The Gazprom Management Committee addressed the preliminary results of the technical and economic assessment of the projects for synthetic liquid fuels (SLF) production and tasked the Company’s relevant subdivisions to continue working on the projects.

The Management Committee took notice of the information on the domestic and foreign SLF markets research.

The relevant subdivisions of Gazprom were entrusted to proceed with the marketing research aimed clarifying and updating the situation with the SLF niche on the domestic and foreign markets, as well as with preparing in the first quarter of 2011 the proposals on practicability of shaping the SLF production industry.

Background:

Creation of SLF production technologies and equipment is a top priority in Gazprom’s innovative activities aimed at tackling the Company’s strategic objectives to diversify marketable products and boost their added value.

In June 2009 the Management Committee tasked the Company’s specialized subdivisions to complete the experimental research on SLF production in the fourth quarter of 2010, and to prepare the proposals on practicability of bringing the obtained technological solutions into pilot operation in the first quarter of 2011.

Preliminary technical and economic assessment of the projects helps determine the conditions for arranging economically viable SLF production.

The SLF production process is based on chemical transformation of hydrocarbon gases (natural, associated, etc.) into liquid hydrocarbons.

The major outcomes of the SLF production process are:

- high-quality environmentally-friendly diesel fuel fully meeting the Euro 5 standard;

- synthetic light naphtha that may be used both as an environmentally-clean component of motor fuels (analogous to straight-run naphtha) and as a high-quality raw material for petrochemicals production;

- synthetic oil (in spite of synthetic motor fuels) that, being processed (in a mix with conventional oil), requires lower operating costs and yields a higher product quality.

SLF production will supply the domestic market with a required variety of quality products and enhance the competitiveness of the petrochemicals exported.

According to the preliminary estimates by Gazprom VNIIGAZ, in 2017 the segment of the Russian motor fuel market, which may be occupied by synthetic light naphtha, will make up to 8 million tons, synthetic diesel fuel – up to 10 million tons.

European countries may become the key importers of the synthetic diesel fuel produced in Russia. According to preliminary estimates, in 2017 the segment of the European motor fuel market, which may be occupied by synthetic diesel fuel, will make up to 39 million tons.

In addition, Russian synthetic oil export is likely to reach 10 million tons per annum by 2030, according to the preliminary estimates by Gazprom VNIIGAZ for the global oil market development.