The Gazprom Board of Directors approved the adjusted Investment Program, Budget (Financial Plan) and Cost Optimization (Reduction) Program for 2013.

According to the adjusted Investment Program for 2013, the total amount of investments will make up RUB 1 trillion 026.1 billion, which is a RUB 320.7 billion increase as compared to the Investment Program approved in December 2012. Meanwhile, the amount of capital investments will make up RUB 782.1 billion (a RUB 123.65 billion increase as compared to the Investment Program approved in December 2012), of which RUB 775.2 billion and RUB 6.9 billion will be allocated for capital construction and acquisition of non-current assets, thus showing an increase of RUB 120.06 billion and RUB 3.6 billion accordingly. The amount of long-term financial investments will stand at RUB 244.01 billion (RUB 197.05 billion up on the Investment Program approved in December 2012).

According to the adjusted Budget for 2013, gains from operating and investment activities will total RUB 5.07 trillion, while the amount of payments in all activities – RUB 5.53 trillion. The external financial borrowings are determined at RUB 229.2 billion (showing a RUB 139.2 billion rise versus the amount of borrowings approved in December 2012). The Budget surplus (taking into account exchange differences, intragroup borrowings and beginning balances on Gazprom's accounts as of early 2013) will account for RUB 0.5 billion.

A new version of the Cost Optimization (Reduction) Program for 2013 envisages measures aimed at cost optimization (reduction) to result in a cumulative effect of RUB 19.55 billion.

The 2013 Investment Program adjustment is mainly driven by the need to increase long-term financial investments in the development of Gazprom Group's power business along with investments in top-priority strategic projects for natural gas production and transportation.

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

Background

The adjusted Gazprom Investment Program for 2013 envisages increased investments in top-priority strategic projects for natural gas transportation, particularly, in construction of the second string of the Bovanenkovo – Ukhta gas trunkline system and in the implementation of the Southern Corridor project.

Funds will be also allocated for pre-construction engineering, purchase of pipes and equipment for a gas pipeline connecting the Izobilny CS to Nevinnomyssk. The gas pipeline construction synchronized with the development of the Severo-Stavropolskoye UGS facility in southern Russia will make it possible to enhance the security of gas supply from the UGS facility during peak loads and via the South Stream gas pipeline system.

The adjusted Investment Program for 2013 provides for increasing investments in UGS facilities and gas processing facilities, retrofitting of gas transmission facilities, carrying out design and survey activities in subsequent years in order to meet the deadlines of facility designing in Russia's East and within the South Stream project.

In the area of production it is planned to increase investments in the infrastructure of the Kshukskoye and Nizhne-Kvakchikskoye gas and condensate fields within the Eastern Gas Program as well as to build wells at the Urengoyskoye and Yamburgskoye fields. In addition, investments will increase for technical upgrade and reconstruction of gas production facilities at the Orenburgskoye field.

The growth of long-term financial investments is mainly related with the need to allocate additional funds for the development of power sector projects. It specifically refers to the financing of Gazprom Energoholding, TGC-1, OGK-2 and Mosenergo Furthermore, additional investments are to be earmarked for implementing the projects aimed at the NGV market development and for the comprehensive upgrade of refining capacities owned by Gazprom Neftekhim Salavat.