As part of the Sakhalin III project, Gazprom has launched construction of the production wells in the Kirinskoye gas and condensate field located on the Sakhalin Island shelf.

To date, one exploratory well is being switched to the production regime. In addition, the Company is planning to launch construction of a new production well this year. The Polyarnaya Zvezda (Polar Star) semi-submerged drilling rig is used to carry out operations in the field.

The Kirinskoye field is Gazprom's top development priority offshore Sakhalin and will serve as a gas source for consumers in Russia's Far Eastern regions. For the first time ever natural gas will be produced from the Russian continental shelf by a subsea production system.

Currently, the Company continues the Kirinskoye field pre-development. A gathering manifold to intake the gas mixture from wells has been installed at the field and a pipeline has been laid to the coast for conveying the produced feedstock. A pipeline conveying monoethylene glycol (MEG prevents hydrates formation in the wells and the gas mixture gathering system) from the coastline to the field and a control cable of the submerged production system have also been placed. Gas flowlines and control cables are being trenched and process equipment is being installed.

Construction of the onshore processing facility (OPF) for gas treatment is underway. Construction and installation operations have been completed and hydro tests have started at a 139 kilometer pipeline running from the OPF to the Sakhalin main compressor station at the Sakhalin – Khabarovsk – Vladivostok gas transmission system (GTS). The OPF and the GTS are designed to receive gas not only from the Kirinskoye field, but from other fields developed as part of the Sakhalin III project.

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 by the September 2007 Order of the Russian Industry and Energy Ministry. Gazprom was appointed by the Russian Federation Government as the Program execution coordinator.

New gas production centers will be established in Eastern Russia: Krasnoyarsk, Irkutsk, Yakutia, Sakhalin and Kamchatka.

The Sakhalin Island shelf is best prepared for gas production and supply to consumers in Russia's Far East. The Sakhalin III project will become one of the basic sources of gas supply. Gazprom holds licenses for three blocks within the project: Kirinsky, Ayashsky and Vostochno-Odoptinsky (licenses granted in 2009 pursuant to the Russian Federation Government Directive), and for the Kirinskoye gas and condensate field (license granted in 2008 pursuant to the Russian Federation Government Directive).

The Kirinskoye gas and condensate field is located 28 kilometers off the Sakhalin Island shore in the Sea of Okhotsk (sea depth – 90 meters). The field was discovered in 1992.

Geological exploration operations were completed at the field in 2011. All reserves were diverted into C1 category and totaled 162.5 billion cubic meters of gas and 19.1 million tons of gas condensate.

In September 2010 Gazprom discovered a large Yuzhno-Kirinskoye gas and condensate field within the promising Kirinsky block. C1+C2 reserves amount to 564 billion cubic meters of gas, condensate reserves – 71.7 million tons.

In autumn 2011 Gazprom discovered the Mynginskoye gas and condensate field within the Kirinsky block. C1+C2 reserves total 19.9 billion cubic meters of gas and 2.5 million tons of gas condensate.

The Polyarnaya Zvezda (Polar Star) semi-submerged drilling rig is one of the two rigs manufactured for Gazprom by the Vyborg Shipbuilding Plant in 2011 (the second rig is called Severnoye Siyaniye – Northern Lights).

The platforms are designed for operation under severe natural and climatic conditions, can stand low temperatures, waves up to 32 meters high, as well as drill gas and oil exploration and production wells down to 7,500 meters at water depths between 70 and 500 meters.