The Gazprom Management Committee has approved the work done by Gazprom to implement the Eastern Gas Program. Special attention was paid to timely delivery of natural gas to Vladivostok and Yuzhno-Sakhalinsk in 2011. The following facilities have been put onstream: the first startup complex of the Sakhalin – Khabarovsk – Vladivostok gas transmission system (GTS), gas laterals and gas distribution pipelines in the south of the Sakhalin Island, Vladivostok and the Russky Island.

Gazprom’s specialized structural units and subsidiaries were tasked to develop an action plan to further boost gas consumption in eastern regions of Russia.

Besides, it is planned to develop the programs on switching motor vehicles and agricultural equipment to natural gas in the Sakhalin Oblast, the Khabarovsk, Primorye and Kamchatka Krais.

The Management Committee ordered to continue pre-investment studies aimed at establishing gas processing facilities in the Far East and the Company’s own gas liquefaction/compression capacities near Vladivostok.

Background

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

In 2011 Gazprom continued geological exploration in the Krasnoyarsk Krai, Irkutsk Oblast, Republic of Sakha (Yakutia) and the Sea of Okhotsk. In particular, an offshore gas and condensate field was discovered within the Mynginskaya geological structure within the Kirinsky prospect (Sakhalin III project) in the Sea of Okhotsk.

The Company obtained the subsurface use license for the Kovykta gas and condensate field (Irkutsk Oblast) with 1.5 trillion cubic meters of A+B+C1+C2 gas reserves.

Gazprom launched pre-development of the Kirinskoye field (Sakhalin III project) in the Sea of Okhotsk. At present, the subsea production complex installation and the offshore pipelines placement are underway at the field. Construction of a gas pipeline has been launched from the onshore processing facility to the main compressor station of the Sakhalin – Khabarovsk – Vladivostok GTS.

Gazprom is finishing the Investment Rationale for the Chayanda field pre-development in Yakutia as well as for transmission and processing of Yakutian gas. It is planned to start oil and gas production from the field in 2014 and 2016 respectively. The Company is going to start the Yakutia – Khabarovsk – Vladivostok GTS construction in 2012.

In March 2011 a gas lateral and the Dalneye gas distribution station were commissioned. The facilities supplied natural gas to consumers in Yuzhno-Sakhalinsk, including Yuzhno-Sakhalinsk CHPP-1.

In September 2011 Gazprom put into operation the first startup complex of the Sakhalin – Khabarovsk – Vladivostok GTS, a top-priority facility of the Eastern Gas Program. CHPP-2 in Vladivostok was the first gas consumer in the Primorye Krai. Next year, gas will be delivered to CHPP-1 in Vladivostok, the Severnaya boiler house and other facilities.

Gazprom continues the project for gas supply to Kamchatka. Pre-development activities are underway in the western fields of the Peninsula. In October 2011 the Nizhne-Kvakchikskoye field was put into operation.

As part of the 2011 gasification program, seven inter-settlement gas pipelines have been built in the Sakhalin Oblast, the Khabarovsk and Primorye Krais. It is planned to construct another four gas pipelines before the end of the year.

The Company pays great attention to natural gas use as a motor fuel in Eastern Russia. A CNG filling station has been built in Bratsk. A methane filling station is being designed in Petropavlovsk-Kamchatsky. In the nearest future, CNG filling stations will be built in Khabarovsk, Blagoveshchensk, Vladivostok and Yuzhno-Sakhalinsk.

In 2011 Gazprom signed the Agreement of Cooperation with the Agency for Natural Resources and Energy under the Japanese Ministry of Economy, Trade and Industry and the consortium of Japanese companies. The documents envisage preparation of a joint feasibility study on the options natural gas use near Vladivostok for the purpose of establishing an LNG plant.