The Gazprom Board of Directors took notice of the information relevant to the comprehensive regional gasification with due account of the NGV fuel market development.

It was noted that since 2013 the annual Program for Russian Regions Gasification, regional programs for gas supply and gasification development and synchronization schedules for gasification programs will contain mandatory sections on the NGV fuel use and the appropriate infrastructure development. The sections, in particular, will stipulate obligations of the parties to expand the network of CNG filling stations, to provide land for construction and to convert vehicles to compressed natural gas (CNG) in parallel with new CNG filling stations construction.

Gazprom has sent proposals on joint development of the NGV infrastructure to 69 regions participating in the Gasification Program. To date, 37 of them are ready to confirm their commitment to convert vehicles to CNG or purchase them by the time when the CNG filling stations are constructed. Currently, Gazprom is preparing a feasibility study for construction of 37 CNG filling stations in 17 regions.

In addition, it is planned to consolidate Gazprom Group's assets on the CNG production and sales in a specialized company in order to improve the NGV fuel strategy implementation.

Further joint work of Gazprom and the Russian Federation constituents will accelerate the NGV fuel market development and will start building the nation-wide NGV fuel infrastructure. Consistent implementation of this project will enable the regions to save significantly on transportation costs, as gas is cheaper than conventional fuels: diesel and gasoline. Agroindustrial companies will significantly save on reduced fuel costs, especially during the sowing and harvesting campaigns.

Natural gas remains to be the cleanest fuel. Its active use will significantly reduce emissions of harmful substances into the atmosphere and improve the environmental situation in the residential areas.

The Board of Directors requested the Management Committee to continue the comprehensive regional gasification by including special sections on motor fuel in the gasification programs, particularly providing for the NGV fuel infrastructure development.

Background

Within the scope of its activities Gazprom deals with development of gas supplies and gasification of the Russian regions. Starting from 2001, Gazprom has been adopting regional gasification programs implemented jointly by Gazprom and the Russian Federation constituents' authorities.

The implementation of gasification programs is based on the General Gas Supply and Gasification Schemes for Russian regions as well as on synchronization schedules for gasification programs. The schedules contain the scope of work and the deadlines both for the Company and for regional authorities.

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 CNG 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 Republic of Kabardino-Balkaria: 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 promotion of the 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.