The Board of Directors took notice of the information surrounding the participation of domestic manufacturers in pipes and steel products delivery for Gazprom and its subsidiary companies located in Russia and abroad.

The Management Committee was tasked to continue development of the competitive environment and arrangement of the bidding processes among steel and pipe manufacturers by Gazprom, its domestic and foreign subsidiaries. The bidding processes are to provide for domestically manufactured steel products and pipes delivery in the amount proportionate to the Russian party’s stake in international gas transmission projects.

Background:

Gazprom procures pipes and steel products on the basis of open bidding processes. Pursuant to the Board of Directors’ decision of December 23, 2008 Russian suppliers are given preference. In 2009 domestically manufactured and imported pipes amounted to 95 and 5 per cent, accordingly, in centralized procurement for Gazprom’s projects in Russia.

Gazprom’s priority to procure domestically manufactured products makes a considerable contribution to Russia’s metallurgical industry development. Imposing stringent requirements for the purchased products, the Company promotes advancement of high-end technologies and enhances Russian pipes competitiveness on the global market. In order to increase substitution of imported pipes with the domestically manufactured ones, metallurgical companies have been upgrading their production facilities over the recent few years so as to improve their product specifications. In particular, between 2008 and 2009 the Vyksa Steel Works, the Izhora Pipe Plant and the Volga Pipe Plant adopted production of 1,420-millimeter pipes designed to sustain the pressure of 120 Ata and to be used for the Bovanenkovo – Ukhta gas trunkline system construction.

Gazprom proposes that the National Export Credit Agency be establish to provide additional backing for Russian manufacturers of steel products and pipes. The Agency would deal with fundraising issues during domestically manufactured products procurement for the projects implemented abroad.