AO Gazprom – global energy company

Largest gas company

Gazprom is the world’s largest gas company basically focused on geological exploration, production, transmission, storage, processing and marketing of gas and other hydrocarbons. The state owns a 50.002 per cent controlling stake in Gazprom.

Mission and strategic targets

Gazprom’s mission is to provide effective and well-balanced gas supply to Russian customers and to safely implement long-term gas export contracts.

Gazprom’s strategy is to acquire the leading position among the global energy companies by entering new markets, diversifying core business activities and ensuring reliable supplies.

Reserves and gas production

Gazprom possesses the world’s largest natural gas reserves. The Company’s share in the global and Russian gas stocks makes up 17 and 60 per cent, respectively, with its overall reserves estimated at 29.85 tcm and currently priced at US$ 182.5 bln. In 2006 a 723.4 bcm increase of Gazprom’s explored gas resources substantially outpaced the extraction rate.

Gazprom’s share in the global and Russian gas production is nearly 20 and 85 per cent, respectively. In 2006 Gazprom Group extracted 556 bcm of gas, 1 bcm up on the production level in 2005.

Reliable gas supplier to russian and foreign customers

Gazprom owns the world’s largest gas transmission system – the Unified Gas Supply System of Russia stretching for 156.9 thousand km. Gazprom Group of companies also service 514.2 thousand km (80 per cent) of the national gas distribution pipelines, and in 2006 supplied 316.3 bcm of gas to 79,750 population centers in Russia.

Gazprom exports gas to 32 countries within and beyond the FSU, and continues reinforcing its positions on conventional international markets. In 2006 the Company sold 161.5 bcm of gas to European countries along with 101 bcm to the CIS and Baltic States.

Route diversification and european energy safety reinforcement

In 2005 Gazprom brought to full capacity the Blue Stream gas pipeline going from Russia to Turkey.

The same year the Nord Stream gas pipeline construction has been launched. The pipeline will enable to substantially enhance the reliability and flexibility of gas supply to Europe.

In 2006 Gazprom and Italian ENI signed a Memorandum of Understanding for the South Stream gas pipeline project execution. This project is also aimed at reinforcing the European energy safety. The South Stream offshore section will be laid through the Black Sea bottom: from Russian to Bulgarian coast.

Preparations are underway for the Barents Sea offshore located Shtokman field that will be the resource base for Russian gas export to Europe via the Nord Stream. In July 2007 Gazprom selected French Total as a partner for Phase 1 of the Shtokman field development. In October 2007 Norwegian StatoilHydro became another Gazprom’s partner to implement this project.

Market and product diversification

Step-by-step Gazprom builds up its presence in LNG market (liquefied natural gas). This helps to extend the Company’s business geography. In 2005 Gazprom supplied its first LNG cargo to the USA. In 2006 LNG was delivered to the Great Britain, Japan and South Korea. Gazprom’s joining the Sakhalin II project gives a strong impetus for the completion of a large-scale project targeted at supplying energy carriers to Asia-Pacific and North America.

Business priorities

A business priority of Gazprom is the development of the Yamal Peninsula, Arctic continental shelf, Eastern Siberia and the Far East.

By order of the Russian Federation Government, Gazprom coordinates the implementation of the Development Program of the integrated gas production, transportation and supply system in Eastern Siberia and the Far East with due regard of potential gas exports to China and other Asia-Pacific countries (Eastern Program). Russia’s East is planned to see the development of a gas processing and gas chemicals industry that will enable to rationally use substantial reserves of helium and other valuable components of Eastern Siberia’s gas.

Business diversification

Oil business development and competitive presence in the power generation industry are the strategic goals of Gazprom on its way to become a global energy company.

The acquisition of Sibneft has allowed the Company to become a key player on the Russian oil market.

Gazprom’s core businesses also cover power generation, which currently tends to undergo integration with the gas business worldwide and helps achieve a considerable synergetic effect. In February 2007 Gazprom and Siberian Coal Energy Company (SUEK) signed a Protocol of Intentions contemplating the creation of a joint venture based on power and coal assets owned by each of the companies. The joint venture’s mission will be becoming a key player in the Russian power market and holding a leading position in the global energy and coal industries.

Environment and social responsibility

Environment protection and ensuring ecological safety in the production operation regions, pollution reduction, industrial and ecological safety during new facilities construction are Gazprom’s environmental priorities. Gazprom’s environment costs increased in 2006 by 30.6 per cent and reached RUR 12.7 bln.

The largest socially oriented project of Gazprom is the Gasification Program for Russian Federation regions over 2005 to 2007, which prioritizes gasifying the rural area, with a total of RUR 43 bln to be invested in the construction of gasification facilities. The Program will result in a further 11 mln of the country’s citizens starting to use natural gas.

Corporate governance improvement

Gazprom goes on streamlining the corporate governance structure. The reform is aimed at enhancing effectiveness of Gazprom’s business as vertically integrated company. The initial steps made to set up subsidiaries specializing in underground gas storage, underground repair, hydrocarbons processing and oil recovery.

Gazprom on global market

Gazprom is confident about its future. In 2006 the price of the Company’s shares grew by 163 per cent and reached US $ 239.33 bln. According to market capitalization Gazprom entered the list of the five largest energy companies in the world.

This is a considerable step to achieving the strategic goal of Gazprom – taking leading positions in the global energy market, increasing the Company’s authority and influence in the world community and ensuring the long-term value growth.

carbon emissions.