A meeting of Gazprom’s Board of Directors has been held in absentia.

The Board reviewed a report on Gazprom’s preliminary operating highlights over 2005 as well as draft investment program, budget (financial plan) & cost optimization (reduction) program for 2006.

The Management Committee was tasked with interacting with the federal executive bodies in the preparation of said documents for the RF Government’s endorsement.

The Gazprom 2005 budget and cost reduction program are expected to be executed fully in line with the targets approved by the Board on 28 September of this year.

The draft budget for 2006 earmarks RUR 1,889.3 bln, RUR 1,980.2 bln, and RUR 90 bln as overall income & revenues, liabilities, expenses & investments and financial borrowings, respectively, with the budgetary surplus projected at RUR 0.153 bln.

The draft cost optimization (reduction) program for 2006 prescribes RUR 11 bln to be saved.

In accordance with the draft investment program for 2006, total investments make up RUR 310.1 bln including RUR 278.42 bln and RUR 31.68 bln as capital and long-term financial investments, respectively.

Reference:

When drafting its 2006 investment program, Gazprom took into account the following key development targets:

 - 548 bcm of gas production;

 - 195.6 bcm of gas exports including 151 bcm to West Europe;

 - providing the reliability and technological safety for the core businesses;

 - maintaining the required level of gas reserves;

 - meeting social priorities.

The Gazprom 2006 investment program encompasses the most crucial investment projects including those aimed at:

 - extracting gas (developing the Yety-Purovskoye, Vyngayakhinskoye, Yen-Yakhinskoye, Urengoyskoye, Yamburgskoye [including Aneryakhinskaya and Kharvutinskaya areas], Zapolyarnoye and other fields);

 - constructing and upgrading gas transmission capacities including the North-European, Northern Tyumen Region – Torzhok and Yamal-Europe gas pipelines, expanding the Urengoy gas transmission hub, etc.;

 - creating underground gas storage capacities;

 - creating gas processing capacities.

To be funded with some 60 per cent of the total investments earmarked, gas transmission projects are a top priority of capital investments. In particular, Gazprom allocated RUR 19.84 bln to bring into service 144 km of NEGP’s transmission part at the Gryazovets-Vyborg section (the total length of NEGP’s onshore section in Russia accounts for 917 km).

A further RUR 11.19 bln are set aside as capital investments for expanding the Urengoy gas transmission hub and commissioning 71.5 km of its transmission part.

To enhance the reliability of gas deliveries to domestic customers over 2006, Gazprom intends to channel RUR 8.58 bln to construct gas laterals and supply gas to the RF constituents.

Over 2006, Gazprom is resolute to bring on stream 1,231.65 km of gas mains and branches, six compressor stations at gas pipelines & underground gas storage depots and a gas treatment unit as well as to hook up 178 wells on gas fields and 11 wells at UGS depots.

A draft long-term investments schedule for 2006 prioritizes, in particular, completing the construction of the Prirazlomnaya offshore ice-resistant platform and preparing the Prirazlomnoye and Shtokman fields for development under the PSA terms.

The draft budget for 2006 allots RUR 123.8 bln for paying off the loans taken by Gazprom in 2005 to buy into Sibneft.