Gazprom's group of experts led by Alexander Ananenkov, Deputy Chairman of the Gazprom Management Committee took a business trip to the Far East.

As part of the meeting on Gazprom's investment projects in the Far Eastern regions held in Khabarovsk today it was highlighted that construction of the Sakhalin – Khabarovsk – Vladivostok gas transmission system (GTS) was progressing within the established timeframe. By now, 1,248 kilometers (92.5 per cent) of the 1,350 kilometer long linepipe have been welded as part of the first startup complex, 1,169 kilometers have been trenched and buried. The necessary piping products have been supplied in full. Installation of the core process equipment, engineering systems and infrastructure facilities is nearing completion at the Sakhalin main compressor station (CS). Preparations are made for the hydraulic testing.

Construction of the Vladivostok gas distribution station (GDS) and an inter-settlement gas pipeline connecting the GDS to the Russky Island with a lateral to Vladivostok CHPP-2 is underway in the Primorsky Krai. In addition, preparations are being made for the construction of an inter-settlement gas pipeline from the GDS to Vladivostok CHPP-1 with a lateral to the Severnaya boiler house. The said facilities are to be commissioned in 2011.

This year the Sakhalin Oblast will face the completion of an inter-settlement gas pipeline from the Dalneye GDS to the Novo-Alexandrovsk settlement with laterals to agricultural facilities. Moreover, it is stipulated to begin construction and installation of an inter-settlement gas pipeline from Novo-Alexandrovsk to the Klyuchi, Sinegorsk and Sanatornoye population centers. Five inter-settlement gas pipelines for gas supply to Gornoye, Krasnoye and a number of regional facilities will be built in the Khabarovsk Krai in 2011.

The meeting paid special attention to the Company's operations offshore the Sakhalin Island. Project documents for pre-development of the Kirinskoye field, a gas source for the Sakhalin – Khabarovsk – Vladivostok GTS, the onshore gas processing complex and the gas pipeline to the Sakhalin gas compressor station are subject to expert review.

Gazprom continues the project for gas supply to Kamchatka. Pre-development activities are underway in the western fields of the Peninsula. In order to enhance the regional gas penetration level, the Company will complete the construction of two inter-settlement gas pipelines connecting CHPP-1, the regional hospital, boiler house No.1 (11th kilometer) and other facilities of Petropavlovsk-Kamchatsky in 2011. Front-end engineering design development will be started for inter-settlement gas pipelines connecting population centers of the Yelizovsky District.

As part of the Company's resource base extension on the Western Kamchatka shelf, the most promising areas have been selected for exploration and the prospecting program until 2014 has been compiled.

Based on the meeting results, tasks were given to timely execute Gazprom's investment projects in the Far East.

Background

Gazprom's expert groups take regular trips to the Far East. A group is made up of top managers from the Company, its specialized subdivisions, subsidiaries and contracting agencies. The trips are primarily aimed at securing timely execution of the projects for shaping the Unified Gas Supply System in Eastern Russia on the basis of the Company's resource base.

The September 2007 Order by the Russian Federation Industry and Energy Ministry approved the 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). Gazprom was appointed by the Russian Federation Government as the Program execution coordinator.

The Eastern Gas Program gives priority to the creation and development of the Sakhalin – Khabarovsk – Vladivostok gas transmission system. Launched in July 2009, the GTS construction is targeted at developing gas supplies to the Khabarovsk Krai and the Sakhalin Oblast as well as arranging gas deliveries to the Primorsky Krai. The 1,350-kilometer first startup complex of the gas pipeline with the annual capacity of 6 billion cubic meters is to be brought onstream in the third quarter of 2011.

As part of the Kamchatka Krai gas supply project Gazprom is performing production drilling and pre-development of two fields – Kshukskoye and Nizhne-Kvakchikskoye. It is planned to reach the design capacity of 175 million cubic meters a year in the Kshukskoye field by 2011. The Nizhne-Kvakchikskoye field commissioning with its design capacity of 575 million cubic meters will allow increasing the total annual gas production capacity on the Peninsula to 750 million cubic meters in 2013 upon the respective demand.

In September 2010 Gazprom commissioned the Sobolevo – Petropavlovsk-Kamchatsky gas trunkline and started gas deliveries to Petropavlovsk-Kamchatsky. CHPP-2 in Petropavlovsk-Kamchatsky will be the main gas consumer on the Peninsula at the initial stage. Further on, the Company is planning to convert CHPP-1 in Petropavlovsk-Kamchatsky to gas and ensure gasification of the Kamchatka Krai settlements located along the gas pipeline route.

The Kirinskoye gas and condensate field is located 28 kilometers off the Sakhalin Island shore in the Sea of Okhotsk (sea depth – 90 meters) within the Kirinsky block of the Sakhalin III project. The C1 reserves of the Kirinskoye field amount to 137 billion cubic meters of gas and 15.9 million tons of gas condensate.

In September 2010 Gazprom discovered the Yuzhno-Kirinskoye field containing 260 billion cubic meters of C1+C2 gas reserves.