The Gazprom Board of Directors approved the adjusted Investment Program, Budget (Financial Plan), and Cost Optimization (Reduction) Program for 2012.

According to the adjusted Investment Program for 2012, the total amount of investments will make up RUB 974.649 billion, which is a RUB 198 billion increase if compared to the Investment Program approved in December 2011. Meanwhile, the amount of capital investments will make up RUB 890.007 billion (a RUB 180.403 billion increase if compared to the Investment Program approved in December 2011), of which RUB 888.694 billion and RUB 1.313 billion will be allocated for capital construction and acquisition of non-current assets, thus showing an increase of RUB 179.13 billion and RUB 1.273 billion accordingly. The amount of long-term financial investments will stand at RUB 84.642 billion (RUB 17.599 billion up on the Investment Program approved in December 2011).

According to the adjusted Budget for 2012, revenues and gains will total RUB 4.972 trillion while liabilities, expenditures and investments – RUB 5.396 trillion. The external financial borrowings are determined at RUB 91.4 billion, showing a RUB 1.4 billion rise versus the amount of borrowings approved in December 2011, which is explained by the USD appreciation against RUB. The Budget surplus will account for RUB 0.2 billion.

The adjusted Cost Optimization (Reduction) Program for 2012 envisages measures aimed at cost optimization (reduction) to result in a cumulative effect of RUB 19.3 billion.

The 2012 Investment Program adjustment is mainly driven by the need to increase investments in the top-priority projects for natural gas production, transmission and underground storage.

The Budget adjustment stems from volumetric and price changes in gas marketing and macroeconomic indicators.

Background

The adjusted Gazprom Investment Program for 2012 envisages increased investments in pre-development of the traditional production areas, including the Urengoyskoye and Astrakhanskoye fields.

The investments will be increased for the Bovanenkovo – Ukhta and Ukhta – Torzhok gas trunkline systems construction as well as the Sakhalin – Khabarovsk – Vladivostok gas transmission system and the gas pipeline connecting the Kirinskoye field onshore processing facility (OPF) with the Sakhalin main compressor station (MCS). Besides, additional funds will be allocated for the Southern Corridor project implementation.

The Investment Program envisages increased investments in the underground gas storage system development.

As part of the Eastern Gas Program, the investments will be increased for pre-development of the Kshukskoye, Nizhne-Kvakchikskoye and Kirinskoye gas and condensate fields.

The increase in the long-term financial investments is caused by, inter alia, the necessity to allocate additional funds to power generation projects.

Pursuant to the adjusted Investment Program for 2012, the following production projects will remain the top-priority investment recipients in capital construction: pre-development of the Bovanenkovo, Zapolyarnoye, Medvezhye, Urengoyskoye, Yamburgskoye and other fields.

The gas transmission priorities will include construction of the Bovanenkovo – Ukhta and Ukhta – Torzhok gas trunkline, the Gryazovets – Vyborg, Pochinki – Gryazovets and SRTO – Torzhok gas trunklines systems.

In Eastern Russia the Investment Program will still be focused on the Sakhalin – Khabarovsk – Vladivostok gas transmission system, the Kirinskoye field OPF – Sakhalin MCS gas trunkline and pre-development of the Kshukskoye, Nizhne-Kvakchikskoye and Kirinskoye fields.

Funds are earmarked for retrofitting the major gas production and transmission assets, re-equipping underground gas storage facilities, constructing and retrofitting gas processing capacities, performing prospecting, geological exploration and production drilling in fields.

The adjusted Investment Program for 2012 also envisages the investments for Gazprom's projects implementation as part of the Russian Federation Government approved Program for Construction of Olympic Venues and Development of Sochi as a Mountain Climate Resort.

The adjusted long-term financial investment plan for 2012 prioritizes, inter alia, Gazprom's participation in the Nord Stream and South Stream gas pipelines construction as well as financing of the projects implementation in Africa, Bolivia, Latin America, the UK, Vietnam and Uzbekistan.