On  July  22,  the  Council  of  JSC Ventspils Nafta has considered and

approved  the Annual Report of Ventspils Nafta for 2003, as well as the

consolidated  Annual  Report  for  2003.  Both  Reports are prepared in

accordance  with the international book-keeping standards, according to

the  legislation  of  the Republic of Latvia, including widely accepted

book-keeping principles.



The  net turnover of Ventspils Nafta in 2003 reached 55,4 million lats.

Taking  into  account the external factor circumstances that influenced

the  activities of the transit business companies of Ventspils Nafta in

2003  it  was planned when preparing the budget of 2003 that net losses

of  Ventspils Nafta in 2003 would make 9,4 million lats.  The losses of

the Holding will be written off from the reserves accumulated by income

of Ventspils Nafta during previous years.



In  addition,  the  financial and economic results of the activities of

Ventspils  Nafta within the first half of the year showed the stability

of  Ventspils  Nafta, because the preliminary net income for the period

from January to June of 2004 reached 1,2 million lats. It significantly

exceeds  the  forecast  for this year' income - 176 thousand lats - and

confirms  therefore  the  rightness  of  policy on Ventspils Nafta risk

diversification,  as well as the return on investments into the spheres

of Ventspils Nafta activities other than transit business.



The   most  important  event  of  2003  for  Ventspils  Nafta  was  the

improvement  of  management  system  that was oriented to the long-term

perspectives of future development. As the result in 2003 the structure

of  Ventspils  Nafta  was improved in accordance with the principles of

multi-industrial activities of the Holding by outsourcing the functions

of  the  holding  company  and  dividing  all business companies of the

Ventspils Nafta Holding into the respective spheres of activities.



Not  considering the administrative or political stoppage of the export

deliveries  by  pipeline  from  Russia  to  Ventspils, transit business

companies of Ventspils Nafta Holding were active in 2003 by looking for

other  ways  to  attract  cargo,  as  well  as  by offering new kind of

services.  However,  because  of the pressure of some negative external

circumstances,  as  well  as in the result of unjustified activities of

Latvian  Governmental  structures responsible for taxation, the figures

of  these companies in 2003 perceptibly influenced the total results of

the Holding.



Unlike  2002 the volumes of railway cargoes transhipped by the terminal

of Ventspils Nafta in last year increased by 4,3 million tonnes or 68%.

The  terminal's  contribution  into  the  total  transhipment of gasoil

railway  deliveries from Russia and other CIS countries in 2003 reached

22,2%, but as to the transhipment of crude oil - 7,5%.



Technical  and  technological  equipment  of  the terminal of Ventspils

Nafta  in 2003 allowed to broaden the range of the transhipped products

by  launching the transhipment of crude oil and gasoil with low sulpher

content  viz.  0,035%  received  by  railway.  By  using the terminal's

capacities  to its most and by planning to activate more the attraction

of  railway  cargoes,  in 2003 the terminal started the construction of

the  most  modern  railway  unloading  facility  that could be used for

unloading  crude  oil  and  petroleum  products depending on the market

situation.



A  new  company Ventspils Nafta Terminals started its operations within

the framework of Ventspils Nafta Holding. It is 100% a daughter company

of  Ventspils  Nafta and took over the functions of the transhipment of

crude  oil  and  petroleum  products - the business activities in which

Ventspils Nafta itself was involved before October 1, 2003.



Taking  into  account  the  circumstances  beyond the activities of the

company  viz.  the decreased export of crude oil and petroleum products

from  Russia  to  Ventspils  during  the last months of 2003, the cargo

turnover  for  the  reported  period  that  was  only  one  quarter for

Ventspils  Nafta  Terminals affected the financial results of Ventspils

Nafta Holding.



Although  the  stoppage of crude oil export by pipeline to Ventspils as

artificially   created   by  Russian  administrative  and  monopolistic

structures  left  a  significant  imprint on the financial and economic

results  of   LatRosTrans - the joint venture between Russia and Latvia

that  ownes  and  operates oil and product pipeline on the territory of

Latvia,  its  net turnover for the reported period reached 13,5 million

lats,  considering  that  the  product  pipeline  operates  to its full

capacity and delivers gasoil to the port of Ventspils.



Aiming  to  increase  the  volumes  of  the transported gasoil, in 2003

LatRosTrans  invested  15  million  lats into the modernization of main

pipelines  and  pump  stations, as well as projects for the increase of

capacities used to transport petroleum products.



LatRosTrans undertakes active measures to overcome the excessive losses

of  petroleum  products incurred as the result of illegal activities by

investing  not  only  its  own resources but also co-operating with the

structures   of   State   authority.  Unfortunately,  this  complicated

situation  in  which  nevertheless  LatRosTrans  was  able to transport

significant  volumes  of gasoil, as well as plan further development of

company's   business   by   long-term   investments  is  aggravated  by

unintelligible  and groundless opinion of the State Income Service that

the  losses  of  LatRosTrans  incurred  in the result of theft shall be

declared  as  petroleum  products  imported  for own free turnover, and

respective  taxes  paid.  LatRosTrans  brought  the  action against the

excessive  taxes  levied  on  the  financial  activities of the company

because  of  the  losses. The management and the Council of LatRosTrans

are  positive  that the decision in respect to this matter will be made

in their favour.



A  successful  operation  in  2003  is  reported  by  Preses  Nams that

concentrated  on the development of printing business and gained profit

in  the  amount  of  0.7  million lats by reaching net turnover of 18.6

million  lats.  To  restore its material and technical base Preses Nams

invested 1.7 million lats in 2003.



Ventspils  Nafta,  by  diversifying its risks within several years, was

investing  its financial resources into liquid real property objects in

the  capital city of Riga (villa Maikapara nams , Preses Nams Building,

Office Building on Palasta Street in Vecriga), in health-resort Jurmala

(former  spa  Rigas  licis ), in Ventspils and other places (conference

and holiday resort Lejastiezumi located at the Usmas Lake). In previous

years,  including  the period of Report, by considering positive trends

on  the real property market described by a steady growth of prices the

market  value  of  the property owned by Ventspils Nafta was constantly

increasing and providing for Ventspils Nafta a stable growth of capital

return as well as additional income reserves.



Ventspils  Nafta  Annual  Report  for 2003 was audited by Ernst & Young

Baltic  .  The  Annual Report has to be further approved by the general

meeting of shareholders on July, 30.



JSC Ventspils nafta

For information:

Gundega Varpa

Tel.: 7229793

e-mail: gundega.varpa@vnafta.lv