The Gazprom Management Committee looked at the Company's activities aimed at developing the underground gas storage (UGS) system in 2011 as well as the short-term plans.

The meeting highlighted that Gazprom had been intensely developing this line of business in 2011. For instance, the Sovkhoznoye, Stepnovskoye, Kasimovskoye, Nevskoye, Kaluzhskoye and Kushchevskoye UGS facilities as well as the Kanchurinsko-Musinsky UGS Complex were retrofitted and expanded. Construction operations carried on at the Udmurtia Reserving Complex, the Kaliningradskoye and Volgogradskoye UGS facilities. As a result, new working gas capacities of around 1.2 billion cubic meters in total were commissioned and new wells were connected. Besides, Gazprom launched construction of the large Bednodemyanovskoye UGS facility last November.

The work done made it possible to boost the total potential of the UGS system. UGS facilities played a critical role in securing reliable gas supplies to consumers during the abnormally cold period of February 2012. In particular, the daily withdrawal rate of 638.7 million cubic meters of gas was reached on February 2, thus hitting the record in the entire Russian UGS history. The peak withdrawal rate from Russian storages made up 33.7 per cent of gas consumption in Russia or 37 per cent of gas consumption within the Unified Gas Supply System.

The Company's specialized structural units were tasked to proceed with retrofitting and construction of UGS facilities to boost the UGS potential.

Background:

Underground gas storage (UGS) facilities are an integral part of Russia's Unified Gas Supply System (UGSS) and are situated in the key gas consumption regions. UGS facilities help smooth out seasonal fluctuations in gas demand, reduce peak loads in the UGSS and allow for better flexibility and reliability of gas supply. The UGS facility network supplies up to 20 per cent of gas during the heating season and more than 30 per cent of gas during cold snaps to Russian consumers.

The projected growth in gas demand predetermines the need to continue the UGS system development. In January 2011 Gazprom approved the Activities on Facilities Construction, Retrofitting and Commissioning in 2011 as well as the task on developing the UGS system until 2015.

In order to maintain high reliability of the gas transmission system and secure uninterrupted gas supplies in autumn-winter 2011/2012, Gazprom raised deliverability of UGS facilities to record amounts. By the withdrawal season startup the operating gas reserve in the amount of 65.2 billion cubic meters (1.2 billion cubic meters more as compared to the 2010/2011 autumn-winter period) was formed in UGS facilities. This is the highest amount in the history of the domestic gas industry.