BULA Resources has successfully tested oil at the Salmskoye oil field in western Siberia, in which it has a 50 per cent stake. Development well 705 tested at a rate of 150 cubic metres per day, or 942 barrels per day, on an 8mm choke, over a four day test period.

It was drilled vertically into the Bajenov reservoir. Chairman, Mr Jim Stanley, in a statement issued yesterday, said it "demonstrates the vast oil reserves contained in this oilfield and we hope to build up to first production before the year end. The pipeline link and pump station facilities have already been put in place which is a significant achievement for our company".

He was unavailable for comment. However, the drilling results represent the first encouraging news for some time.

The drilling has been hit by delays which were caused by poor Russian equipment. The flow rate compares more than favourably with results from Amoco and Shell which owns adjacent development blocks. Consultants have estimated the field contains 585 million barrels of proven and probable recoverable oil reserves.

The other 50 per cent of the well is owned by Russian group Khantymansiyskneftegasgeolocica.

Industry sources said it would take Bula eight to 10 years to develop the well from its existing resources. However, this could be accelerated to two years if it embarked on a funding to raise around £70 million.

Some sources were suggesting that Bula may arrange a placing to raise £20 million later this year and that this would be followed by debt funding later.

Bula was embroiled in a row with two of its Russian directors last year. This led to a legal wrangle. There was a subsequent settlement and the directors left the board. However, as resolutions had already been circulated to shareholders, the directors were ousted at a meeting in August.