The Gazprom Board of Directors approved the work being done by the Company to implement the Eastern Gas Program.

The Company is intensely expanding its resource base in Eastern Russia and developing its production and transmission capacities. In particular, the Kirinskoye field pre-development is nearing completion. For the first time ever natural gas will be produced from the Russian shelf by a subsea production system. This summer Gazprom will connect the first production well to a gas gathering system.

Supporting and enclosing structures are built, main process equipment and utilities are installed and startup operations continue at the Kirinskoye onshore processing facility (OPF). Besides, hydraulic testing is conducted and gas is fed into a gas pipeline connecting the OPF to the Sakhalin main compressor station within the Sakhalin – Khabarovsk – Vladivostok gas transmission system.

The decision was made to accelerate and expand the scope of field exploration activities in the Sakhalin, Yakutia and Irkutsk gas production centers.

Exploratory wells will be built at the Yuzhno-Kirinskoye field and the Vostochno-Odoptinsky block in the Sakhalin shelf as part of the Sakhalin III project. 3D seismic survey will be carried out this year at the Ayashsky block.

Between 2013 and 2014 it is planned to build 18 exploratory wells and to perform 3D seismic survey at an area of over 2,500 square kilometers at the Chayandinskoye field in Yakutia. The geological exploration and the final evaluation of reserves will be completed in 2015.

At present, FEED documents for the oil rim pre-development infrastructure at the Chayandinskoye field are under consideration by state experts. The period under review covers pilot commercial operation. Design and survey work is in progress for the construction of an oil pipeline.

Follow-up exploration projects are being prepared for Gazprom's other fields in Yakutia: Sobolokh-Nedzhelinskoye, Verkhnevilyuchanskoye, Tas-Yuryakhskoye and Srednetyungskoye. It is planned to carry out seismic survey at these fields in 2013.

Comprehensive prospecting activities provided for by a follow-up exploration plan started at the Kovyktinskoye field in the Irkutsk Region. Engineering survey is nearing completion and design work began on exploratory wells to be built in 2014. Pre-development facilities are being designed for a period of pilot commercial operation.

The main stage of the Kshukskoye and Nizhne-Kvakchikskoye gas and condensate fields pre-development is completed as part of the project for gas supply to the Kamchatka Territory. This will make it possible to bring these fields to an aggregate annual capacity of up to 750 million cubic meters of gas.

Gazprom's prioritized objective in Eastern Russia is supplying Russian consumers with natural gas. This year the Company will start building four gas branches, four gas distribution stations and ten inter-settlement gas pipelines in the Kamchatka and Khabarovsk Territories and the Sakhalin Region. Moreover, it is planned to launch the construction of a small-scale liquefied natural gas (LNG) production facility, a receiving terminal as well as storage & regasification units in the Khabarovsk Territory.

The meeting noted that Gazprom had the necessary resource base for creating in the East a large center for Russian gas supplies to the Asia-Pacific region.

The top-priority goal here is to develop LNG production. An LNG plant with an annual capacity of 15 million tons will be built near Vladivostok. Its first process train will be commissioned in 2018. As part of the Vladivostok-LNG project Gazprom set up a special purpose company and initiated talks with potential gas buyers.

Commercial talks are underway with Chinese partners regarding the eastern route of gas supplies to China.

In order to maintain high rates of the gas industry development in Eastern Russia Gazprom is cooperating with state authorities to create a favorable tax regime, streamline pricing mechanisms in the domestic market as well as introduce other state measures of supporting eastern projects.

The Management Committee was tasked to continue executing the Eastern Gas Program.

Background

The state-run 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) was approved in September 2007 by the Russian Industry and Energy Ministry. Gazprom was appointed by the Russian Government as the Program execution coordinator.

New gas production centers are emerging in Eastern Russia: Krasnoyarsk, Irkutsk, Yakutia, Sakhalin and Kamchatka.