The Gazprom Management Committee reviewed the readiness of the Unified Gas Supply System (UGSS) for the period of peak loads during the autumn/winter period of 2008-2009, as well as the measures to be taken to assure a long-term uninterrupted gas supply to Russian consumers during the winter period.

The meeting pointed out that the UGSS was generally ready for the forthcoming autumn/winter period.

Heads of subsidiary companies and organizations of Gazprom were authorized with timely completing major activities aimed at preparing facilities for the 2008-2009 autumn/winter operation, as well as to continue executing the programs for new capacities development as well as gas production, transportation, underground storage and processing capacities reconstruction and capital overhaul.

The core business units of Gazprom were entrusted with developing documentation with the view to consider this issue at the meeting of the Board of Directors in October this year.

In the course of preparation for the 2008-2009 winter period UGS facilities will be replenished on October 15, 2008 with the same gas volume as was extracted during the last autumn-winter period. Commercial gas reserves created in UGS facilities will account for 64 bcm, an increase of 500 mcm of gas compared to the same period of 2007.

During December and February the average potential daily UGS productivity will be increased by 7.6 mcm to 500 mcm of gas. Maximum potential daily productivity by the beginning of the take-off period will reach 620 mcm, an increase of 12 mcm and 20 mcm compared to the last year and the anomalous period of 2006-2007 respectively.

During the autumn/winter period of 2008-2009 gas production is projected to reach 296 bcm, which is 1.6 bcm more versus the previous autumn/winter period.

In accordance with the schedule, 77gas treatment units, 74 booster compressor shops and 399 wells were overhauled, as well as 137 wells were commissioned as of October 1 this year. In particular, new wells were commissioned at the Yuzhno-Russkoye, Kharvutinskaya area of the Yamburg field and Orenburg field.

Over nine months of the current year 1,735 km of gas trunklines were reinsulated, gas pipelines were overhauled (524 km replaced), and 986 km of underwater crossing pipelines were inspected (93 km and repaired), in-tube diagnostics of 15.4 km of gas pipelines was conducted. 797 medium and capital repairs for gas pumping units and 16 comprehensive scheduled maintenance works were implemented at UGSS facilities, comprehensive repair of 49.2 km of technological pipelines of compressor stations was done.

In accordance with the schedule, gas distribution facilities are prepared for winter period; scheduled inspections of regional and local gas distribution stations are in progress. At present, the subsidiary and affiliated gas distribution companies of Gazprom Group maintain 544.5 thousand km of gas pipelines, 36.4 thousand of boilers, over 16 thousand of industrial and 177 thousand of communal consumers.

The meeting emphasized that successful operation in the autumn-winter season, especially during spells of low temperature and peak gas take-off by consumers, will largely depend on build-up of back-up fuel reserves (fuel oil, coal etc.), on regional gas consumption discipline, as well as on compliance with the Schedule1provisions at the power generation facilities and large industrial enterprises.

Within the frames of the bilateral Agreements signed between Gazprom and the governments of the Russian Federation constituents, regional gas trading companies should more actively engage executive authorities in the aim of controlling the maintenance of the specified level of fuel reserves to prevent unmanageable situations in the gas supply sector.

Background:

To secure uninterrupted gas supply to the household sector, a schedule stipulating the conversion of Russian industrial consumers to standby energy sources (Schedule 1) is endorsed annually by regional authorities.

Schedule 1 is applied under Article 19 of the Regulations on Gas Supply in the Russian Federation, approved by the Russian Federation Government Directive # 162 from February 5 1998. Schedule 1 provides for a partial conversion of customers to standby energy sources (fuel oil, peat, coal etc.) under extremely low temperature to spare an amount of gas for meeting increased demand of the residential sector.

Conversion to backup fuels and their timely procurement is fixed in contracts with all industrial consumers.