<PAGE>

16.9 CHANGE  OF  NAME

     If  a  Shareholder  ceases  to  be  a Shareholder and the corporate name of
     the  Company  or any Group Company contains any word the same or similar to
     the  corporate  name  or any distinctive part of the corporate name of that
     Shareholder, the remaining parties shall procure that the corporate name of
     the Company or any Group Company shall be changed to exclude that word to a
     name  that  bears  no  relation  to  the corporate name of that Shareholder
     within 30 days of the Shareholder ceasing to be a Shareholder.

17.  ENFORCEMENT  OF  RIGHTS

17.1 RIGHTS  OF  THE  COMPANY

     If  at  any  time  the  Company (1) wishes to enforce or exercise any right
     under  or  (2)  has  any  claim against or is the subject of a claim by any
     Shareholder or any member of a Shareholder's group in respect of:

     17.1.1 this Agreement;

     17.1.2 any  other  agreement  or  deed  to  which  that  Shareholder  or  a
          member of that Shareholder's group is also a party; or

     17.1.3 any  obligation  owed  to  the  Company  or another Group Company by
          any  Shareholder  or a member of that Shareholder's group,

     that  matter  shall  be  dealt  with  on  behalf  of  the  Company  by  a
     committee  of the Directors appointed by the other Shareholder not involved
     in  the  claim. The provisions of this Clause do not prejudice to the right
     of any party to dispute any claim to which it relates.

17.2     AUTHORITY  OF  COMMITTEE

The  committee  of  Directors  appointed under this Clause has full authority to
exercise  rights  on  behalf  of  the  Company.

17.3 RIGHTS  OF  SHAREHOLDERS

     Shareholders  or  Directors  which  have  not  participated  in  the
     deliberations  of  the committee may not see the minutes of meetings of the
     committee  or  require  the  provision of any information relating to those
     deliberations of the committee.

18.  COMPETITION  WITH  THE  BUSINESS

18.1 RESTRICTIONS

     18.1.1 Unless  it  has  obtained  the  prior  written  consent  of  the  A
          Shareholder,  the B Shareholder must not (and shall procure that its 9
          largest shareholders as of the date of this Agreement (including legal
          and  beneficial  owners  of  shares  in  the B Shareholder), officers,
          employees,  agents  and consultants, and all or any Associated Company
          of the B Shareholder and the shareholders, officers, employees, agents
          and  consultants  thereof  must  not),  either alone or jointly, with,
          through or on behalf of any person, directly or indirectly:

<PAGE>

          (a)  carry  on  or  be  engaged  or  concerned  or  interested  in any
               activities  which  are in direct competition with the Business in
               the  Kurgan  and  Tyumen  regions  of  the  Russian  Federation
               (including but not limited to development of the four oil and gas
               exploration  licences owned by ZNG as at the date hereof, bidding
               for  and/or  development  of  further  oil  and  gas  exploration
               licences  and  oil  and  gas  production licences in such regions
               (including  but  not limited to the licences detailed in Schedule
               6));

          (b)  carry  on  or  be  engaged  or  concerned  or  interested  in any
               activities in the Khanty-Mansisk region of the Russian Federation
               which  are  in  direct  competition  to  the  Business unless the
               Company  has  first  been  offered  a  right  of first refusal in
               respect  of such activities. For the purposes of offering a right
               of  refusal  under  this  paragraph  (b),  SEG  shall give to the
               Company  (or  procure  is given to the Company) written notice of
               such  opportunity  together  with  sufficient  supporting
               documentation  in  respect of the proposal in order to enable the
               Company  to evaluate the same. The Company shall have 10 Business
               Days  from  receipt  of  such notice to indicate to SEG by giving
               written  notice  to  it  that  it  is  interested in principal in
               pursuing  the  opportunity  and, if it confirms such interest, it
               shall  have  a  further  20 Business Days to determine whether it
               wishes  to  proceed with such opportunity. SEG shall procure that
               the  Company  is  promptly  afforded  all  access  during  the
               aforementioned  periods  to  such documentation, personnel, sites
               and  information  as  it  may  reasonably require to enable it to
               investigate,  conduct due diligence on, and evaluate the proposal
               and  shall  provide assistance to and co-operate with the Company
               for  such  purposes  and  shall  promptly  respond  to all of its
               enquiries and requests in respect thereof. If the Company decides
               to  proceed  with  the  opportunity,  SEG  shall  use  its  best
               endeavours  to  ensure  that  the  opportunity  is awarded to the
               Company.  Where  SEG  indicates  that  the  opportunity  is  time
               critical, the Company undertakes to use its reasonable endeavours
               to  diligently consider and respond to any opportunity offered to
               it under this paragraph (b) as soon as reasonably practicable; or

          (c)  solicit  or  contact  with  a  view  to  the  engagement  or
               employment by any person, any employee, officer or manager of any
               Group  Company or any person who has been an employee, officer or
               manager of any Group Company within the previous two-year period,
               except  for  an employee who has been seconded to a Group Company
               by such Shareholder.

     18.1.2 Unless  it  has  obtained  the  prior  written  consent  of  the  B
          Shareholder,  the  A  Shareholder  must  not, either alone or jointly,
          with,  through  or  on  behalf  of any person, directly or indirectly,
          carry  on  or  be engaged or concerned or interested in any activities
          which are in direct competition with the Business in the Kurgan region
          of the Russian Federation.

<PAGE>

     18.1.3 Each  Shareholder  agrees  to  procure  that  each  of  their
          Associated  Companies  shall comply with the provisions of this Clause
          as though it applied directly to them.

18.2 INVALIDITY

     18.2.1 Each  of  these  restrictions  is  an  entirely  separate  and
          independent  restriction  on  each Shareholder and the validity of one
          restriction  shall not be affected by the validity or unenforceability
          of another.

     18.2.2 Each  Shareholder  considers  the  restrictions  in  this  Clause to
          be reasonable and necessary for the protection of the interests of the
          Company. If any such restriction shall be held to be void but would be
          valid  if  deleted in part or reduced in application, such restriction
          shall  apply with such deletion or modification as may be necessary to
          make it valid and enforceable.

18.3 DURATION

     The  covenants  set  out  in  this  Clause  shall  continue  to  apply to a
     Shareholder  for  a  period  of  12  months  from  the  date  on which that
     Shareholder  ceases  to  be a Shareholder. The covenants shall be construed
     during  this  period  by  reference  to the Business, customers, employees,
     officers  or  managers  or  contracting  parties  of the Company during the
     two-year  period  prior to the date on which the Shareholder ceased to be a
     Shareholder.

18.4 EXCLUSIONS

     Nothing  contained  in  this  Clause  precludes  or  restricts  any
     Shareholder or any of its Associated Companies:

     18.4.1 holding  not  more  than  five  per  cent of the issued voting share
          capital of any company whose shares are listed on a stock exchange;

     18.4.2 acquiring  any  business  or  company,  as  an  integral  part  of a
          larger  transaction  or acquisition of a business, company or group of
          companies,  not predominantly engaged in a competing business PROVIDED
          THAT:

          (a)  it  uses  all  reasonable  endeavours  to  dispose  of  such
               business  or  company which competes with the Business within six
               months  of the date of completion of the original transaction (or
               as soon as possible thereafter);

          (b)  in  making  any  such  disposal,  it  must  grant  the  Company a
               right of first refusal to acquire the business or company on bona
               fide arms length terms; and

          (c)  if  the  Company  does  not  purchase  the  business  or  company
               within  a  reasonable  period  it  may dispose of the business or
               company to a third party;

     18.4.3 carrying  on  any  activity  carried  on  by  it  in  the  12 months
          before the Completion Date; or

<PAGE>

     18.4.4 from  carrying  on  and/or  developing,  whether  organically  or by
          acquisition,  any  of  its existing activities which at the Completion
          Date are similar to the Business.

19.  PUBLIC  ANNOUNCEMENTS

19.1 SHAREHOLDER  APPROVAL

     A  Shareholder  must  not  make  any  public  announcement  or  issue  any
     circular  relating to the Group or this Agreement without the prior written
     approval of the other Shareholder. This does not affect any announcement or
     circular  required  by  law  or  any  regulatory  body  or the rules of any
     recognised  stock exchange (including for the avoidance of doubt, as may be
     required for the purposes of marketing an initial public offering of Baltic
     or  an  Associated  Company of Baltic), but the party with an obligation to
     make  an  announcement  or  issue  a  circular shall consult with the other
     party/parties  so  far  as  is reasonably practicable before complying with
     such obligation.

19.2 ORAL  STATEMENTS

     The  Shareholders  intend  that  any  oral  statements  made  or replies to
     questions  given  by  either  Shareholder  relating  to  the Group shall be
     consistent with any such public announcements or circulars.

20.  INFORMATION,  INSURANCE,  RECORDS,  LICENCES

20.1 RIGHTS  TO  INFORMATION

     A Shareholder may at all reasonable times and at its own expense:

     20.1.1 discuss  the  affairs,  finances  and  accounts  of  the Company and
          the  Group  with  its  officers,  principal  executives  and principal
          shareholders; and

     20.1.2 inspect  and  make  copies  of  all  books,  records,  accounts,
          documents and vouchers relating to the Business and the affairs of the
          Company and the Group.

20.2 INSURANCE,  RECORDS  AND  LICENCES

     The  Shareholders  undertake  that  they  shall  use  their  reasonable
     endeavours to procure that:

     20.2.1 the  Group  maintains  with  a  well  established  and  reputable
          insurer prudent insurance in accordance with current industry practice
          from  time  to  time  against  all  risks  usually  insured against by
          companies  carrying  on  the  same or similar business to the Business
          which  shall  include  product  liability insurance, insurance against
          loss  of  profits  and  consequential  loss and insurance for the full
          replacement  or reinstatement value of all its assets of all insurable
          nature;

     20.2.2 the  Group  keeps  proper  books  of  account  and  makes  true  and
          complete  entries  of  all  its  dealings  and  transactions of and in
          relation to the Business; and

<PAGE>

     20.2.3 the  Group  shall  use  its  best  endeavours to obtain and maintain
          in full force and effect all approvals, consents or licences necessary
          for the conduct of the Business.

21.  CONSORTIUM  TAX  RELIEF

     Each  Shareholder  which  is  a  member  of  the  consortium which owns the
     Company  for  the  purpose  of Section 413(6) of the Income and Corporation
     Taxes  Act  1988  ("ICTA  1988")  shall  be entitled by the submission of a
     written  notice  to  the  Company  and the other Shareholder to require the
     Company  to  surrender  to  it  (or  any  of  its  associated  companies) a
     proportionate  share  of any consortium relief which may be available to it
     and  which  arises  from  the  trading  activities  of  the  Company,  for
     consideration  (payable on 1 January following the accounting period ending
     31  March to which the losses relate), in the case of each recipient, equal
     to  the  amount of the losses and/or other amounts surrendered to it by way
     of  consortium  relief  multiplied by the rate of corporation tax on income
     profits  for the account period of the company to which the losses or other
     amounts  relate. A Shareholder may only request the surrender of consortium
     relief  under this Clause 21 to the extent it is permitted under applicable
     United Kingdom legislation. The Shareholders undertake to give such written
     consents  that  may be required in order to give effect to the surrender of
     consortium  relief  in  accordance  with  the  terms  of  this  Clause.  No
     Shareholder  shall  knowingly  enter into arrangements (for the purposes of
     Section  410  of ICTA 1988) which shall affect the right of any Shareholder
     to  obtain  consortium  relief  at  any time when the Company has losses or
     other amounts available for surrender by way of consortium relief, provided
     that,  subject  to  Clause  12 and the Articles, this shall not prevent any
     Shareholder  from  transferring  Shares  in  accordance with the provisions
     relating  thereto  set out in this Agreement and the Articles. In the event
     that  payments  are  made for consortium relief which is subsequently found
     not  to  be  available  or not required, the Company shall repay the amount
     overpaid  within  14  Business  Days of the issue of a written claim by the
     payer.

22.  DURATION  AND  TERMINATION

22.1 DURATION

     Subject  to  the  other  provisions  of  this  Agreement,  this  Agreement
     shall  continue  in  full  force  and effect without limit in point of time
     until the earlier of:

     22.1.1 the  Shareholders  agree  in  writing  to  terminate this Agreement;
           and

     22.1.2 an  effective  resolution  is  passed  or  a  binding  order is made
          for  the  winding-up  of  the Company other than to effect a scheme of
          reconstruction or amalgamation;

     provided  that,  subject  to  Clause  12.2.2, this Agreement shall cease to
     have  effect  as regards any Shareholder who ceases to hold any Shares save
     for  any  of  its provisions which are expressed to continue in force after
     termination.

<PAGE>

22.2 TERMINATION

     Termination  of  this  Agreement  shall  be  without  prejudice  to  any
     liability  or  obligation  in  respect  of  any  matters,  undertakings  or
     conditions  which shall not have been observed or performed by the relevant
     Shareholder prior to such termination.

23.  CONFIDENTIALITY

23.1 CONFIDENTIAL  INFORMATION

     The  parties  shall  use  all  reasonable  endeavours  to keep confidential
     and  to  ensure  that  their  respective  Associated  Companies  and  their
     respective  officers, employees, agents and professional and other advisers
     keep confidential any information (the "CONFIDENTIAL INFORMATION"):

     23.1.1 relating  to  the  customers,  business,  assets  or  affairs of any
          Group  Company  which they may have or acquire through ownership of an
          interest in the Company; or

     23.1.2 relating  to  the  customers,  business,  assets  or  affairs of the
          other  parties  or  any  member  of their group which they may have or
          acquire  through  being  a  Shareholder  or making appointments to the
          Board  or  through  the  exercise  of its rights or performance of its
          obligations under this Agreement.

23.2 RESTRICTIONS

     23.2.1 No  party  may  use  for  its  own  business purposes or disclose to
          any  third  party  any Confidential Information without the consent of
          the other parties.

     23.2.2 This Clause does not apply to:

          (a)  information  which  is  or  becomes  publicly  available
               (otherwise than as a result of a breach of this Clause);

          (b)  information  which  is  independently  developed  by the relevant
               party  or  acquired  from a third party, to the extent that it is
               acquired with the right to disclose it;

          (c)  information  which  was  lawfully  in  the  possession  of  the
               relevant party free of any restriction on disclosure;

          (d)  information  which  following  disclosure  under  this  Clause,
               becomes  available  to  the relevant party from a source which is
               not  bound  by  any  obligation of confidentiality in relation to
               such information;

          (e)  the  disclosure  by  a  party  of Confidential Information to its
               principal  shareholders or its directors or employees or to those
               of  its  Associated  Companies who need to know that confidential
               information  in  its  reasonable opinion for purposes relating to
               this  Agreement  but  those principal shareholders, directors and
               employees  shall  not  use  that Confidential Information for any
               other purpose;

          (f)  the  disclosure  of  information  to  the  extent  required to be
               disclosed  by  law  or  any  court of competent jurisdiction, any

<PAGE>

               governmental  official  or  regulatory  authority  (including the
               London  Stock  Exchange,  the  Financial  Services Authority, the
               Panel  on  Takeovers and Mergers and the United States Securities
               and  Exchange  Commission)  or  any  binding  judgment,  order or
               requirement of any other competent authority;

          (g)  the  disclosure  of  information  to  any  tax  authority  to the
               extent reasonably required for the purposes of the tax affairs of
               the party concerned or any member of its group;

          (h)  the  disclosure  to  a  party's  professional  advisers  of
               information  reasonably  required  to  be  disclosed for purposes
               relating to this Agreement; or

          (i)  any  announcement,  or  circular  made,  or  information provided
               in  accordance  with  the  terms  of Clause 19.

     23.2.3 Each  party  shall  inform  any  shareholder,  officer,  employee or
          agent  or any professional or other adviser advising it in relation to
          matters  relating  to  this  Agreement,  or  to  whom  it  provides
          Confidential  Information,  that  such information is confidential and
          shall instruct them:

          (a)  to keep it confidential; and

          (b)  not  to  disclose  it  to  any  third  party  (other  than  those
               persons  to  whom  it  has  already  been  or may be disclosed in
               accordance with the terms of this Clause).

23.3 DAMAGES  NOT  AN  ADEQUATE  REMEDY

     Without  prejudice  to  any  other  rights  or  remedies  which a party may
     have,  the  parties  acknowledge  and  agree  that  damages would not be an
     adequate  remedy  for  any  breach  of  this  Clause 23 and the remedies of
     injunction, specific performance and other equitable relief are appropriate
     for  any  threatened or actual breach of any such provision and no proof of
     special  damages shall be necessary for the enforcement of the rights under
     this Clause 23.

23.4 SURVIVAL

     23.4.1 The  disclosing  party  shall  remain  responsible for any breach of
          this  Clause  by  the  person to whom that confidential information is
          disclosed.

     23.4.2 The  provisions  of  this  Clause  23  shall survive the termination
          of this Agreement for whatever cause for a period of 2 years.

24.  NOTICES

24.1 ADDRESSES

     Any  notice,  claim  or  demand  in connection with this Agreement shall be
     in  writing  in  English  (each  a "NOTICE") shall be sufficiently given if
     delivered  or  sent  to  the  recipient  at its fax number, telex number or
     address  set  out  in  Schedule  5 or any other fax number, telex number or
     address  notified  to  the sender by the recipient for the purposes of this
     Agreement.

<PAGE>

24.2 FORM

     Any  Notice  shall  be  in  writing  in  English  and  may  be  sent  by
     messenger, telegram, telex, fax or prepaid first class post (first class in
     the  case  of  service  in  the  United  Kingdom and airmail in the case of
     international service). Any Notice shall be deemed to have been received on
     the next working day in the place to which it is sent, if sent by telegram,
     telex or fax, or 60 hours from the time of posting, if sent by post.

25.  WHOLE  AGREEMENT  AND  REMEDIES

25.1 WHOLE  AGREEMENT

     This  Agreement  contains  the  whole  agreement  between  the  parties
     relating  to the subject matter of this Agreement at the date hereof to the
     exclusion of any terms implied by law which may be excluded by contract and
     supersedes  any  previous  written or oral agreement between the parties in
     relation  to the matters dealt with in this Agreement. In this Clause "this
     Agreement' includes all documents entered into pursuant to this Agreement.

25.2 TERMINATION  OF  OPTION  AGREEMENT

     The  Option  Agreement  shall  terminate  and  cease  to  have  any further
     force  and  effect on execution of this Agreement and BP shall procure that
     Baltic shall provide to SEG a written statement to this effect.

25.3 NO  INDUCEMENT

     Each  of  the  Shareholders  acknowledges  that  it has not been induced to
     enter  into  this  Agreement by any representation, warranty or undertaking
     not expressly incorporated into it.

25.4 REMEDIES

     So  far  as  permitted  by  law and except in the case of fraud, each party
     agrees  and  acknowledges that its only right and remedy in relation to any
     representation,  warranty  or  undertaking made or given in connection with
     this  Agreement  shall  be for breach of the terms of this Agreement to the
     exclusion  of  all  other  rights  and remedies (including those in tort or
     arising under statute).

25.5 LEGAL  ADVICE

     Each  party  to  this  Agreement  confirms  it  has  received  independent
     legal  advice  relating  to all the matters provided for in this Agreement,
     including  the provisions of this Clause, and agrees, having considered the
     terms  of  this Clause and the Agreement as a whole, that the provisions of
     this Clause are fair and reasonable.

26.  GENERAL

<PAGE>

26.1 SURVIVAL  OF  RIGHTS,  DUTIES  AND  OBLIGATIONS

     Termination  of  this  Agreement  for  any  cause shall not release a party
     from  any liability which at the time of termination has already accrued to
     another  party  or  which  thereafter  may  accrue in respect of any act or
     omission prior to such termination.

26.2 CONFLICT  WITH  THE  ARTICLES

     In  the  event  of  any  ambiguity or discrepancy between the provisions of
     this Agreement and the Articles, it is intended that the provisions of this
     Agreement shall prevail and accordingly the Shareholders shall exercise all
     voting  and  other rights and powers available to them so as to give effect
     to  the provisions of this Agreement and shall further if necessary procure
     any  required  amendment  to the Articles. The Company is not bound by this
     Clause.

26.3 NO  PARTNERSHIP

     Nothing  in  this  Agreement  shall  be  deemed to constitute a partnership
     between  the  parties nor constitute any party the agent of any other party
     for any purpose.

26.4 RELEASE  ETC.

     Any  liability  to  any  party  under  this  Agreement  may  in whole or in
     part  be released, compounded or compromised or time or indulgence given by
     that  party  in  its  absolute  discretion  as regards any party under such
     liability  without  in  any way prejudicing or affecting its rights against
     any  other  party  under  the  same  or a like liability, whether joint and
     several or otherwise.

26.5 WAIVER

     No  failure  of  any  party  to exercise, and no delay by it in exercising,
     any  right,  power  or  remedy  in  connection  with this Agreement (each a
     "RIGHT")  shall  operate as a waiver of that Right, nor shall any single or
     partial  exercise  of  any  Right preclude any other or further exercise of
     that  Right or the exercise of any other Right. The Rights provided in this
     Agreement  are  cumulative  and  not exclusive of any other Rights (whether
     provided  by  law  or  otherwise). Any express waiver of any breach of this
     Agreement shall not be deemed to be a waiver of any subsequent breach.

26.6 PAYMENTS

     All  payments  due  under  this  Agreement  shall  be  paid in full without
     any  deduction  or  withholding other than as required by law or under this
     Agreement  and  the paying party shall not be entitled to assert any credit
     set  off  or  counterclaim  against  any  other  party  in order to justify
     withholding payment of any such amount in whole or in part.

26.7 VARIATION

     No  variation  of  this  Agreement  shall  be  effective  unless in writing
     and signed by or on behalf of each of the parties.

<PAGE>

26.8  ASSIGNMENT

     26.8.1 This  Agreement  shall  be  binding  on  and inure to the benefit of
          the  parties  and  their successors and permitted assigns. The parties
          may  not  assign  or  transfer  all  or  any  part  of their rights or
          obligations  under this Agreement nor any benefit arising under or out
          of  this  Agreement  without  the  prior  written consent of the other
          parties  nor  shall  any  party  be entitled to make any claim against
          another  party  in respect of any loss which it does not suffer in its
          own  capacity as beneficial owner of the Shares except as contemplated
          by Clause 26.8.2.

     26.8.2 Except  as  otherwise  expressly  provided  in  this  Agreement, the
          benefit  of  the  provisions  of this Agreement may be assigned to any
          Associated Company provided that such assignment shall not be absolute
          but shall be expressed to have effect only for so long as the assignee
          remains an Associated Company.

26.9  TIME OF THE ESSENCE

     Time  shall  be  of  the  essence  of  this  Agreement, both as regards any
     dates,  times  and  periods  mentioned  and as regards any dates, times and
     periods  which  may be substituted for them by agreement in writing between
     the parties.

26.10 FURTHER  ASSURANCE

At  any  time  after the date of this Agreement the parties shall, and shall use
all  reasonable  endeavours  to procure that any necessary third party shall, at
the  cost  of  the  relevant  party  execute such documents and do such acts and
things  as  that  party may reasonably require for the purpose of giving to that
party  the  full  benefit  of  all  the  provisions  of  this  Agreement.

26.11 ILLEGALITY

     If  any  provision  in  this  Agreement  shall  be  held  to  be  illegal,
     invalid  or  unenforceable,  in  whole  or  in  part,  under the law of any
     jurisdiction, the legality, validity or enforceability of such provision or
     part under the law of any other jurisdiction and the legality, validity and
     enforceability of the remainder of this Agreement shall not be affected.

26.12 COUNTERPARTS

     This  Agreement  may  be  entered  into  in any number of counterparts, all
     of  which  taken together shall constitute one and the same instrument. Any
     party may enter into this Agreement by executing any such counterpart.

26.13 COSTS

     Each  party  shall  bear  all  costs  incurred by it in connection with the
     preparation, negotiation and entry into this Agreement and the documents to
     be  entered  into  pursuant to it. The parties shall procure that the costs
     incurred  by BP in dealing with the conditions precedent detailed in clause
     2.1.1and 2.1.3 be borne by ZNG up to an aggregate sum of US$75,000.

<PAGE>

27.  CONTRACTS  (RIGHTS  OF  THIRD  PARTIES)  ACT  1999

     A  person  who  is  not  a  party  to this Agreement has no right under the
     Contracts  (Rights  of  Third Parties) Act 1999 to enforce any term of this
     Agreement.

28.  GOVERNING  LAW  AND  SUBMISSION  TO  JURISDICTION

28.1 GOVERNING  LAW

     This  Agreement  shall  be  governed  by  and  construed in accordance with
     English law.

28.2 JURISDICTION

     All  the  parties  irrevocably  agree  that  the  courts  of England are to
     have exclusive jurisdiction to settle any dispute which may arise out of or
     in connection with this Agreement.

28.3 SUBMISSION  AND  WAIVER

     All  the  parties  irrevocably  submit  to  the jurisdiction of such courts
     and  waive  any objection to proceedings in any such court on the ground of
     venue  or  on  the  ground  that  the  proceedings  have been brought in an
     inconvenient forum.

28.4 APPOINTMENT  OF  PROCESS  AGENT

     SEG  (the  "PRINCIPAL")  irrevocably  appoints  Tim  Peara of 24 Hoop Lane,
     London  NW11 8BU (the "AGENT") as its agent to accept service of process in
     England  in any legal action or proceedings arising out of or in connection
     with this Agreement provided that:

     28.4.1 service  upon  the  Agent  shall  be  deemed  valid service upon the
          Principal  whether  or  not the process is forwarded to or received by
          the Principal;

     28.4.2 the  Principal  shall  inform  all  other parties to this Agreement,
          in  writing,  of any change in the address of the Agent within 28 days
          of such change;

     28.4.3 if  the  Agent  ceases  to  be  able to act as a process agent or to
          have  an  address  in  England,  the  Principal  irrevocably agrees to
          appoint a new process agent in England acceptable to the other parties
          and  to deliver to the other parties within 14 Business Days a copy of
          a written acceptance of appointment by the new process agent; and

     28.4.4 nothing  in  this  Agreement  shall  affect  the  right  to  serve
          process in any other manner permitted by law.

29.  AUTHORITY  TO  DELIVER

     The  signature  or  sealing  of  this  Agreement by or on behalf of a party
     shall constitute an authority to the solicitors, or an agent or employee of
     the  solicitors, acting for that party in connection with this Agreement to
     deliver it as a deed on behalf of that party.

<PAGE>

     IN  WITNESS  WHEREOF  this  Agreement  has  been duly executed as a deed by
     BP and SEG and executed by the Company on the date written above.

                                   SCHEDULE 2
                                DEED OF ADHERENCE

THIS  DEED  OF  ADHERENCE  is  made  on  [DATE]  by  [ ]  of  [ ]  (the
"COVENANTOR")

SUPPLEMENTAL  to  a  Shareholders'  Agreement  dated  [          ] 2005 and made
between  Baltic  Petroleum  (E&P)  Limited,  Siberian  Energy Group Inc. and the
Company  (the  "AGREEMENT').

The  Covenantor  covenants  as  follows:

1    The  Covenantor  confirms  that  it  has  been supplied with and has read a
     copy  of  the Agreement and covenants with each of the persons named in the
     Schedule  to  this Deed to observe perform and be bound by all the terms of
     the  Agreement  which  are  capable of applying to the Covenantor and which
     have  not  been performed at the date of this Deed to the intent and effect
     that  the Covenantor shall be deemed with effect from the date on which the
     Covenantor  is registered as a member of [the Company] to be a party to the
     Agreement (as if named as a party to that Agreement).

2    This  Deed  shall  be  governed  by  and  construed  in  accordance  with
     English  law  and  the  Covenantor  hereby  submits  irrevocably  to  the
     non-exclusive  jurisdiction  of  the  English Courts (but accepts that this
     Deed  may  be  enforced  in any court of competent jurisdiction) and hereby
     appoints  [a  person  resident  in England and reasonably acceptable to the
     Board  of Directors of the continuing Shareholder] as its agent for service
     of all process in any proceedings in respect of the Agreement.

EXECUTED  as  a  deed  on  the  date  written  above.]

                                    SCHEDULE
     [PARTIES TO AGREEMENT INCLUDING THOSE WHO HAVE EXECUTED EARLIER DEEDS OF
                                   ADHERENCE]

<PAGE>

                                   SCHEDULE 3
                                   WARRANTIES
                             PART I - SEG WARRANTIES

A.   WARRANTIES  IN  RELATION  TO  ZNG

1.   INFORMATION

1.1  All  information,  including,  but  not  limited  to,  the  information
     contained  in  the Disclosure Schedule and relating to ZNG provided by SEG,
     ZNG  and/or  any  of  their  respective  professional advisers, officers or
     employees  to  BP  or any of its professional advisers in the course of the
     negotiations  leading  to  this Agreement (the "DUE DILIGENCE INFORMATION")
     was  when  given,  is  now,  and  will  at Completion be true, complete and
     accurate  and  not  misleading in any respect. The information contained in
     the  Disclosure  Schedule  is  true,  complete and accurate in all material
     respects  and  there  are  no other facts or matters which would render any
     such information misleading.

1.2  There  has  been  provided  to  BP  and  JV  Co  such  information  as  is
     necessary  to  enable  each  of  them to make an informed assessment of the
     assets,  liabilities,  financial position, profits, losses and prospects of
     ZNG  and  of  the  rights  attaching  to  the  ZNG  Interests and any other
     information which might otherwise reasonably affect the willingness to into
     this Agreement and perform their respective obligations hereunder.

2.   CAPACITY

     ZNG  is  a  limited  liability  company duly organised and incorporated and
     validly existing under the laws of the Russian Federation and has the power
     and authority to own its properties and assets and to carry on its business
     as it is now being conducted.

3.   CAPITAL  AND  CONSTITUTION

3.1  ZNG's  charter  capital  meets  the  minimum  capital  requirements
     established by Russian law and has been fully paid up in cash.

3.2  Apart  from  this  Agreement,  there  is  no  Encumbrance  on,  over  or
     affecting  the  ZNG  Interests  or  loan  capital  of  ZNG  and there is no
     agreement or commitment to give or create any such Encumbrance and no claim
     has been made by any person to be entitled to any such Encumbrance.

3.3  All  necessary  state  registrations  in  respect of ZNG have been made and
     all  registers, books and records of ZNG required to be kept by Russian law
     have  been  properly  kept in all material respects and contain an accurate
     and complete record of the matters with which they should deal.

3.4  All  returns,  particulars,  resolutions  and  documents  required  by
     Russian legislation to be filed in respect of ZNG have been duly and timely
     filed and are correct in all respects.

<PAGE>

4.   SEG'S  TITLE  TO  ZNG  INTERESTS

4.1  SEG  is  a  sole  participant  in ZNG and has obtained clear and unfettered
     legal title to the ZNG Interests.

4.2  SEG  has  duly  acquired  its  title  to  the  ZNG  Interests  in  full
     compliance  with  the  then  applicable  law, including, but not limited to
     Russian anti-monopoly law and the constituent documents of ZNG.

4.3  All  consents  and  approvals  required  for  SEG  to  transfer  the  ZNG
     Interests  to the Company as contemplated by this Agreement, including, but
     not limited to, approvals of the Central Bank of Russia, have been duly and
     timely obtained.

5.   ACCOUNTS

     5.1  The  audited  consolidated  accounts  of  SEG  for  the  year ended 31
          December 2004 (the "2004 ACCOUNTS"):

     5.1.1 give  a  true  and  fair  view  of  the  assets, liabilities (whether
          present  or  future,  actual  or  contingent, unquantified or disputed
          liabilities),  solvency and state of affairs and financial position of
          ZNG as at 31 December 2004 and its profits or losses for the financial
          period ended on that date; and

     5.1.2 have  been  prepared  in  accordance  with  United  States  generally
          accepted  accounting  principles  ("US GAAP") consistently applied and
          comply  with  the requirements of applicable legislation and have been
          audited  in  accordance with the standards of the United States Public
          Company Accounting Oversight Board;

     5.1.3 adopt  the  same  bases  and  policies  of accounting adopted for the
          preparation  of  ZNG's  audited  accounts  for  the last two preceding
          accounting periods.

5.2  The  management  accounts  of  ZNG  dated  31  March  2005  and  30  June
     2005(the "MANAGEMENT ACCOUNTS"), a copy of which has been provided to BP:

     (a)  give  a  true  and  fair  view  of  the  assets,  liabilities (whether
          present  or  future,  actual  or  contingent, unquantified or disputed
          liabilities) and state of affairs and financial position of ZNG at the
          date  thereof and its profits or losses for the financial period ended
          on that date;

     (b)  have  been  prepared  with  due  care  and attention and in accordance
          with  policies  and  principles  consistently  applied  throughout the
          period to which they relate; and

     (c)  have  been  prepared  adopting  the  same  policies  and  principles
          adopted in the preparation of the 2004 Accounts.

6.   FINANCIAL  MATTERS

6.1     Since  31 December 2004, ZNG has carried on its business in the ordinary
course and there has been no material adverse change in the financial or trading
position  or prospects of ZNG, no material changes have occurred in ZNG's assets
or  liabilities  as  shown  in  the  2004  Accounts  and  ZNG has not, except as

<PAGE>

disclosed  in  the  Management  Accounts,  assumed  or  incurred any liabilities
(including  contingent  liabilities).

6.2     ZNG is not insolvent and is able to pay its debts as they fall due.  ZNG
has  not taken any corporate action nor have any other steps been taken or legal
proceedings started or threatened against ZNG for its winding up, dissolution or
reorganisation  or for the appointment of a receiver, trustee or similar officer
of  it  or  of  any  of  its  assets  or  revenues.

6.3     Proper provision for all liabilities and obligations (actual, contingent
or  disputed) and capital commitments of ZNG have been made in the 2004 Accounts
or  in  the  Management Accounts or are otherwise disclosed in the Due Diligence
Information.

7.   INTERESTS  OF  SEG,  DIRECTORS  AND  EMPLOYEES

7.1  None  of  the  following  is  outstanding:

     (a)  loans  made  by  ZNG  to  SEG  and/or any of the directors or officers
          of ZNG or SEG and/or any Associate of any of them;

     (b)  debts  owing  to  ZNG  by  SEG and/or any of the directors or officers
          of ZNG or SEG and/or any Associate of any of them; and

     (c)  securities for any such loans or debts as mentioned above.

7.2  There  are  no  existing  contracts,  engagements,  guarantees  or
     indemnities  to  which  ZNG  is  a party and in which SEG and/or any of the
     directors  or  officers  of  ZNG  or SEG and/or Associate of any of them is
     directly  or  indirectly  interested and ZNG does not depend upon or derive
     any  benefit  from  any assets, facilities or services owned or supplied by
     SEG  or  any  of  its Associates or any contract to which SEG or any of its
     Associates is a party.

8.   TITLE,  ENCUMBRANCES,  ASSETS  AND  COMPLIANCE  WITH  LAW

8.1  ZNG  has  possession  and  control  of  and  good  title  to all the assets
     used in or in connection with its business and no circumstances exist under
     which  any person may claim entitlement to possession of any of such assets
     in competition with or in priority to ZNG.

8.2  ZNG  has  properly  made  all  mandatory  registrations  with  Russian tax,
     medical, insurance, pensions, social, insurance and statistics authorities.
     All  licences,  consents,  examinations, clearances, filings, registrations
     and  authorisations  which are or may be necessary to enable ZNG to own its
     assets and carry on its business are in full force and effect including but
     not  limited  to  geological  survey  licences,  permits or consents in the
     Kurgan Oblast of Western Siberia, Russia and elsewhere.

8.3  No  Encumbrance  (or  agreement  or  commitment  to  grant any Encumbrance)
     is outstanding against any part of the undertaking of ZNG or against any of
     the  assets  used  in  or in connection with its business including but not
     limited  to  geological  survey licences, permits or consents in the Kurgan
     Oblast  of Western Siberia, Russia and elsewhere and no claim has been made
     by any person to be entitled to any such Encumbrance.

<PAGE>

8.4  No  asset  including  but  not  limited  to  geological  survey  licences,
     permits  or  consents  in  the Kurgan Oblast of Western Siberia, Russia and
     elsewhere of ZNG is shared with any other person.

8.5  ZNG  has  conducted  and  is  conducting  its  business  in all respects in
     accordance with all applicable laws and regulations.

9.   LICENCES  AND  GRANTS

9.1  Details  of  all  subsoil  geological  survey  licences  held by ZNG in the
     Kurgan  Oblast  of Western Siberia, Russia and elsewhere are set out in the
     Disclosure Schedule. All such licences have been duly issued and registered
     with  the relevant authorities and lawfully held by ZNG with no exclusions,
     restrictions, notice of revocation or prohibitions as to use.

9.2  Neither  ZNG  nor  (in  so  far  as  relates  to  ZNG's  business)  its
     contractors  has  carried  out  any  of  its activities, including, but not
     limited to, exploratory, geophysical, subsoil surveying, drilling of wells,
     geodesic  works, cartography, storage and use of explosives or operation of
     explosive  and  fire  hazardous facilities without all applicable licences,
     permits  and  consents  including  but  not  limited  to any operational or
     geological survey licences, permits or consents issued by any government or
     regulatory  body  and  neither  ZNG  nor  (in  so  far  as relates to ZNG's
     business)  any  of  its contractors is or has been in breach of any term of
     any licence, including operational licences, permits and consents.

9.3  ZNG  has  not  been  and  is  not subject to any arrangement for receipt or
     repayment of any grant, subsidy or financial assistance from any government
     department or other body.

10.  CONTRACTS  AND  OTHER  OBLIGATIONS

10.1 Details  of  all  contracts  to  which ZNG is a party have been supplied in
     the  Due  Diligence Information. ZNG is not a party to any contract entered
     into  otherwise than in the ordinary and usual course of ZNG's business. No
     bid,  tender, proposal, or offer given or made by ZNG on or before the date
     hereof  is capable of giving rise to a contract merely by unilateral act of
     another person.

10.2 Each  contract  to  which  ZNG  is  a party is in full force and effect and
     binding  on the parties to it. ZNG has not defaulted under or breached such
     contract  and,  so far as SEG is aware, no other party to such contract has
     defaulted  under  or breached such a contract and no such default or breach
     by ZNG or any other party is likely or has been threatened.

10.3 No  power  of  attorney  given  by ZNG is in force. No authorities (express
     or  implied)  by which any person may enter into any contract or commitment
     to do anything on behalf of ZNG are subsisting.

<PAGE>

11.  INTELLECTUAL  PROPERTY;  CONFIDENTIAL  INFORMATION

11.1 ZNG  does  not  own,  use,  require  to  use  or  infringe any Intellectual
     Property.  So far as SEG is aware, no person is infringing any Intellectual
     Property  in  which ZNG has a beneficial interest. For the purposes of this
     paragraph,  "INTELLECTUAL  PROPERTY"  means  patents, rights to inventions,
     utility  models, copyright, trade marks, service marks, trade, business and
     domain names, rights in trade dress or get-up, rights in goodwill or to sue
     for  passing  off,  unfair competition rights, rights in designs, rights in
     computer  software,  database  rights,  topography  rights,  rights  to
     information  contained  in  any survey report including geophysical surveys
     and  exploratory  feasibility surveys, moral rights, rights in confidential
     information (including know-how and trade secrets) and any other similar or
     equivalent  rights,  in  each  case  whether registered or unregistered and
     including all applications for and renewals or extensions of such rights in
     any part of the world.

11.2 ZNG  has  not  at  any  time disclosed to any person (other than BP or SEG)
     any information relating to any of its know-how, trade secrets, exploration
     licences,  mineral  licences,  surveys,  production licences, geological or
     geophysical  research  findings,  estimates in relation to proved, probable
     and  possible  gas,  oil,  condensate  reserves  or any derivative thereof,
     confidential  information,  price  lists or lists of customers or suppliers
     relating  to its business except in the ordinary course of its business and
     upon it having secured the confidential nature of such disclosure.

12.  DISPUTES  AND  LITIGATION

12.1 ZNG  is  not  engaged  in  any  litigation  or  arbitration proceedings and
     there  are  no  proceedings pending or threatened, either by or against ZNG
     and, so far as SEG is aware, there are no circumstances which are likely to
     give rise to such proceedings.

12.2 There  is  no  dispute  with  any  revenue, or other official department in
     the  Russian  Federation  or  elsewhere, in relation to the affairs of ZNG,
     and,  so  far  as SEG is aware, there are no facts which may give rise to a
     dispute.

13.  TAXATION

13.1 ZNG  complies  with  any  and  all  Russian statutory tax reporting and tax
     payment procedures.

13.2 ZNG  is  not  in  tax  arrears,  was  not  engaged in any tax disputes with
     the  tax  authorities,  and  no  tax  disputes  or  claims  are  pending or
     threatened against ZNG.

14.  INSURANCE

14.1 ZNG  employees  are  and  at  all  material  times  have  been,  adequately
     covered by the mandatory medical insurance under Russian law.

14.2 ZNG  does  not  carry  out  any  activities  that  are  subject  to  the
     mandatory insurance under applicable law.

<PAGE>

15.  EMPLOYMENT  MATTERS

15.1 Details  of  all  the  officers  and  employees  of  ZNG,  including  all
     emoluments  and  other principle terms of employment, have been provided in
     the  Due  Diligence Information. All such information is complete, accurate
     and  up  to date and since such information was provided no change has been
     made in the emoluments or other terms of employment of any of such persons.

15.2 ZNG  is  not  under  any  liability  or  obligation,  or  party  to  any
     ex-gratia  payment  or  promise, to pay, or accustomed to paying, pensions,
     gratuities,  superannuation allowances or the like, or otherwise to provide
     benefits,  to  or  for  any  of it past or present officers or employees or
     their  dependents; and there are no retirement benefit, or pension or death
     benefit, or similar schemes or arrangements in relation to, or binding upon
     ZNG or to which ZNG contributes, except as provided by applicable law.

16.  ANTI-MONOPOLY

16.1 ZNG  has  complied  in  all  respects with all anti-monopoly legislation in
     the  Russian Federation and elsewhere in the world and has not entered into
     any  transactions  or  taken any actions whatsoever which would require the
     consent of or filing with any Russian anti-monopoly authorities.

16.2 Full  compliance  with  and  entry  into  this  Agreement  will not require
     the  consent of or filing with any anti-monopoly authorities in the Russian
     Federation.

17.  EFFECT  OF  AGREEMENT

17.1 The  execution,  delivery  and  performance  of  this  Agreement:

     (a)  will  not  violate  any  provision  of  any  law  or regulation or any
          order  or  decree  of  any governmental authority, agency or court, to
          which ZNG is subject, and/or the Charter of ZNG;

     (b)  does  not  require  filing  with,  or  the  consent, waiver, approval,
          authorisation or agreement of any person or any governmental authority
          who is not a party to this Agreement; and

     (c)  will  not  cause  ZNG  to  lose  any interest in or the benefit of any
          asset,  right,  licence  or  privilege it presently owns or enjoys and
          will not result in the creation or imposition of any Encumbrance on or
          over  any of the assets of ZNG or the ZNG Interests, other than in the
          form  of  SEG's  obligation  to  contribute  the  ZNG Interests to the
          Company on the terms provided herein.

17.2 There  are  no  agreements  or  arrangements  concerning  ZNG  which can be
     terminated  or are terminable or the terms of which can be varied or are in
     any  way variable as a result of any change in the control of ZNG or change
     in the composition of the board of directors of ZNG.

<PAGE>

18.  SUBSIDIARIES

     ZNG  does  not  have,  and  has  never had, any subsidiary undertakings and
     does  not  own  any stocks, shares, debentures, loan stock or other form of
     securities or investments.

19.  ENVIRONMENTAL

19.1 None  of  the  soil,  subterranean  and  ground  waters,  air,  or flora or
     fauna  of  Orlovo-Pashkovskiy,  Mokrousovskiy,  Privolniy  or West-Suerskiy
     subsoil  plots  is  polluted,  contaminated,  or  diseased  in  excess  of
     applicable environmental norms.

19.2 There  is  no  reason  to  expect  that  the  State  Environmental  Expert
     Panels'  consents  with  respect  to  ZNG's  operations  in the territories
     covered  by  the  geological  survey  licenses  will not be granted, or the
     issuance thereof will be substantially delayed.

B.   WARRANTIES  IN  RELATION  TO  SEG

1.   CORPORATE  ORGANISATION

     SEG  is  a  corporation  duly  organised,  validly  existing  and  in  good
     standing  under  the laws of the State of Nevada, United States and has all
     requisite  corporate  power  and  authority  and all necessary governmental
     licences,  authorisations,  permits,  consents  and  approvals  to  own its
     properties  and  assets and to conduct its business as now conducted and as
     currently proposed to be conducted.

2.   VALIDITY  OF  AGREEMENTS

2.1  SEG  has  all  requisite  corporate  authority  and  power  to  execute and
     deliver  this  Agreement  and  the  documents  and instruments contemplated
     hereby  and to consummate the transactions contemplated hereby and thereby.
     The  execution  and  delivery  of  this  Agreement  and  the  documents and
     instruments  contemplated  hereby  and the performance of SEG's obligations
     hereunder  have  been  duly authorised by the board of directors of SEG, as
     applicable, no other corporate proceedings on the part of SEG are necessary
     to  authorize  the execution, delivery and performance of the Agreement and
     the  documents  and  instruments  contemplated  hereby or to consummate the
     transactions contemplated hereby and thereby.

2.2  This  Agreement  has  been  and,  at  Completion, each of the documents and
     instruments  required  to  be  entered into by SEG pursuant hereto will be,
     duly and validly executed and delivered by SEG and, assuming this Agreement
     has  been,  and,  at  Completion,  each  of  the  documents and instruments
     contemplated hereby will be, duly authorised, executed and delivered by the
     parties  hereto,  this  Agreement  constitutes and, at Closing, each of the
     documents  and  instruments  required  to  be  entered into by SEG pursuant
     hereto  will  constitute, a valid and binding agreement of SEG, enforceable
     against SEG in accordance with its terms.

3.   NO  CONFLICT  OR  VIOLATION

     The  execution,  delivery  and  performance  by  SEG of this Agreement does
     not  and will not violate or conflict with any provision of the Articles of
     Incorporation  or  by-laws of SEG or violate any provision of law, statute,

<PAGE>

     judgment, order, writ, injunction, decree, award, rule or regulation of any
     court,  arbitrator or other governmental or regulatory authority applicable
     to SEG's business or properties.

4.   CONSENTS  AND  APPROVALS

     All  consents,  waivers,  authorizations  or  approvals of any governmental
     or  regulatory authority, domestic or foreign, or any other person, firm or
     corporation,  and  each  declaration  to or filing or registration with any
     such  governmental  or  regulatory  authority, that is required of or to be
     made by SEG in connection with the execution and delivery of this Agreement
     by  it  or  the  performance by it of its obligations hereunder, except for
     each  consent,  waiver,  authorization,  approval,  declaration,  filing or
     registration arising out of any applicable securities laws has been made.

5.   INFORMATION

5.1  All  information,  including,  but  not  limited  to,  the  information
     contained  in  the  Disclosure Schedule, relating to SEG provided by SEG or
     its  professional  advisers,  officers  or  employees  to  BP or any of its
     professional  advisers  in  the  course of the negotiations leading to this
     Agreement  was when given, is now, and will at Completion be true, complete
     and accurate and not misleading in any respect.

5.2  All  information  relating  to  SEG,  its subsidiaries and their respective
     businesses  contained in any filings and registrations made by SEG with the
     United  States  Securities  and  Exchange  Commission  was at the time such
     filings  or  registrations  were  made  true,  complete and accurate in all
     material respects.

6.   FINANCIAL  STATEMENTS

     SEG's  consolidated  financial  statements  for  the year ended 31 December
     2004  give a true and fair view of the assets, liabilities (whether present
     or  future,  actual  or  contingent, unquantified or disputed liabilities),
     solvency  and  state  of  affairs  and  financial  position  of SEG and its
     subsidiaries  at  such  date  and  its  profits or losses for the financial
     period ended on that date, and have been prepared and audited in accordance
     with  US  GAAP consistently applied and comply with the requirements of all
     applicable law.

7.   LITIGATION

7.1  There  are  no  claims,  actions,  suits,  proceedings,  labour disputes or
     investigations  pending or, to the knowledge of SEG, threatened in relation
     to  SEG  before  any  federal,  state  or  local  court  or  governmental,
     administrative  or regulatory authority, domestic or foreign, or before any
     arbitrator  of  any  nature,  brought  by  or  against SEG or its officers,
     directors, employees, agents or any of its Associated Companies.

7.2  Neither  SEG  nor  any  of  SEG's  assets  or properties is subject to, nor
     to  the  knowledge  of  SEG  does  any  basis  exist  for, any order, writ,
     judgment,  award, injunction or decree of any federal, state or local court
     or  governmental  or  regulatory authority or arbitrator, that affects SEG,
     SEG's  shares  or  SEG's  assets,  properties,  operations,  net  income or
     financial  condition  or  which  would  interfere  with  the  transactions
     contemplated by this Agreement.

<PAGE>

8.   COMPLIANCE  WITH  LAW

     The  operations  of  SEG  have  been  conducted  in  accordance  with  all
     applicable  laws,  regulations, orders and other requirements of all courts
     and  other  governmental or regulatory authorities having jurisdiction over
     SEG and its assets, properties and operations. SEG has not received written
     notice  of  any violation of any such law, regulation, order or other legal
     requirement,  nor  is  it  in  default  with  respect  to  any order, writ,
     judgment,  award, injunction or decree of any federal, state or local court
     or governmental or regulatory authority or arbitrator, domestic or foreign,
     applicable  to  SEG  or  any  of  its assets, properties or operations. The
     business  is  not  being  and  has  not  been conducted in violation of any
     applicable  order,  writ, judgment, injunction, decree, statute, ordinance,
     rule or regulation of any governmental entity.

9.   UNDISCLOSED  LIABILITIES

     SEG  has  no  indebtedness  or  liability,  absolute  or contingent, direct
     or  indirect,  which  is  not  shown  or provided for on the balance sheets
     included  in  SEG's consolidated financial statements for the year ended 31
     December  2004  other  than liabilities incurred or accrued in the ordinary
     course  of  business (including liens for current taxes and assessments not
     in  default)  since  31  December  2004 and there is no existing condition,
     situation  or  set  of  circumstances which could reasonably be expected to
     result in such a liability.

10.  DECLARATION  OF  SOLVENCY

     SEG  is  not  insolvent  and  is  able  to  pay its debts as they fall due.
     SEG  has not taken any corporate action nor have any other steps been taken
     or  legal proceedings started or threatened against SEG for its winding up,
     dissolution or reorganisation or for the appointment of a receiver, trustee
     or similar officer of it or of any of its assets or revenues.

11.  DISCLOSURE  OF  CONFIDENTIAL  INFORMATION

     SEG  has  not  at  any  time disclosed to any person (other than BP) any of
     ZNG's  know-how,  trade  secrets,  exploration  licences, mineral licences,
     surveys,  production licences, geological or geophysical research findings,
     estimates in relation to proved, probable and possible gas, oil, condensate
     reserves  or  any derivative thereof, confidential information, price lists
     or lists of customers or suppliers relating to its business.

12.  TAX  MATTERS

     SEG  has  duly  filed  all  tax  and  information  returns required to have
     been  filed  on or before the date hereof by it with the United States, any
     state,  county  and local government authority and any foreign jurisdiction
     (including  Canada) and each such return completely and accurately reflects
     the  income,  franchise,  property,  sales,  use, value-added, withholding,
     exercise,  capital  or  other  tax  liabilities  and  all other information
     required to be reported thereon. All taxes shown as due and payable on each
     return  have been timely paid, or withheld and remitted, to the appropriate
     taxing  authority.  SEG is not delinquent in the payment of any tax and has
     not  requested  any  extension  with  which to file any return. There is no
     claim,  audit,  action,  suit,  proceeding  or investigation now pending or
     threatened against SEG in respect of any tax.

<PAGE>
                             PART II - BP WARRANTIES

1.   CORPORATE  ORGANISATION

     BP  is  a  private  limited  company  duly  organised  and validly existing
     under  the  laws  of  England  and  has  all  requisite corporate power and
     authority and all necessary governmental licences, authorisations, permits,
     consents  and approvals to own its properties and assets and to conduct its
     business as now conducted and as currently proposed to be conducted.

2.   VALIDITY  OF  AGREEMENTS

2.1  BP  has  all  requisite  corporate  authority  and  power  to  execute  and
     deliver  this  Agreement  and  the  documents  and instruments contemplated
     hereby  and to consummate the transactions contemplated hereby and thereby.
     The  execution  and  delivery  of  this  Agreement  and  the  documents and
     instruments  contemplated  hereby,  and the performance of BP's obligations
     hereunder, have been duly authorised by the board of directors of BP and no
     other  corporate  proceedings  on the part of BP are necessary to authorize
     the  execution, delivery and performance of the Agreement and the documents
     and  instruments  contemplated  hereby  or  to  consummate the transactions
     contemplated hereby and thereby.

2.2  This  Agreement  has  been  and,  at  Completion, each of the documents and
     instruments  to  be  entered  into  by BP pursuant hereto will be, duly and
     validly executed and delivered by BP and, assuming this Agreement has been,
     and,  at  Completion,  each  of  the documents and instruments contemplated
     hereby  will  be,  duly  authorised,  executed and delivered by the parties
     hereto,  this  Agreement constitutes and, at Closing, each of the documents
     and instruments to be entered into by BP pursuant hereto will constitute, a
     valid  and  binding  agreement  of BP, enforceable against BP in accordance
     with its terms.

3.   NO  CONFLICT  OR  VIOLATION

     The  execution,  delivery  and  performance  by  BP  of this Agreement does
     not  and  will not violate or conflict with any provision of the Memorandum
     or  Articles of Association of BP or violate any provision of law, statute,
     judgment,  order,  writ,  injunction, decree, award, rule, or regulation of
     any  court,  arbitrator,  or  other  governmental  or  regulatory authority
     applicable to BP's business or properties.

<PAGE>

                                   SCHEDULE 4
                               DISCLOSURE SCHEDULE

Part  I,  Section  A,  Paragraph  6.3:
--------------------------------------

Without  the funding to be provided pursuant to the terms of Loan Agreement, ZNG
would  be  insolvent.

<PAGE>

EXECUTED as a DEED by                   )
BALTIC PETROLEUM (E&P) LIMITED          )
acting by a Director and                )
a Director/Secretary                    )
                                         /s/James Pockney
                                         --------------------------------
                                         Director

                                         /s/Mark Gilchrist
                                         --------------------------------
                                         Secretary

EXECUTED as a DEED by                   )
SIBERIAN ENERGY GROUP INC.              )
                                         /s/David Zaikin
                                         --------------------------------
                                         Authorised signatory

                                         David Zaikin, CEO
                                         --------------------------------
                                         Name

EXECUTED as a DEED by                   )
ZAURALNEFTEGAZ LIMITED                  )
acting by a Director                    )
and a Director/Secretary                )
                                         /s/Simon Escott
                                         --------------------------------
                                         Director

                                         /s/Mark Gilchrist
                                         --------------------------------
                                         Secretary

<PAGE>

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