The Gazprom Board of Directors meeting is underway at the Company’s headquarters.

The Board of Directors approved the Company’s proposal on the conditions and procedure of transiting to formula-based gas pricing, starting from January 1, 2011.

The Gazprom Management Committee was tasked to continue cooperating with federal executive authorities on the preparation and submission to the Russian Federation Government the relevant draft regulation.

Background:

Pursuant to the Russian Government Directive No.333 dated May 28, 2007, the ministries concerned, the Russian Federal Tariff Service and Gazprom are considering the issues of a transfer, starting from January 1, 2011, to the market-based pricing principles applying the market-based price formula. The formula stipulates that natural gas prices will be shaped according to the principles of equal profitability between domestic and foreign gas supplies with due regard to the interfuel competition. In the majority of long-term gas supply contracts signed by Gazprom and its industrial consumers, the Company has provided for application of the price formula, starting from 2011 in compliance with the decision by the Russian Federation Government.

The opinion was reached at the working meetings of the Russian Energy Ministry, the Russian Ministry of Economic Development and the Russian Federal Tariff Service, that there was a need to introduce a transition period (2011–2013). During this period it is necessary to gradually raise the domestic prices by 2014 to the level of equal profitability.

In this context, Gazprom has prepared a draft directive of the Russian Government that stipulates, inter alia, the formula-based wholesale prices discounting to the level defined by the Russian economy development scenario for 2011–2013.

At the same time, the transition to market-based pricing principles will only be applied for industrial consumers, while retaining state regulation of  wholesale gas prices for the population.

A timely transfer to shaping domestic gas prices on the basis of market principles, which reflect the consumer properties of gas and the interfuel competition, will promote creation of the conditions for improving the national economy, development of related industries, as well as sustainable operation of the gas industry.