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GAZPROM

January 26, 2010

Board of Directors reviews Gazprom’s marketing policy amid global financial and economic crisis

A Board of Directors’ meeting is underway at the Company’s Headquarters.

The Board of Directors took note of the information on Gazprom’s marketing policy amid the financial and economic crisis.

Based on the information reviewed, the Board of Directors approved the work done by the Management Committee to maintain Russian gas consumption by foreign countries at the current level through a set of measures aimed at raising Russian gas competitiveness, taking advantage of the gas market changes and entering new pipeline and LNG markets.

The Management Committee was entrusted with continuing the actions to steadily increase the overall amount of gas trade on the domestic market under the conditions of growing competition with independent producers as well as to improve the discipline of payments for the gas supplied.

 

Background:

The long-term contract system underlies Gazprom’s export activities. Providing multi-year gas supply and off-take guarantees and ensuring the European gas market stability, long-term contracts meet the strategic interests of both suppliers and consumers. Gazprom’s long-term contract portfolio has long secured growing gas exports to countries beyond the FSU at a 25 per cent level of the total consumption.

The global financial and economic crisis resulted in a substantial decrease of European gas consumption in 2009 coupled with massive expansion of LNG production and regasification capacities and an increase in the LNG amount on the supply side.

At the same time, from the mid-2009 Gazprom has recorded stable gas demand growth on the key markets. In the second half of 2009 Russian gas sales beyond the FSU started to grow steadily. By the end of 2009 the volumes of gas supplied to European consumers considerably surpassed the identical figures in 2008. In the fourth quarter of 2009 Gazprom increased gas sales to Europe by more than 19 per cent as compared to the same period of the past year.

Over the last years Gazprom has consecutively pursued the strategy to improve its operating efficiency inside the FSU. At present, the primary objective is to ensure transition to the market mechanisms in gas payments and pricing as well as in transportation services with all gas consumers. In the aim of optimizing gas flows and diversifying the gas export infrastructure, Gazprom establishes alternative gas routes enabling to efficiently manage gas flows.

Development of an objective forecast of gas demand recovery in Russia for a mid-term perspective is among Gazprom’s top-priority tasks at the moment.

Gazprom continues its activities targeted at the Russian gas market development. For instance, the Company has started implementing a number of projects related to the gas production and transmission system creation in Eastern Siberia and the Far East. Gasification of Russian regions is progressing at a rapid pace.

Gazprom also carries out a considerable scope of work to develop electronic and exchange gas trade using advanced information technologies.

Gazprom’s power assets make it possible to achieve substantial synergy with its core businesses, namely through gaining additional profits in the process of gas-powered generation.

Introduction of new coal-fired generating units and combined-cycle gas turbines with the efficiency in excess of 50 per cent as well as enhanced utilization of the installed capacity of existing coal-fired generating units enable to lower gas consumption for power generation purposes, raising thus the economic efficiency of power generation.

Projects for the construction of new and retrofitting of the existing power plants will allow Gazprom Group to retain its competitive advantage in the Russian power industry.

 

 

 

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