Gazprom OAO (EDR) : Strategic Aim – Creating Cutting-Edge Gas Infrastructure In Russia's East And Linking It With Unified Gas Supply System Of Russia

The Gazprom Management Committee addressed the Company's large-scale efforts aimed at implementing the Eastern Gas Program (http://www.gazprom.com/about/production/projects/east-program/).

It was noted that the creation of powerful gas production centers as well as gas transmission and processing capacities in Russia's East was strategically important for the economic and social development of all the regions of Eastern Siberia and the Far East.

Gazprom rapidly enhances its resource base in the eastern regions and actively develops its production capacities applying the most cutting-edge technologies. For instance, Russia's first subsea production facility and the gas transmission system were successfully tested in the Kirinskoye field within the Sakhalin III project in October. In 2014 the Company plans to connect the second production well and in future, upon the construction of additional wells, the field will be brought to its full capacity.

The Company intensively conducts design & survey and geological exploration activities offshore Sakhalin and Kamchatka, in the Republic of Sakha (Yakutia), the Irkutsk Region and the Krasnoyarsk Territory.

In particular, two exploration wells were constructed offshore Sakhalin in the major Yuzhno-Kirinskoye field (Sakhalin III project) this year and two more wells are due to be built next year. Between 2014 and 2016 in the Vostochno-Odoptinsky and Ayashsky blocks of the project it is expected to conduct major seismic surveys, drill a prospecting & appraisal well and get ready for the construction of another two similar wells.

It is scheduled to conduct 3D seismic surveys in two prospects offshore West Kamchatka as well as to build a prospecting & appraisal well and prepare for the construction of another one in the next three years.

The scheduled 3D seismic surveys were conducted in full and 11 exploration wells were constructed in the Chayandinskoye field in Yakutia in 2013. A positive feedback from the Russian State Expert Evaluation Department was received on the project documentation for the site facilities of the Chayandinskoye field oil rim during the pilot operation period. The work is underway for streamlining general design solutions for the field. In addition, seismic surveys started in the Sobolokh-Nedzhelinskoye, Verkhnevilyuchanskoye, Tas-Yuryakhskoye and Srednetyungskoye fields. Follow-up draft exploration projects for these fields will be prepared before the year end.

Design & survey operations are currently underway for the construction of exploration wells in the Kovyktinskoye field in the Irkutsk Region between 2014 and 2016. The design documentation for the field predevelopment during the pilot operation successfully passed the State Expert Evaluation. An additional exploratory well was constructed in the Chayandinskoye field in 2013; the efficient methods are being defined for intensifying hydrocarbon inflows.

For the purpose of comprehensive treatment of gas from the Yakutia and Irkutsk gas production centers, design & survey operations are being conducted; the main engineering solutions were devised for constructing a gas processing plant (GPP) and a helium plant in the Amur Region. The GPP will be technologically connected with a gas chemical complex, which SIBUR is intended to construct.

The establishment of gas industry in eastern Russia is primarily aimed at supplying gas to Russian consumers. The Company currently conducts design and construction & installation operations at forty facilities to continue the development of gas supply to the Kamchatka, Primorye and Khabarovsk Territories as well as the Sakhalin Region.

The meeting pointed out that the considerable resource base also allowed Gazprom to set up a large eastern center for exporting Russian natural gas to the rapidly growing Asia-Pacific market. The development of the Company's own LNG production will provide for strengthening its position in Asia-Pacific.

The key part here is assigned to the Vladivostok-LNG project, under which an LNG plant with the annual production capacity of 10 million tons will be constructed with the possibility of further expansion. The first train of the plant will be commissioned in 2018. Gazprom has already started developing the design documentation. Talks are currently underway for concluding long-term contracts with the potential gas purchasers, including Japanese companies.

Commercial negotiations are in progress with Chinese partners concerning the eastern route of pipeline gas supply to China. Once the contract is signed, Gazprom will start the negotiations regarding the western route.

With a view to implement the projects in eastern Russia in the most efficient way, Gazprom is engaged in productive work with the government authorities for developing the state support measures, including the creation of a favorable tax regime.

In addition, a decision is required for extending the Russian Government Directive No. 1539-r dated September 6, 2011 currently in effect for the whole term of the Production Sharing Agreement beginning with 2014. It will make it possible to go on with the gasification of southern and central areas of the Sakhalin Region.

The meeting of the Management Committee particularly stressed that Gazprom was facing a strategic aim - creating a cutting-edge gas infrastructure in eastern Russia and linking it with the Unified Gas Supply System of Russia.

The relevant structural units were tasked to continue the implementation of the Eastern Gas Program.

The state-run Development Program for an integrated gas production, transportation and supply system in Eastern Siberia and the Far East, taking into account potential gas exports to China and other Asia-Pacific countries (Eastern Gas Program) was adopted in September 2007 pursuant to the Russian Industry and Energy Ministry Order. Gazprom was appointed by the Russian Federation Government as the Program execution coordinator.

In eastern Russia new gas production centers were set up in Sakhalin and Kamchatka, the Yakutia center is being shaped and the Irkutsk and Krasnoyarsk centers are next in turn.