Led by Alexander Ananenkov, Deputy Chairman of the Gazprom Management Committee, the Company’s delegation made a business trip to the Sakhalin Oblast.

In Yuzhno-Sakhalinsk Alexander Ananenkov met with Alexander Khoroshavin, Governor of the Sakhalin Oblast.

The discussion centered on the progress with the Agreement of Cooperation and the Accord on Gasification between Gazprom and the Sakhalin Oblast Administration. The parties also discussed the vital cooperation issues with regard to the Eastern Gas Program execution and the Sakhalin gas production center formation. An emphasis was placed on the synchronized activities of the parties when constructing facilities of the Sakhalin – Khabarovsk – Vladivostok gas trunkline, engineering of the infrastructure to deliver the entitlement gas to the Yuzhno-Sakhalinsk Combined Heat and Power Plant (CHPP-1) as well as synchronized construction of the northern hub for natural gas withdrawal from the Sakhalin II fields and its delivery to the Sakhalin – Khabarovsk – Vladivostok gas transmission system (GTS).

As part of the meeting Alexander Ananenkov and Alexander Khoroshavin discussed the issues of interaction between the Oblast Administration and Gazprom relevant to the Sakhalin III fields development (Gazprom is the subsurface licenses holder), as well as the possibility to create oil refineries on the basis of the oil resources found offshore the Sakhalin Island. It was highlighted that successful implementation of Gazprom’s projects on Sakhalin would significantly stimulate socio-economic growth in the region.

Background:

Gazprom and the Sakhalin Oblast Administration inked the Agreement of Cooperation and Accord on Gasification in 2006.

In 2007 Gazprom’s Representative Office for the Sakhalin Oblast was established in the city of Yuzhno-Sakhalinsk.

The September 2007 Order by the Russian Federation Industry and Energy Ministry approved the Development Program for an integrated gas production, transportation and supply system in Eastern Siberia and the Far East, taking into account potential gas exports to China and other Asia-Pacific countries (Eastern Gas Program). Gazprom was appointed by the Russian Federation Government as the Program execution coordinator.

The Eastern Gas Program stipulates the prioritized construction and development of the Sakhalin – Khabarovsk – Vladivostok GTS to be connected in future with the gas pipeline from the Republic of Sakha (Yakutia). The Sakhalin – Khabarovsk – Vladivostok GTS is being constructed according to the assignment by the Russian Federation Government and the decision of the Gazprom Board of Directors.

The first start-up complex of the Sakhalin – Khabarovsk – Vladivostok GTS will be brought onstream in the third quarter of 2011. It shall ensure gas supply to Vladivostok and generation capacities commissioning in the Primorsky Krai by the 2012 APEC Summit.

The first GTS start-up complex will have the length of 1,350 kilometers and the capacity of 6 billion cubic meters per annum. Later on, the gas pipeline will be extended to around 1,800 kilometers. When brought to full capacity, the system will deliver circa 47.2 billion cubic meters of natural gas. This will make it possible to meet the prioritized gas demand of Russia’s Far Eastern regions (Khabarovsk and Primorsky Krais, the Jewish Autonomous District and the Sakhalin Oblast), as well as to create additional potential for gas exports to Asia-Pacific countries.

Natural gas from the Sakhalin offshore area and Yakutia’s fields will serve as the primary resource base for the Sakhalin – Khabarovsk – Vladivostok GTS development. In July 2009 Gazprom obtained the subsurface licenses for the Kirinsky, Vostochno-Odoptinsky and Ayashsky blocks of the Sakhalin III project. Geological exploration activities are already in progress at the Kirinskoye field (license obtained in 2008). The field is to be brought onstream in 2014.