Dear Mr Medvedev! Dear participants of the meeting!

Nowadays, wide application of sci-tech achievements is a prerequisite for the development of any company.

This is even more crucial for Gazprom, which delivers unique and, at the same time, extremely sophisticated projects in hydrocarbon production, transportation and processing sectors.

First of all, it is necessary to mention the Company’s activities on Yamal transforming it into the major gas production center. Implementation of a megaproject on Yamal requires most advanced and environmentally friendly technologies of field development. Another prioritized business of Gazprom includes offshore activities with the major task of applying new technical solutions. The third block is Eastern Siberia and the Far East. The top priority objective of the sci-tech sector here is to develop technologies on separation and utilization of strategically important components of natural gas found in Eastern Siberia, as it has a multi-component structure with a high content of helium, inter alia. Therefore, gas field development in Eastern Siberia will provide for simultaneous creation of gas processing and gas chemical centers, which will subsequently make our activities in this region essentially different from those in Western Siberia.

Gazprom is currently an advanced company in terms of technology development.

As for R&D financing, Gazprom is the leading energy company of Russia and is among the top five in the world.

In our innovative activities we give priority to achieving the maximum efficiency possible when maintaining a high level of reserves buildup and hydrocarbons production, securing reliability of supplies, competitiveness, investment attractiveness and planning of the Company’s development.

Mr Medvedev, you may know well that Gazprom pays close attention to R&D management. Thus, the Company has a Scientific and Technical Council comprising, inter alia, 7 corresponding members and 14 academicians of the Russian Academy of Sciences. R&D management is targeted at strategic priorities of business and is based on regulated procedures using target-oriented programs. At present, Gazprom is executing 12 sci-tech development programs and another 26 ones are being elaborated.

Gazprom has established and is running a venture fund in charge of venture activities coordination within the Company. It directs development and production of new techniques and technologies towards innovative products creation in the prioritized areas. Nowadays, 9 projects in 5 areas are being carried out worth a total of RUB 1.4 billion within the venture fund.

The Company closely cooperates with leading R&D institutions of Russia. By now, Gazprom partners in the innovative sector with 15 universities, 28 industry-specific research institutes and 5 institutes of the Russian Academy of Sciences.

In this area we also cooperate with 12 foreign and a number of Russian industrial companies. Over the recent ten years Gazprom invested some RUB 10 billion in development and construction of Russian equipment.

The Company imposes most stringent requirements on equipment producers. The domestic producers are facing the following major tasks: production of block-type equipment, reliability of gas-pumping units and raising their efficiency, manufacture of large-diameter pipes with outer and inner insulation coating designed for 22 MPa of operating pressure.

Close cooperation between Gazprom and Russian companies, for instance, the defense and industry complex, helps the Company to resolve the issues of imports substitution. Nowadays the gas industry is mostly equipped with domestic gas-pumping units, automated process control systems, metering equipment and pipes. Gazprom has been pursuing the policy of imports substitution for several years already. By now, the amount of equipment and materials purchased from domestic producers accounts for 90 per cent in the Company’s overall investment program.

To exemplify the cooperation with Russian companies of the defense and industry complex we may look at engineering and manufacturing of pilot cross-country vehicles with ultra-low pressure tires, as well as stationary drilling rigs to drill wells with a nominal depth ranging between three and eight thousand meters. At present, these devices have no analogues in the world.

Gazprom has retained and is efficiently developing the sci-tech potential of the gas industry. Today the Company owns 9 specialized R&D organizations, unique pilot production plants, test sites and test benches. The research sector is represented in the Company by almost 6 thousand experts.

The intensity of innovative activities in Gazprom is also confirmed by an increase in orders placed by Gazprom with its R&D subsidiaries: from RUB 4.7 billion in 2006 up to RUB 11.4 billion in 2008. Over 9 months of 2009 the amount exceeded RUB 12 billion.

Between 2004 and 2008 the amount of intellectual property increased by 40 per cent and exceeded 1,700 units. At the same time, the Gazprom Group applied some 19 per cent of its patents, which is two times as large as in the global practice.

A vivid example of innovative approaches, unique technologies and equipment application is Gazprom’s activities on Yamal, where a totally new superpower gas production center of Russia is being constructed and equipped according to the latest achievements in science and technology. As part of the Yamal project innovative developments are applied across the entire gas chain – from upstream to downstream.

In particular, to secure delivery of the Yamal gas into the Unified Gas Supply System of Russia, the construction of the new-generation Bovanenkovo – Ukhta gas transmission system is underway. This world’s unparalleled system is really a frontier gas project. For the system construction we are utilizing unique second-to-none pipes of domestic origin that were manufacture specifically by Gazprom’s order. The pipes can resist the pressure of 120 Ata and may be operated under harsh natural and climatic conditions of the Far North.

As part of the activities aimed at Yamal’s development Gazprom managed to erect the bridge crossing of the Obskaya – Bovanenkovo railroad within the shortest timeframe possible. This is the world’s longest bridge located beyond the Polar Circle and has no analogues in the bridge-building practice both by the structure specifics and by construction and operation conditions. The bridge was installed over a very short period of time in the severe climate on the permafrost and marshy lands. The up-to-date innovative technologies of ground treatment that were applied during the construction of the bridge and our facilities on Yamal under the permafrost conditions make it possible to make the deadlines several times shorter.

In addition to its extensive working experience in Western Siberia, Gazprom acquired the same on Yamal too. Foreign oil and gas companies, the global leaders, have no experience of the kind.

We are holding a workshop in Alaska for our foreign counterparts. I may say that they have neither the understanding of how to develop hydrocarbons under local conditions, nor the experience or knowledge. We have got something to offer to our American colleagues, if they wish to, relevant to the comprehensive hydrocarbon development in Alaska.

An important field of Gazprom’s innovative activities is ensuring safe and efficient operation of the Company’s existing production facilities. A focus is placed on advanced methods of diagnostics and forecasting of the technical condition. First of all, the Unified Gas Supply System facilities.

Pursuant to Gazprom’s order, pipeline diagnostic pigs and external automated scanners have been developed and are applied. Remotely controlled diagnostic complexes are installed at compressor stations. These high-tech items of equipment help us determine the size of defect in the most exact and prompt way, thus making a considerable contribution in enhancing the reliability of our gas transmission system.

We pay serious attention to nanotechnologies development. Gas-to-liquids technology development by Gazprom is a vivid example.

A unique catalyst of the domestic production has been created. Now we are carrying out R&D, prepare equipment for pilot commercial operation. I am speaking about small-scale production of gas liquids. This is a top-priority field for Gazprom and Russia’s fuel and energy complex in general, since it allows diversification of final products to tackle the low-pressure gas challenge at the fields being under development, and what is more important – to solve the problem of associated petroleum gas utilization. Synthetic liquid fuels meet the most stringent environmental requirements of the Euro-4 and Euro-5 standards.

As part of the Gazprom Clean Water environmental program, nanotechnologies have been developed and applied for water purification and decontamination on the nuclear and molecular levels. Innovative technology for the gas pumping units’ exhaust gases treatment decreases the nitrogen oxides content to 80 per cent and treatment costs to 30 per cent.

Special attention is paid by Gazprom to non-conventional gas resources development. The Company is executing the Kuzbass Methane program for coalbed methane production. The program is of utter importance and relevance for Russia, which holds abundant coal reserves several times in excess of oil and gas reserves.

Gazprom retains the leading position in innovations primarily due to standardization of innovative activities. Novel solutions once standardized become available for rapid and broad practical implementation.

We purposefully develop a system of corporate standards and make active efforts in the national and international standardization processes. Meanwhile, Gazprom carefully analyzes the opportunities of applying international standardization norms with no impact on our country’s interests.

Dear colleagues, dear Mr Medvedev!

As you may see, today Gazprom is a strategic innovator among Russian companies.

We clearly understand that the growth in innovative potential implies the growth in competitive advantages, thus laying the cornerstone for the Company’s economic stability in the future.

In addition, it is evident that this important field of the Company’s activity promotes only those industries, which products and services are used by Gazprom. We have research institutes, research teams and schools, venture capital funds, test benches, we apply technologies in practice. However, the industry capable of exporting knowledge instead of gas has not emerged! These research teams, all of our partners and suppliers depend on gas demand both on the domestic and, what is more important, on the international market. They ultimately depend on the oil price per barrel.

Taking into account Russia’s fuel and energy balance, the bulk of national entrepreneurs have no incentives to develop new businesses and create unique products. The difference in energy prices, primarily natural gas, on the domestic and foreign markets, gives Russian companies considerable competitive advantages and provides them with a guaranteed profit from conventional product sales. There is no use creating something new…

We are sure that for large-scale and quality modernization of Russia’s economy, creation of essentially new businesses that will gain profit from knowledge and high-tech equipment sales, we need to cut down the opportunities of realizing profit from the difference between domestic and global energy prices.

We need a real inter-fuel competition on the domestic market otherwise we’ll be unable to meet the desired objective of creating a new structure of the economy.

Otherwise, there will be no economic incentives to increase the energy efficiency, create knowledge-based production. The new structure of economy aimed at innovative development may only be achieved in case of a new structure of the fuel and energy balance. The new structure of the fuel and energy balance is an inter-fuel competition that is not available in the fuel and energy complex so far.

Thank you for your attention!