On 25 June 2007, Sergey Bogdanchikov, president of Rosneft, and Dmitry Konov, president of SIBUR, signed a Memorandum of Understanding (MoU) in Moscow concerning the processing, marketing and sales of associated gas.

The MoU provides for the establishment of a joint venture on a parity basis at the Yuzhno-Balyksk Gas Processing Plant (GPP), which belongs to SIBUR. The joint venture has been set up with a division of capacity in accordance with the parity stakes of each partner in the new company.

The provisions of the MoU state that the two companies intend to increase the processing of associated gas to 3 billion cubic meters per annum. In the event that gas production rises at Rosneft’s fields, a further increase in gas processing at the GPP is possible.

The Yuzhno-Balyksk Gas Processing Plant began operating in 1978. It annually processes about 1.5 billion cubic meters of associated petroleum gas produced at the fields of Rosneft’s subsidiary Yuganskneftegaz.

Since 2006, Rosneft has been implementing an Integrated Gas Program. The program’s level of capital investment stands at RUB 16.6 billion, which will allow the Company to achieve 95% utilization of gas from all fields by 2010. This figure completely meets all license requirements.

Setting up the joint venture at the Yuzhno-Balyksk Gas Processing Plant will enable Rosneft to process all associated petroleum gas produced at the fields of Yuganskneftegaz and to provide additional processing capacity in the event of further increases in associated gas production.