Today Yuzhno-Sakhalinsk has hosted the 11th International Sakhalin: Oil and Gas Conference 2007. Attending the Conference was Gazprom delegation.

As pointed out in the Gazprom report presented at the Conference the Company’s resource base in Sakhalin and the Sakhalin-Khabarovsk-Vladivostok gas pipeline grid development is a top-priority business direction for Gazprom in Russia’s East. Gazprom joining the Sakhalin-2 project in April 2007 as a leading shareholder is the Company’s first step within Gazprom business activity in Sakhalin.

Gazprom set up Gazprom invest Vostok to be responsible for investment project execution in the Russia’s East. At the same time the Sakhalin projects will be coordinated by Gazprom Representative Office.

The report particularly stressed that within the midterm (at least until 2015) gas of the Sakhalin-1 project would be the only source to satisfy gas needs of consumers in the Khabarovsk, Primorsky Krais, Sakhalin Oblast, Jewish Autonomous Okrug. The State Program on Social and Economic Development of the Far East and Zabaikalye during the period to 2013 increases gas demand in Russia’s East.

The report offered a number of measures to develop stable gas supply in the Far East due to the Sakhalin-1 project potential and stressed the topicality to develop the General Scheme for gas supply and gasification of the Sakhalin Oblast.

Reference:

On June 15, 2007, the Government of the Russian Federation approved the Draft Program for the Unified Gas Production, Transportation, Supply System Development in Eastern Siberia and Far East due to possible gas export to Chinese markets and other Asia Pacific countries. Gazprom was appointed to coordinate the Program execution.

Pursuant to the Eastern Program approved in June 2007 by the State Commission for Fuel and Energy Complex Development and Mineral and Resource Base Reproduction, the large-scale gas production at the Sakhalin shelf is being developed at the first stage of the Program implementation. In this case the Program covers not only Sakhalin-1, 2 projects being executed at the moment, but also prospective projects such as Sakhalin-3 project and others. The Program stipulates development of LNG capacities and Sakhalin-Khabarovsk-Vladivostok gas transmission grid.

The Program’s priority principle is a Russian consumer, the necessity to primarily satisfy gas need of the Russian market.

Sakhalin shelf is the most studied sea area in the Far East. Within shelf boundaries nine hydrocarbon fields were discovered with gas, oil and condensate reserves of 1.2 tcm, 394.4 mcm, 88.5 million tons, correspondingly. The Sakhalin shelf prospect hydrocarbon resources exceed 6 btce.

On April 18, 2007, Gazprom and Sakhalin Energy shareholders (Royal Dutch Shell plc, Mitsui & Co. Ltd and Mitsubishi Corporation) where Sakhalin Energy is the Sakhalin-2 project operator signed Purchase and Sale Agreement, which stipulates Gazprom acquisition of a 50 per cent plus one share stake in Sakhalin Energy.

The Sakhalin Oblast is a strategic partner for Gazprom. On September 14, 2006, Gazprom and the Sakhalin Oblast Administration signed the Agreement of cooperation, which identified the regional gasification as a major business direction for joint work. Currently, the Sakhalin Oblast is gasified by 9 per cent.

At present Gazprom does not supply natural gas to the regional consumers.

The Agreement of gasification between Gazprom and the Sakhalin Oblast Administration stipulates development of the General Scheme for gas supply and gasification of the region. Gazprom has developed the Major Provisions of the General Scheme for gas supply and gasification of the Far Eastern Federal District.