Today at the Gorky residence in the presence of Dmitry Medvedev, President of the Russian Federation, Alexander Lukashenko, President of the Republic of Belarus, Vladimir Putin, Prime Minister of the Russian Federation and Mikhail Myasnikovich, Prime Minister of the Republic of Belarus Gazprom and Beltransgaz signed the contracts for gas supply to and transit across Belarus from 2012 through 2014. Besides, Gazprom and the State Property Committee of the Republic of Belarus entered into the purchase and sale agreement for a 50 per cent stake in Beltransgaz .

The documents have been signed in furtherance the agreements reached today by the Russian Federation Government and the Government of the Republic of Belarus. The agreements identify formation of gas prices and transmission tariffs as well as terms and conditions for purchase and sale of shares and further activities of Beltransgaz.

Pursuant to the supply contract, the gas price for Belarus will make up USD 165.6 per 1,000 cubic meters in 2012. Between 2013 and 2014 the prices will be calculated under the formula based on the following key components: the gas price for the Yamal-Nenets Autonomous Okrug consumers (established by the Russian Federal Tariff Service), the cost of gas transmission from a wellhead in the YaNAO to the Russian-Belarusian border, the cost of underground gas storage in Russia as well as Gazprom's expenses on gas marketing. It is also expected that the price formula components will be indexed to inflation.

In 2012 Belarus will purchase 22.5 billion cubic meters of gas from Gazprom, in 2013 and 2014 – 23 billion cubic meters each year. At that, the contract allows adjusting the gas amounts.

According to the contract for gas transmission via the Republic of Belarus, the tariff for pumping 1,000 cubic meters of gas through Beltransgaz-owned gas pipelines will amount to USD 2 per 100 kilometers. Between 2013 and 2014 the tariff will be monthly calculated under a formula. The tariff for gas transmission via the Yamal – Europe gas pipeline in Belarus will be monthly calculated under a formula for the entire term of the contract.

Pursuant to the purchase and sale agreement for a 50 per cent stake in Beltransgaz, Gazprom will pay USD 2.5 billion for the shares, thus raising its stake in Beltransgaz to 100 per cent.

The minimum markup for the gas that Beltransgaz will sell to Belarusian consumers since January 1, 2012 will total USD 15.95 per 1,000 cubic meters, between 2013 and 2031 it will be adjusted to inflation. Starting from January 1, 2032, the minimum markup will be regulated by an authorized body of the Republic of Belarus according to the Belarusian legislation. At the same time, the markup may not be lower than the amount needed to cover the expenses and investments of Beltransgaz, including the economically viable rate of return, and in no case lower than USD 11.09 per 1,000 cubic meters.

Background

On November 25, 2011 the Russian Federation Government and the Government of the Republic of Belarus signed:

the Agreement on the prices (tariffs) formation procedure for natural gas supply to the Republic of Belarus and transmission via gas pipelines located in this country;

the Agreement on the terms and conditions for shares purchase and sale and further activities of Beltransgaz.

Before December 31, 2011 (inclusive) the terms and conditions for Russian gas supply to and transmission across Belarus are defined by the gas supply and transit contract of 2007–2011 signed by Gazprom and Beltransgaz. The documents prescribes that the gas price for Belarus is calculated under a formula (corresponding to the price formula for Russian gas supplies to Europe). Between 2008 and 2010 discount rates (0.67, 0.7 and 0.9 respectively) were used for determining the price.

In May 2007 Gazprom and the State Property Committee of the Republic of Belarus inked the Purchase and Sale Agreement for a 50 per cent stake in Beltransgaz worth USD 2.5 billion payable in equal portions within four years. In 2010 the transaction was completed.