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September 28, 2007

Board of Directors considers information on executing Gasification Program for Russian Regions

The Boards of Directors’ meeting is in progress at the Gazprom Headquarters.

The Board of Directors heard and considered the information on the progress with implementing the Gasification Program for the Russian Regions.

It was noted that Gazprom fully performs its obligations in connection with the construction of inter-settlement gas pipelines in Russian regions. In the meantime, the administrations of some regions have just partially implemented the approved synchronization schedules for gasification facilities commissioning as related to street-level pipeline laying, gas boiler plants installation and consumers preparation for natural gas supply.

“Overall progress status of street-level networks commissioning has reached 52 per cent of the target end-of-year value so far. Failure to meet the scheduled deadlines will be considered for the purpose of funds allocation in the coming year.

Volume of investments in the coming year is made up of two basic elements – funds allocated for the accomplishment of gasification facilities construction and for the construction of the new ones.

In case regions fail to perform the obligations undertaken, amount of funds provided for the construction of new facilities may drop to zero. Investments will be provided only to those regions, which perform their obligations as related to the construction of street-level networks and preparation for consumers transfer to natural gas supply. Let the people who live in the regions ask their local leaders why funds allocation has been cut and why they have no gas”, said Dmitry Medvedev, Russia’s First Deputy Prime Minister, Chairman of the Company’s Board of Directors.


The major goal of the Program for Gasification of the Russian Regions implemented by Gazprom is to provide gas to an ultimate user.

In the course of Program implementation responsibility areas are distributed in the following way. Gazprom carries out the construction of inter-settlement gas pipelines at its expense. The construction of street-level gas distribution networks, household-level networks, acquisition and installation of gas equipment is ensured by the administration (government) of an entity by attracting funds from the budgets of all levels and from local population. A synchronization schedule for gasification facilities commissioning is approved by Gazprom and the administrative authorities of the Russian constituent entities involved in the Program for the purpose of work coordination. Today synchronization schedules for gasification facilities construction are approved by all the Russian constituent entities involved in the Program implementation.

In early 2005 Russia’s gasification level was equal to an average of 54 per cent including 61per cent in urban areas and 36 per cent in rural areas.

In 2005-2006 Gazprom invested RUR 22.8 bln in the gasification of the Russian regions including RUR 5.2 bln in 2005 and RUR 17.6 bln in 2006 ensuring average Russian gasification level upsurge to 58 per cent as of January 1, 2007, including 64 per cent in urban and 40 per cent in rural areas.

Meanwhile 150 settlements were gasified, including 410 thousand apartments and housing estates (180 thousand in urban and 230 thousand in rural areas). 2 thousand municipal enterprises (hospitals, schools, kindergartens, etc.), 600 rural boiler plants, over 50 agricultural enterprises were converted to natural gas.

RUR 20.2 bln were allocated for Gasification Program implementation in 2007. This allowed to preserve the level of investments in those regions where synchronization schedules were implemented in full as well as to additionally involve five Russian constituent entities in the Program as follows: Irkutsk Oblast, Republic of Karelia, Republic of Altai, Yamal-Nenets Autonomous Okrug, Republic of Dagestan. Thus, the number of Russian constituent entities involved in the Gasification Program totaled 58.

RUR 19.7 bln (out of RUR 20.2 bln) were spent to continue the construction of 309 facilities commenced in 2005-2006, as well as to design and commence the construction of 257 new gasification facilities. RUR 500 mln were allocated for the general layout development for gas supply and gasification of nineteen Russian constituent entities.

In addition, RUR 1.5 bln were allocated for the reconstruction and technical upgrading of the existing gas networks in 2007.

Today 283 gasification facilities have been constructed by Gazprom at its own expense and granted certificates of acceptance boards. The construction of 68 facilities is being completed followed by the execution of delivery/acceptance documentation.

Thus, obligations undertaken by Gazprom in connection with the Gasification Program for the Russian Regions will be fully performed in 2007 as well. The construction of a total of 402 inter-settlement pipelines 6.8 thousand km long will be completed in 52 Russian constituent entities in 2007.

At the same time, in 22 of 58 Russian constituent entities involved in the Company's Gasification Program for the current year there is a synchronization schedule slippage as related to the preparation for consumer transfer to natural gas supply, while in 15 of them the slippage is considerable.

The implementation of the Gasification Program for the Russian Regions for 2007 will result in the gasification of 580 settlements, 2.2 apartments and housing developments (including 1.5 mln in urban and 0.7 mln in rural areas). Some 12 thousand municipal enterprises (hospitals, schools, kindergartens, etc.), some 2.5 rural boiler plants, 290 agricultural enterprises will be converted to natural gas. The Gasification Program will cover 6 mln Russian citizens.

This will result in the upsurge in Russia’s gasification level to an average of 62 per cent including 67 per cent in urban areas and 44 per cent in rural areas in early 2008.




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