The Gazprom Board of Directors discussed the information on the natural gas vehicle (NGV) fuel market development.

It was noted that one of Gazprom's main objectives in the domestic market is to considerably expand the NGV fuel business and set up the Company's large-scale natural gas market on its basis.

This project is also of major importance for the society as a whole due to the environmental friendliness and economic efficiency of the NGV fuel. Thus, the conversion of motor vehicles from gasoline to natural gas allows for decreasing harmful substances emission fivefold at average. This is especially important for big cities where a fair share of air pollution is due to motor vehicles.

At the same time, it was mentioned that the absence of a federal law, envisaging a set of measures to promote the conversion of motor transport to gas, is one of the main problems for the domestic NGV fuel market development.

On this account, Gazprom addressed a proposal to the Russian Federation President to entrust the concerned ministries, departments, oil and gas companies with a task to prepare a draft document determining target values and specific measures of government support to conversion of motor transport to gas. Today, in compliance with the Russian President's order, this issue is being elaborated in the Russian Federation Government.

Gazprom decided on including a special section concerning motor transport conversion to gas into the Russian Regions Gasification Program beginning with 2013.

The Board of Directors charged the Management Committee with the continuation of work on expanding the use of natural gas as a motor fuel in Russia in cooperation with state authorities.

The Management Committee was also tasked to continue work on expanding the use of natural gas as a motor fuel abroad. The Board of Directors will be made aware of the progress with this work in the first quarter of 2013.

Background

Natural gas use as a motor fuel is rapidly expanding around the world and nowadays involves more than 80 countries. The annual increase in gas-powered vehicle fleet averages 26 per cent. The world's leading vehicle producers turn out more than 80 models of gas-powered cars. The Russian fleet of gas-powered vehicles numbers some 86 thousand units (global vehicle fleet is comprised of some 15 million units).

Today, 243 compressed natural gas (CNG) filling stations are operating in 59 Russian regions, with 208 owned by Gazprom.

In 2011, 361.6 million cubic meters of compressed natural gas was sold through Russian CNG filling stations, which is 16.6 million cubic meters more than in 2010, but amounts only to 18 per cent of Russian CNG filling stations' design capacity.

According to the 2011 results, the most developed regional markets are in the Stavropol and Krasnodar Territories, the Sverdlovsk, Rostov, Chelyabinsk and Tula Regions, the Republic of Bashkortostan and the Kabardino-Balkar Republic: they accounted for more than half of the total CNG sales in Russia.

Gazprom entered into cooperation agreements on natural gas use as a motor fuel with the Kaluga, Orel, Nizhny Novgorod and Tambov Regions. Regional regulatory acts aimed at developing local CNG markets were adopted in Moscow, the Stavropol Territory, the Sverdlovsk, Tambov, Kaluga and Saratov Regions and the Republic of Tatarstan.

At the moment, gas filling capacities are being promoted in Eastern Siberia and the Far East. A CNG filling station has already been built in Bratsk. A methane filling station is being designed in Petropavlovsk-Kamchatsky. In the nearest future, CNG filling stations will be built in Khabarovsk, Blagoveshchensk, Vladivostok and Yuzhno-Sakhalinsk.

In July 2012, the Gazprom headquarters saw a multisectoral meeting on the promotion of NGV fuel use. Taking part in the meeting were representatives of the concerned Russian ministries, leading oil companies, large producers of automotive equipment and executive authorities of the Russian Federation constituents. The meeting noted the necessity of a special legal basis, government control of motor vehicles conversion to gas and interconnection between gas filling network construction and oil products market development.

In the European NGV fuel market, Gazprom Group is represented in Germany and in the Czech Republic. Gazprom aims at expanding its presence in this sector in Europe, among other things through constructing or purchasing CNG filling stations.