The Board of Directors appreciated the results of the Russian Regions Gasification Program 2010 implemented by Gazprom and tasked the Company's Management Committee to carry on the gasification activity in 2011.

In the course of the meeting it was highlighted that Gazprom had met all of its regional gasification obligations in 2010. 156 inter-settlement gas pipelines were constructed with the total length of some 2,100 kilometers in 44 constituent entities of the Russian Federation including 18 facilities built on a tight schedule as part of the wildfire remediation efforts. The gas pipelines constructed in 2010 deliver gas to more than 300 settlements.

Background

Russian regions gasification is carried out jointly by Gazprom and authorities of federal constituents: the Company finances construction of the inter-settlement gas pipelines delivering gas to population centers, while regional authorities take on street-level networks deployment and preparation of consumers for gas supplies.

Starting from 2005 Gazprom has considerably intensified the activities aimed at increasing regional gasification in Russia. Between 2005 and 2009 Gazprom invested some RUB 90 billion in the regional gasification raising the average gas penetration level in Russia to 63.2 per cent (9 per cent increase) including 67.5 per cent in cities and towns (6.5 per cent increase) and 45.5 per cent in the rural area (9.5 per cent increase).

In December 2009 the Gazprom Management Committee approved the updated Concept for Russian Regions Gasification. The Concept stipulates a differentiated approach of the Company to the gasification process depending on the existence and the development level of natural gas reserves in the regions. The document describes the gasification mechanism for the population centers that are sparsely inhabited and detached from gas trunklines using, among other things, liquefied and compressed natural gas as well as liquefied petroleum gas.

The Russian Regions Gasification Program 2010 envisaged investment by Gazprom in the amount of RUB 25 billion. The funds were allocated for new facilities construction and front-end engineering and design work as well as for development of general schemes of gas supply and gasification.

Moreover, Gazprom additionally allocated RUB 612 million and commissioned 18 inter-settlement gas pipelines in federal constituents hit by wildfire. Thus, Gazprom allocated a total of RUB 25.612 billion as part of the Russian Regions Gasification Program 2010.

Administrations of the bulk of regions where Gazprom was constructing gasification facilities in 2010 fulfilled their obligations to prepare consumers for gas supplies. At the same time, eight regions fall considerably behind the pace envisaged by the schedules, namely – the Arkhangelsk, Kaliningrad, Pskov, Tver and Tula Oblasts as well as the Republics of Adygea, Dagestan, North Ossetia – Alania. Seven more regions show a slow pace of operations.

The adopted Russian Regions Gasification Program 2011 envisages the investment in the amount of RUB 25 billion.

The Company's regional gasification efforts in 2011 are oriented at achieving the maximum economically viable level of gasification with the priority given to the federal programs implementation as refer to the Olympic venues and the 2012 APEC Summit facilities gasification. As in previous years, meeting the obligations assumed by the regional administrations in respect to the preparation of consumers to receive gas as well as timely and full payment for gas supplies will remain the key factors while allocating the investments by Gazprom.