As part of the visit by the Russian Federation Prime Minister Vladimir Putin to China, Alexey Miller, Chairman of the Gazprom Management Committee and Jiang Jiemin, President of China National Petroleum Corporation have signed today in Beijing a Framework Agreement on major terms and conditions for natural gas supply from Russia to China on the basis of the previously signed agreements.

The parties reiterated that a high pace of the Eastern Gas Program execution by Gazprom created favorable conditions for further cooperation deepening in the gas sector and for subsequent signing of a long-term contract for gas supply from Russia to China.

Background:

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

At present, Gazprom Group holds more than forty licenses for the right to use the subsurface resources in Eastern Siberia and the Far East including the Chayanda field in Yakutia, the Chikanskoye field in the Irkutsk Oblast, the Sobinskoye field in the Krasnoyarsk Krai and the Kirinskoye field offshore the Sakhalin Island. In July 2009 Gazprom was granted the licenses for the Kirinsky, Vostochno-Odoptinsky and Ayashsky blocks of the Sakhalin III project and for the Zapadno-Kamchatsky block.

Gazprom is successfully performing geological exploration in the Krasnoyarsk and Kamchatka Krais, the Irkutsk Oblast, the Republic of Sakha (Yakutia) and offshore the Sakhalin Island. In July 2009 exploration drilling was launched in the Kirinskoye field offshore the Sakhalin Island. Gazprom is active in developing the Yakutia gas production center based on the Chayanda field, where exploration drilling was initiated in 2009.

Among gas trunkline projects, the Sakhalin – Khabarovsk – Vladivostok gas transmission system (GTS) is a top priority of the Eastern Gas Program. In July 2009 Gazprom set to constructing this gas trunkline. Construction of the Yakutia – Khabarovsk – Vladivostok GTS will start upon completion of the Sakhalin – Khabarovsk – Vladivostok GTS.

As part of the Sakhalin II project with Gazprom as the majority shareholder, the first Russian LNG plant was put onstream in early 2009 and the first Russian LNG cargoes were shipped to foreign consumers. The plant is to achieve its projected capacity (9.6 million tons per year) in 2010.

China National Petroleum Corporation (CNPC) is the largest state-owned petroleum corporation of China (the Chinese Government holds a 100 per cent stake) and is one of the leading integrated oil and gas production companies of the world.

Incorporated in 1998 on the platform of the former China’s Ministry of Petroleum Industry, today CNPC is comprised of the companies dealing with oil and gas exploration, production, transmission, storage, as well as oil refining, petrochemicals and research. CNPC is the largest crude oil producer and supplier, and retains a dominating position in oil and gas production, processing and marketing in China. CNPC and its subsidiaries supply 79 per cent of the domestic oil market, control 95 per cent and 40 per cent of the China’s natural gas and petroleum derivatives markets, respectively, and are involved in international investment projects in 28 countries.

Gazprom and CNPC signed the Agreement of Strategic Cooperation on October 14, 2004 in Beijing within the official visit of the Russian Federation President Vladimir Putin to China. The Agreement covers a wide spectrum of joint businesses including scrupulous discussion of the issues related to the organization of Russian natural gas deliveries to China by Gazprom. The possible ways of implementing joint gas processing and gas chemical projects in eastern Russia and in third parties are being studied.

The documentation developed by Gazprom VNIIGAZ for an underground gas storage facility in China is an example of successfully implemented joint sci-tech projects.