The Management Committee took notice of the information on the South Streamproject implementation progress.

Gazprom’s core business units were entrusted with completing the development of a substantiated decision with regard to advancing to the investment stage of the project.

Background:

As a part of the diversification strategy for Russian natural gas supply to European markets, and with a view to shorten the length of transit gas pipelines across foreign states territories, Gazprom intends to construct a pipeline across the Black Sea to Bulgaria and further to South European and Central European countries – South Stream.

On June 23, 2007, Gazprom and ENI signed the Memorandum of Understanding for the South Streamproject execution.

The Memorandum sets out the cooperation areas for both companies in the South Streamengineering, financing, construction and management sectors.

The total length of the offshore section will be around 900 km, with the maximum depth exceeding 2,000 m and full capacity averaging 31 bcm. The section is planned for commissioning in 2013.

In January 2008, the South Stream AG Special Purpose Entity was registered in Switzerland. The venture was established by Gazprom and ENI on a parity basis.

By now, the project related intergovernmental agreements have been signed with Bulgaria, Serbia, Hungary and Greece.

The agreements envisage the establishment of joint ventures to perform feasibility studies as well as further construction and operation of the South Streamgas pipeline system in the member states.

The initial stage of the South Streamconstruction project stipulates the development of a consolidated investment substantiation to be completed by the end of 2009. On May 29, 2008, Gazprom’s expert analysis report pointed to the expediency of shifting to the investment substantiation stage. Based on the results of the investment feasibility a decision with regard to advancing to the investment stage will be taken.

As part of the pre-investment stage Gazprom set up a Coordination Committee to develop the South Streamfeasibility study, as well as Working Groups to perform the following activities: marketing research, logistics and UGS, technical and environmental issues, preparation for the Environmental Impact Assessment procedure, financial and economic estimates, legal support, general issues and the deal closing.