Today, Bogdan Budzulyak, Head of Gazprom’s Gas Transportation, Underground Storage and Utilization Department has convened an extended meeting dedicated to intra-corporate preparations for the 2005-06 autumn-winter heating season.

Attending the meeting were heads of Gazprom’s core business units as well as general directors of more than 30 gas production, transmission, distribution, processing and other subsidiaries. Reports on the Company’s readiness for the upcoming autumn-winter period were delivered by top managers of the Gas Transportation, Underground Storage and Utilization Department, Gas, Condensate and Oil Production Department, Central Gas Flow Dispatching Department, Investment & Construction Department, Lentransgaz, Severgazprom, Orenburggazprom, Tomsktransgaz, Permtransgaz, Gazpromregiongaz and Urengoygazprom.

The meeting emphasized that over the seven months of 2005 Gazprom had produced a total of 319.4 bcm of gas, 1.4 and 1.2 bcm up on the same period in 2004 and target, respectively. The increase largely stemmed from the boost of capacities at the Pestsovoye (7 bcm), Zapolyarnoye (5.4 bcm) and Yety-Purovskoye (5.4 bcm) fields. Moreover, Gazprom transmitted via UGTS both the above-target amount of its own and 2.2 bcm of gas extracted by independent gas producers and oil companies.

7.46 mln t of condensate and oil, a 560 thou t jump versus the previous year, was produced basically due to the expansion of capacities at the Yen-Yakhinskoye field (300 thou t).

Within the 2005-06 autumn-winter heating season (from October through March), gas production is projected at 288.67 bcm, with a 770 mln cu m increase and 144.2 bcm (the first quarter of 2005 schedule) slated for the fourth quarter of 2005 and first quarter of 2006, respectively. At the same time, the virtual extraction over the first quarter of 2005 exceeded the target by 2 bcm mostly due to the increased gas withdrawals (as compared to previous years) over the February-March period featured by low temperatures.

As of 1 August 2005, Gazprom supplied Russian consumers with 226.1 bcm of gas, 5.3 bcm up on the previous year’s identical period, including the:

• power generation sector with 87.2 bcm;
• metallurgical sector with 17.3 bcm;
• agrochemical sector with 12.2 bcm.

88.7 bcm (5.4 bcm more versus the last year’s same period) and 31.1 bcm (3.4 bcm up on the January-July period of 2004) was piped beyond FSU and to the CIS & Baltic States, respectively, with 32 bcm transited from Central Asia.

Just like in the past years, a corporate key challenge over the upcoming autumn-winter period will be providing uninterrupted gas deliveries to top priority customers, namely utilities and the population already supplied before 1 August with 49 bcm of gas (which is some 22 percent of the country’s overall consumption).

As underscored, key technological up- and midstream equipment was being prepared on schedule. As of 1 August 2004, Gazprom completed most maintenance and repair works during scheduled interruptions of upstream activities, namely performed repairs of 60 gas treatment units and 36 booster stations, which is 79 and 90 percent against the target, respectively.

Furthermore, the Company overhauled 318 wells (58 percent versus the annual target). The annual well overhaul program implementation rates allow to forecast the achievement of all the targets set for 2005.

As of 1 August 2005, Gazprom hooked up 67 gas wells, including 4, 24, 8, 13, 1, 3 and 14 wells at the Zapolyarnoye, Yamburgskoye, Urengoyskoye, Yety-Purovskoye, Yen-Yakhinskoye, Orenburgskoye and Pestsovaya area of the Urengoyskoye field.

Over the seven months of the current year, the Company overhauled 1,084.8 km of gas pipelines, 65 underwater crossings and 122 gas distribution stations as well as performed in-line inspection of over 11 thou km of gas mains, examined 701 lines of underwater crossings, repaired 166.3 km of Tyumentransgaz and Surgutgazprom’s gas pipelines under an emerged and bare pipeline sections maintenance program and restored design working pressure along over 700 km of pipeline sections.

Starting 2005, Gazprom’s pipeline transmission part experienced 15 failures (eight failures down on the previous year’s same period).

At its compressor stations, Gazprom performed 636 intermediate and capital repairs of gas-pumping units, stepped up 347 preventive maintenance measures and supplied 133 engines.

The meeting underlined that in accordance with an RF Government directive, Gazprom would build up before 20 October 2005 62.6 bcm of commercial gas reserves in its underground gas storage facilities, which are currently being filled with gas ahead of time. As of 25 August 2005, 34.1 bcm of gas (78.7 percent of the total gas reserves withdrawn last year) was injected into UGS facilities of Russia.

In July 2005, Gazprom launched experimental gas withdrawals from the Karashur UGS facility, which is the first depot of the Udmurt Reserve Complex of UGS Facilities. Before this year-end, Russia’s UGS facilities are expected to have new capacities commissioned. The move will permit to boost their potentially maximum daily and average daily throughput from 550 to 568 mln cu m/d by the start of the withdrawal period and from 470.5 to 477 mln cu m/d during the December-February period, respectively.

With the foundation of Gazpromregiongaz, Gazprom practically completed the consolidation of its gas distribution assets. The Gazprom Group controls 428 thou km of distribution pipelines and oversees deliveries of natural and liquefied gas to 25.1 mln apartments and 199.3 thou companies with gas fired equipment. Gazprom’s subsidiaries are preparing their gas distribution networks for the 2005-06 autumn-winter heating season in accordance with the schedule. Over the past reporting period, gas transmission units did not record any accidents at their distribution grids.

The meeting pointed to the need of rigorously observing gas consumption discipline over the upcoming autumn-winter period, avoiding gas over-withdrawals and encouraging local consumers to use alternative energies during peak loads.

The parties specifically noted that under the Plan on synchronized commissioning of top priority gas transmission facilities to effect deliveries by the Yamal-Europe gas pipeline until 2006, the Krupskaya, Slonimskaya, Minskaya and Orshanskaya compressor stations (Belarusian section of the Yamal-Europe line) should be brought on-line until 2005-end. This maneuver will enable Gazprom to bring the Belarusian section of the line to its nominal capacity. Despite Belarus fell behind schedule in fulfilling its land allocation commitments and untimely handed out the Minskaya and Orshanskaya construction licenses, all the four compressor stations are currently under construction and are slated for commissioning in 2005.

At the end of the meeting, respective business units and subsidiaries of Gazprom were entrusted with taking exhaustive measures to have UGTS fully geared up to the 2005-06 autumn-winter heating season, with special emphasis to be laid on procurement financing necessary for building up UGS capacities in Russia.

DIVISION OF RELATIONS WITH MASS MEDIA