The Board of Directors approved Gazprom's efforts being taken to develop trade, transport and investment cooperation in the gas sector between Russia and the Republic of Belarus.

The Management Committee was tasked to continue its efforts within the intergovernmental agreements signed on November 25, 2011 and related to the terms of natural gas supply to the Republic of Belarus and gas transmission via its territory, as well as Beltransgaz operations.

It was noted that Belarus was the second largest sales market for Russian gas among the republics of the former USSR. Based on the results of 2011, the Republic of Belarus was supplied with 20.6 billion cubic meters of gas (29 per cent of total sales in the CIS). Belarus is a strategically important link ensuring Gazprom's export deliveries to Europe: in 2011 the volume of Russian gas transmitted via the Republic amounted to 31.3 billion cubic meters, or 21 per cent of total exports to Europe.

Members of the Board of Directors underlined that participation of Russia and the Republic of Belarus in the Customs Union and their entrance into the Common Economic Space since 2012, had opened new horizons for the integration of both countries' economies, ensured a high level of coordination and additional opportunities for even more promising economic development.

The cooperation between Russia and the Republic of Belarus in the gas sector may be a good example of that. A switch to a new strategic level of the relationships in that sector gave the Republic of Belarus an opportunity to purchase gas nowadays and in the long term under the reasonable price for the country. Increasing Gazprom's stake in Beltransgaz to 100 per cent allowed solving a number of issues for both parties: providing effective integration of the Russian and Belarusian gas transmission systems, reducing transit risks in the Republic, giving additional guarantees for gas sales in the receptive market over a long period. Joining Beltransgaz also allowed Gazprom to play an active role in the gas infrastructure development in the Republic of Belarus – which is very important for its synchronization with the Company's facilities development in Russia.

Nowadays, Gazprom successfully implements a number of measures in the production, marketing, financial and economic activities of Beltransgaz, with a view to improve the company's efficiency. Inter alia, it is currently planning to audit the technical state of Beltransgaz-owned fixed assets and to elaborate some proposals on improving gas transmission and underground storage facilities, to prepare the company's development programs for three-year and ten-year periods, as well as the General Scheme of Gas Supply to the Republic of Belarus. In addition, the Beltransgaz corporate governance issues are now in focus, the documents required to rename the company as Gazprom Transgaz Belarus have been prepared. The main actions aimed to increase the operating efficiency of Beltransgaz will be taken before the end of 2012.

Background

On November 25, 2011 the Russian Federation Government and the Government of the Republic of Belarus signed:

• the Agreement on the prices (tariffs) formation procedure for natural gas supply to the Republic of Belarus and transmission via the gas pipelines located in the Republic of Belarus;
• the Agreement on the terms and conditions for shares purchase and sale, and further activities of Beltransgaz.

In furtherance of the above-mentioned documents, Gazprom and Beltransgaz signed on November 25, 2011 contracts for gas supply to Belarus and gas transmission via the Republic for 2012–2014. In addition, Gazprom and the State Property Committee of the Republic of Belarus entered into the purchase and sale contract for a 50 per cent stake in Beltransgaz. Taking account of the 50 per cent stake in Beltransgaz acquired by Gazprom between 2007 and 2010, Gazprom became the owner of 100 per cent of Beltransgaz shares.