The Board of Directors’ meeting has adjourned at the Gazprom Headquarters.

The Board of Directors approved the work being done by Gazprom to get stock exchange trading in natural gas up and running.

At the meeting it was noted that in order to resume operation of the electronic trading platform (ETP) and to launch exchange trading in natural gas in Russia, a relevant resolution had to be adopted by the Government of the Russian Federation.

The Board of Directors tasked the Company’s Management Committee to continue the interaction with federal executive authorities in developing a draft resolution of the Russian Government on exchange and electronic trading in natural gas. The Management Committee was also tasked to prepare and approve a plan of actions for Gazprom to enhance the domestic natural gas market by making provisions for the development of exchange and electronic trading.

The Board of Directors took notice of the data on the implementation of the basic principles of Gazprom’s Financial Strategy under the crisis conditions in the global capital markets.

Background:

In recent years exchange trading technologies for natural gas have partially been used for the sales of physical gas volumes of Gazprom and independent producers at the electronic trading platform (ETP) of Mezhregiongaz.

Natural gas sales at the ETP of Mezhregiongaz started in November 2006 pursuant to the Resolution of the Russian Government “On Experimental Marketing of Natural Gas at the Electronic Trading Platform” and to the Order of the Russian Ministry of Industry and Energy “On Experimental Sales of Natural Gas at the Electronic Trading Platform”.

In 2008 a total of 6.1 billion cubic meters of natural gas was marketed at the ETP of Mezhregiongaz, including 3.1 billion cubic meters by Gazprom and 3 billion cubic meters by independent producers. Among the major reasons for adjusting the actual volume of natural gas sales against the threshold set by the Russian Government for Gazprom in the amount of 7.5 bcm are warm weather and the necessity to achieve volume parity between Gazprom and independent producers.

In 2008 Gazprom has performed a big scope of work to streamline the electronic trading system. Integration of ETP hardware and software with a financial and accounting system of Gazenergoprombank enabled to accomplish the automation of all the operations related to transactions, payments and delivery instructions. Thus, the whole cycle will be curtailed from 10 days to 3.5 hours. This year the technology is to be applied to trading for monthly and weekly supplies.

A natural gas exchange, being a more complicated structure than ETP, is mainly designed for derivative financial instruments trading, first of all, futures contracts, with physical volumes of gas delivered as per the participants’ decision made upon the startup of the contract maturity period.

The most important element of the exchange infrastructure is a provider of clearing and settlement services for exchange traders. A subsidiary of Gazprombank, ZAO Settlement and Depositary Company – a special clearing company for the commodity market, with the participation of a pool of the authorized banks selected from the major Russian financial institutions – shall ensure settlement of transactions performed in relation to natural gas in Russian rubles and in the Russian jurisdiction.

It is essential that both structures (ETP and exchange) could perform efficiently supplementing each other.

At one of the major stages of launching exchange trade in natural gas, the Russian Federation shall entitle Gazprom and its affiliated companies, being the main producers and suppliers of natural gas, with a right to trade natural gas through exchange mechanisms at market prices.

In addition, in order to set up an exchange trading system in Russia in line with the relevant practices of the world’s leading commodity exchanges, it is necessary to streamline the tax legislation, in particular, to revise the mechanism of defining the amount of and the payment procedure for value added and income taxes on commodity futures trading. Therefore, Gazprom requested Russia’s Federal Financial Markets Service to speed up the procedure of adopting the Federal Law “On Making Changes in the Second Part of the Tax Code of the Russian Federation”.

It is provided for that at an initial stage the natural gas exchange will serve Russia’s domestic market. Later on, as the capacity of natural gas export facilities is increased and natural gas markets in the CIS and EU are liberalized, the natural gas exchange will spread its activities to foreign markets.