Novy Neft II Limited - Update

Hamilton, Bermuda: 20 December 2004 - The Directors of Novy Neft II Limited (the "Company") refer to the announcements made on 19 August and 9 December 2004 that the Company would buy back shares in the market for cancellation should they become available, in order to address any possible imbalance between the supply and demand for the Company's Shares.

In accordance with these previous announcements, the Directors have bought back shares during the recent extreme Russian market volatility in an attempt to address such an imbalance between supply and demand.

To date the Company has bought back and cancelled 3,765,274 ordinary shares or 36.81% of the issued share capital of the Company.

As they have recently demonstrated, the Directors are prepared, if and when necessary, to approve further buy backs of shares in an attempt to protect shareholders from a widening discount and to facilitate as much as possible demand from the Company's shareholders to reduce their Gazprom exposure during times of volatile market conditions.

Although the magnitude of future market stabilisation initiatives is likely to be less pronounced than in the recent past, the Directors wish to reiterate their commitment towards creating an investment vehicle that provides a combination of attractive underlying exposure to Gazprom local shares as well as strong embedded discount protection mechanisms.

The Directors would like to remind shareholders that the Company's Prospectus states that at each annual general meeting falling after the anniversary of the Company's launch €˜an ordinary resolution shall be proposed that the Company continue as an investment company. If that resolution is not passed, the Directors are required to formulate proposals to be put to shareholders for the winding up or other reorganisation or reconstruction of the Company'.  The Directors believe that such an annual vote is a powerful tool in preventing a sustained discount to net asset value materialising and serves to ensure that the Company will only remain in existence with continued support from shareholders.

The Directors wish also to remind shareholders that they will only use their discretion to buy-back or redeem Shares in accordance with guidelines which are designed to ensure that the Company is not open-ended for taxation or regulatory purposes and that accordingly shareholders cannot expect with any degree of certainty that any of the Shares they may offer for re-purchase or redemption will be bought back or redeemed at any particular time.

In exercising their discretion the Directors will consider, if required, buy backs of up to a further 20% of the issued share capital of the Company (based on the issued share capital as at 19 August 2004). If this is approved they will look to ensure that any such buy backs are reasonably spread over the course of the next six months unless market conditions dictate a different approach. Provided the above limits have not been used up, the Directors will also consider redemption requests as from March 2005.

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