In January 2004, LUKOIL won the bid round for carrying out operations within the contract area of Block A, the purpose of which is to explore for gas condensate, and in the event of a commercial discovery, organize the gas and gas condensate production.

Block A is located in the eastern part of the Rub al-Khali basin to the south from Ghawar, the largest oil field in Saudi Arabia and in the world. The total area of the block is 29,928 square kilometers.

On March 1, 2004, LUKOIL Saudi Arabia Energy Ltd (LUKSAR) was established as the operating company; the venture’s participants are LUKOIL overseas (80%) and Saudi Aramco, the national company (20%). The company’s office is in Al-Khobar, the Eastern Province of Saudi Arabia. On March 7, 2004, the Government of Saudi Arabia and LUKSAR signed a Production Agreement for 40 years (including the first exploration period of 5 years).

For the period after the Agreement was signed, LUKSAR completed the reinterpretation of over 8000 km of historical seismic data, performed 2D, 3D and 3D-Sparse seismic in the area of about 1800 square kilometers, processed and interpreted the received data.

The first exploration well is located in the dome of Tukhman structure. The target well depth is about 5000 meters. In summer 2005, the well design was developed, and the environmental impact assessment was completed.

Based on the tender results, the drilling rig contract was signed with Pool Arabia, a Saudi company, which is an entity within the international Nabors Drilling group. The estimated period of drilling is 9 months.

The well construction contractors include local companies (GENTAS, Saleh & Abdulaziz Abahsain, Hajjan and King Fahd University of Petroleum & Minerals) and large international companies, such as Schlumberger, Weatherford, Baker Hughes, Varel International, Medbit, Reed Hycalog, Halliburton and Smith Bits.