PROFILE: GAZPROM EXPORT 1 World s Largest Natural Gas Exporter 2 History of Gazprom Export 3 Values 4

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2 TABLE OF CONTENTS PROFILE: GAZPROM EXPORT 1 World s Largest Natural Gas Exporter 2 History of Gazprom Export 3 Values 4 GAS SUPPLY GENERAL STATISTICS 5 Europe 6 LNG/Asia 20 Gas Purchases 20 GAS TRANSPORTATION AND STORAGE 22 Transportation 23 Gas Storage 26 EXPORTS OF CRUDE OIL, PETROLEUM PRODUCTS, SULPHUR 27 Current Activities 28 Future Activities 28 ECOLOGY 30 CHARITY AND SPONSORSHIP 32 *Photos taken from Gazprom Archives

3 1. PROFILE: GAZPROM EXPORT 1

4 WORLD S LARGEST NATURAL GAS EXPORTER OUR COMPANY: Supplies blue fuel to more than 20 countries. Exports gas condensate, oil, petroleum products, liquefied hydrocarbon gases and other petroleum and petrochemical products. Carries out marketing of gas in new markets, optimizes export flows, and analyses and forecasts the natural gas market trends. Participates in the development and implementation of Gazprom s gas and energy investment projects in Russia and abroad. In 2011, purchased for Gazprom s portfolio 27.5 billion cubic meters of gas from Turkmenistan, Uzbekistan and Azerbaijan. Actively participates in improving cooperation with foreign partners. Gazprom Export is one of the most successful and advanced Russian companies. The size of Gazprom Export s export earnings largely fills in Russia s budget revenues. In 2011, the volume of natural gas exports to far-abroad countries amounted to 150,0 billion cubic meters. RUSSIAN GAS AND EUROPE Russia s share of the world s proven oil reserves amounts to 4.6%, coal - 20%, gas - 28%. Further increase of the share of natural gas, which ranks second after oil, in the energy consumption balance is expected on the European continent. With limited domestic gas reserves and reduction of self-sufficiency, Europe s need in gas imports will increase. Gazprom Export is ready to meet the growing demand of European consumers, using the powerful potential of the Russian gas industry. GAS RESERVES OF RUSSIA AND GAZPROM Gazprom Export s strong position in the global market is due to Gazprom s gas reserves. Gazprom possesses the world s largest natural gas reserves. Its share of global reserves is 18%, in Russia - 70%. As of December 31, 2010, Gazprom Group s gas reserves in categories A + B + C1 totaled 33.1 trillion cubic meters. Gazprom accounts for about 14.5% and almost 85% of the world and Russian gas production respectively. In 2011, Gazprom Group s companies produced billion cubic meters of gas and associated gas. The length of gas pipelines and gas transmission network totaled more than thousand kilometers. 215 linear compressor stations with total capacity of gas pumping units of 42 thousand MW are used in gas transportation. Gazprom operates 25 underground storage facilities and 6 gasprocessing plants in Russia. 2

5 HISTORY OF GAZPROM EXPORT: STAGES OF A LONG JOURNEY: V/O SOYUZGAZEXPORT The All-Union Foreign Trade Organisation (V/O) Soyuzgazexport was founded on April 23, GVP GAZEXPORT In the autumn of 1991, Soyuzgazexport was incorporated into the state gas concern Gazprom as a state-owned foreign trade enterprise. By December of the same year, following the organization s transition from the jurisdiction of the Russian Soviet Federative Socialist Republic to that of the Russian Federation, the state-owned foreign trade enterprise was named GVP Gazexport. VEP GAZEXPORT In 1993, GVP Gazexport was transformed into a foreign trade subsidiary of Russian joint-stock company (RAO) Gazprom, and became known as the foreign trade enterprise VEP Gazexport. OPEN JOINT-STOCK COMPANY GAZEXPORT Open joint-stock company Gazexport was formed in accordance with Resolution No.39 of the Board of Directors of the Russian joint-stock company Gazprom, dated April 9, 1997 and Resolution No. 53 of the Board of Directors of OAO Gazprom, dated February 12, The Moscow Registration Chamber registered the company on May 12, 1999 (certificate No ). OAO Gazprom is the company s founder and 100% owner. OOO GAZPROM EXPORT In 2006, in accordance with the founder s decision, OOO Gazexport was renamed to OOO Gazprom Export. The head office is located at: 9 Strastnoy bulvar, , Moscow. Phone: , fax: info@gazpromexport.ru; post@gazpromexport.ru Contacts for media: comm@gazpromexport.com http: 3

6 VALUES Russian gas export is an essential element of Europe s energy security, which is confirmed by more than 40 years of experience in gas supply to the European continent. The company s reputation in the eyes of partners and the public is of special importance to the management of Gazprom Export. RELEVANCE OF THE COMPANY S ACTIVITIES TO THE INTERESTS OF GAS IMPORTING COUNTRIES: OUR PRIORITY: A reliable and sustainable gas supply to importing countries. The history of gas supplies to Europe shows that despite tumultuous political changes that have occurred both in the buying countries and in the former Soviet Union, we are able to ensure an uninterrupted gas supply to our customers. OUR BENCHMARKS: Attracting investment for the development of Russian gas transmission and distribution networks; Earning revenues from transit and storage of Russian gas; Improving the environment through the use of gas instead of other energy sources; Gazprom Export is committed to social responsibility for its activities, at the same time contributing to the development of the Russian gas industry and the economy. RELEVANCE OF THE COMPANY S ACTIVITIES TO RUSSIA S NATIONAL INTERESTS: Contributing to Russia s fuel and energy export development and maintaining a positive foreign trade balance; Strengthening of Russia s position in the global fuel and energy market; Expanding the economic base in order to improve cooperation with countries that import Russian gas; Increasing foreign currency earnings; Attracting investment to the Russian gas industry; Improving Russia s employment and income levels; Ensuring employment in the field of imported gas transportation and distribution. 4

7 2. GAS SUPPLY GENERAL STATISTICS 5

8 EUROPE DYNAMICS OF GAS EXPORT TO EUROPE Since 1973, a total of more than 3.5 trillion cubic meters of Russian gas was delivered for export. NATURAL GAS VOLUME OF SALES THROUGH GAZPROM EXPORT IN FAR ABROAD (BILLION M3) Total In 2011, Gazprom Export supplied 150,0 billion cubic meters of gas to European countries. Western European countries accounted for approximately 70% of its exports from Russia, 30% - Central European states. The Western European market absorbs the bulk of Russian exports. In 2011, Gazprom Export supplied 112,03 billion cubic meters of gas to markets in the region. The major importers are: Germany billion cubic meters Turkey - 26 billion cubic meters Italy billion cubic meters France billion cubic meters GAZPROM EXPORT S NATURAL GAS DELIVERIES TO WESTERN EUROPE (BCM) IN 2011 Austria 5.43 Germany Italy France 9.53 Switzerland 0.31 Netherlands 4.37 Finland 4.19 Turkey Greece 2.9 United Kingdom 8.16 Denmark

9 Central European natural gas market is particularly important because of its geographical proximity to Russia. In recent years, there have been improvements of relationships with partners against a background of significant geopolitical changes and the desire of countries to diversify energy supply sources. The Russian blue fuel provides about 60% of gas consumption in the region. In 2011, Gazprom Export exported billion cubic meters. The major importers are: Poland billion cubic meters Czech Republic billion cubic meters Hungary billion cubic meters Slovakia billion cubic meters Over 75% of our exports to Central Europe are heading towards these countries. GAZPROM EXPORT S NATURAL GAS DELIVERIES TO CENTRAL AND EASTERN EUROPE (BCM) IN 2011 Czech Republic 7.59 Slovakia 5.89 Poland Bulgaria 2.81 Hungary 6.26 Romania 2.82 Serbia 1.39 Bosnia and Herzegovina 0.28 Slovenia 0.53 Macedonia

10 AUSTRIA For over 40 years, the largest company in Austria OMV AG, was the Russian gas industry s main business partner. Until 1994, the government owned 100% of this company s shares. The state currently remains its largest shareholder (via the Austrian Industrial Holding) owning 31.5% stake in OMV. In April 2004, OMV Gas GmbH (a 100% subsidiary of OMV AG) became the legal successor on contracts signed between Gazprom Export and OMV AG. In 1968, OMV became the first Western company to sign a long-term natural gas-purchasing contract with the former Soviet Union. Until September 2006, Russian gas deliveries to Austria were carried out under four long-term contracts that stretched till By May 1, 2011, Austria has received a total of around 175 billion cubic meters of Russian natural gas including 5.43 billion cubic meters received in Gazprom Export, the Austrian company RAG and Germany s WINGAS are involved in the joint exploitation of the Haidach underground gas storage facility (UGSF) in Austria. The ongoing liberalization of the Austrian gas market and the restructuring of OMV AG activities in its natural gas trade resulted in the parties concluding an agreement stating that instead of the OMV Gas International company, the future Russian gas purchases would be made through EconGas. Gazprom Export annulled its existing contracts with OMV AG and GWH on 28 September These were replaced with new contracts, which Gazprom Export signed with EconGas, GWH and Centrex for Russian natural gas deliveries to Austria (from November 1, 2006 to December 31, 2027). In addition, GWH and Centrex earned the right to make their own direct gas sales on the Austrian market, particularly in the provinces of Carinthia, Styria and Salzburg (with the two companies signing corresponding contracts with the final consumers). Thus, Gazprom Export was able to achieve its strategic goal of entering the Austrian end-user market. BOSNIA AND HERZEGOVINA Since 1978, Russia has been delivering natural gas to Bosnia and Herzegovina, which was previously a part of the former Yugoslavia. Prior to the break-up of the Socialist Federal Republic of Yugoslavia, exports were made under the Intergovernmental Agreement of Between 1993 and 1995, deliveries were made under contract with the joint Russia-Yugoslavian enterprise Progresgas-Trading. Since October 1995, Gazprom Export has been delivering gas through the company Energoinvest d.d. Sarajevo. Founded in 1951, the state-owned Energoinvest d.d. Sarajevo is the leading energy company in Bosnia and Herzegovina. Our annual export volumes to Bosnia and Herzegovina do not exceed 400 million cubic meters. The total volume of gas delivered under the effective contract between 1997 and December 31, 2010 stands at more than 3.6 billion cubic meters. About 279 million cubic meters were delivered in

11 BULGARIA Russia is the sole natural gas exporter to Bulgaria. Deliveries first began in The cooperation between the two countries is based on several documents, the most important of which were the General Agreement between member-states of the former Council for Mutual Economic Assistance (CMEA ) on developing the Orenburg gas field and constructing the main Orenburg Western Soviet Border gas pipeline, and the Yamburg Agreement between the former Soviet Union and Bulgaria on developing the Yamburg deposit and constructing the Yamburg Western Soviet Border gas pipeline. Gazprom Export s main partners on the Bulgarian market are Bulgargaz EAD and Overgas Inc. Bulgargaz is a state-owned enterprise and a 100% subsidiary of the Bulgarian Energy Holding EAD. The enterprise was created in Overgas Inc. is a joint-stock company, with 50% of its shares held by Gazprom Export. Overgas Inc. is involved in constructing and operating the Bulgaria s gas pipeline and gas transmission networks, and delivering natural gas to final consumers. The long-term contract between Gazprom Export and Overgas Inc. stipulates for the annual delivery of 2.5 billion cubic meters of gas between 1997 and The long-term contract with Zarubezhgaz Management und Beteiligungsgesellschaft mbh (Germany) over the same period stipulates for 0.6 billion cubic meters of annual deliveries to Bulgaria. Bulgaria consumed 2.81 billion cubic meters of natural gas in All Bulgaria s needs were met due to imports from the Russian Federation billion cubic meters of gas has been exported to Bulgaria by December 31, On January 18, 2008, Russia and Bulgaria signed an Intergovernmental Agreement on cooperation in constructing the South Stream transit gas pipeline through Bulgaria. The Bulgarian parliament ratified this agreement on July 25, The control over the company which will be in charge of building and operating the gas pipeline, will be equally divided (50%-50%) between Gazprom and its Bulgarian partners. May 15, 2009, Gazprom and Bulgarian Energy Holding signed an Agreement on constructing a gas pipeline for natural gas transit through the Bulgarian territory under the South Stream project, initialed by the parties on 28 April 2009 during the visit of the Prime Minister of Bulgaria Sergey Stanishev to Moscow. In late 2010, the two companies signed the Shareholders agreement and Charter of the joint venture South Stream Bulgaria, created on a parity basis for the implementation of the South Stream project in the territory of Bulgaria. South Stream Bulgaria will implement the pre-investment stage of the project, as well as finance, construct and operate the gas pipeline on the Bulgarian territory. 9

12 CZECH REPUBLIC First Russian natural gas supplies to Czechoslovakia were launched in Currently, all deliveries are effectuated under long-term agreements signed between Gazprom Export and RWE Transgas, and also with Vemex. The main partner of Gazprom Group in the Czech Republic is RWE Transgas. The existing gas supply and transportation contracts in the Czech Republic were signed in 1998 and 1999 respectively, and were extended to 2035 in 2006 with annual delivery volumes up to 9.0 bcm and transit volumes up to 30.5 bcm per annum. The Russian gas transit through the territory of the Czech Republic is performed by Netforgas company acting as the Czech gas transportation system operator. Transit is going along the Uzhgorod route with Lanzhot as entry point and also through the Yamal-Europe pipeline with entry point at Olbernhau. In March 2006, Gazprom export was contracted to supply gas to Vemex s.r.o., it marked the beginning of the diversification of supplies to the Czech market. Gazprom Group s participation in Vemex also meant that the company had met its goal of reaching Czech final consumers. From January 1, 2007 in line with the EU energy policy the Czech gas market was fully liberalized. On October 10, 2007 Gazprom Export and Vemex s.r.o. signed a long-term supply contract from 2008 to 2012 for 500 million cubic meters of gas annually, with a possible extension of the contract for five years. In 2011, 7.59 billion cubic meters of gas to the Czech Republic was delivered, and 22, 97 bcm passed through as transit, including 0,15 bcm earmarked for the compressor stations. DENMARK Contract for the supplies of natural gas via Nord Stream pipeline signed in 2006 determined basic conditions of 1 billion cubic meters of Russian gas purchases by Danish company DONG in plateau period within 20 years. On September 20, 2009 the agreement was reached to sell DONG another 1 billion cubic meters annually on the conditions of the acting contract. Following the start of the Nord Stream operation on November 8, 2011, deliveries of Russian gas to Denmark started. FINLAND Russian natural gas has been supplied to Finland from Russia for about 40 years. In 1971, the first contract for the supply of up to 1.4 billion cubic meters per year was signed. The gas physically came to Finland in 1974, and as of the current moment, Finland has received about 107 billion cubic meters of gas in total, including 4.19 billion cubic meters in 2011 alone. For 25 years the Finnish partner of the Russian side was the Neste company (in 1998 after merging with the Imatran Voima company, converted into the Fortum corporation), with which Gazprom has developed strong relationships. For many years the companies have jointly cultivated the Finnish natural gas market. The result of this collaboration in 1994 was the creation of the joint-stock company Gasum, committed to the import and sale of natural gas, as well as the operation and development of a gas transmission system in Finland. In January 2005, Gazexport and Gasum extended the contract for gas supply to Finland dated March 12, 1994 till December 31, In 2011 the contract was extended for another year. 10

13 FRANCE There has been successful mutually beneficial cooperation between Russia and France for the supply of natural gas for more than 35 years. During this time, France has imported more than 324 billion cubic meters of Russian gas. In 2011, exports to that country amounted to 9.53 billion cubic meters. Currently there are three long-term contracts between Gazprom Export and GDF Suez for the delivery of Russian gas to France. The first two contracts were both signed on September 3, 1975 and provided gas to the Slovakian- Austrian border. Within the frameworks of the Gas for Pipes project, the third contract was signed on October 28, 1983 for delivery of gas to the Czech-German border. On December 19, 2006, Gazprom Export and GDF Suez signed a major package of commercial agreements that included the extension of the existing contracts through 2031 with the delivery points relocation to France s border, the sale of new volumes through the Nord Stream pipeline, and the transfer of natural gas and the corresponding transport capacities to Gazprom Export for its operations on the end-user market of France. On March 1, 2010 Gazprom Export and GDF Suez signed a MoU on additional supplies of Russian natural gas and the Nord Stream project. In accordance with it, the parties will explore the possibility of Gazprom Export supplying GDF Suez additional volumes of gas starting in Deliveries will be effectuated through the Nord Stream as well. In addition to supplying gas, cooperation between GDF Suez and Gazprom also includes all the major activities: Energy saving at gas installations; Research and design development, construction, operation, repair and reconstruction of gas transportation facilities, as well as research in this area; Reduction of gas losses; Creation and operation of underground gas storage; Training of experts. The two companies have also created a coordinating committee to help determine the priorities for their cooperation. Its functions include creating working groups for specific assignments, confirming activity plans, and approving proposals. As part of the Gazprom s strategy to enter the end consumer market a new company of Gazprom Group, Gazprom Marketing & Trading France, engaged in supplying gas to end-users in France, was registered in July 2006 in France. 11

14 GERMANY Germany has been and remains the largest Russian natural gas buyer. The total volume, including trading in this country reached billion cubic meters in Russian natural gas deliveries to Germany are made under contracts signed between Gazprom Export and the companies E.ON Ruhrgas AG, WIEH GmbH & Co. KG, and WINGAS GmbH & Co. KG. The total volume of natural gas exported by Russia to Germany since the start of deliveries (in 1973, including the former German Democratic Republic) to date has reached more than 964 billion cubic meters. Joint-stock company Ruhrgas was founded in Its operations include the purchase and transmission of natural gas along main pipelines, with its subsequent sale to gas distribution companies. The company is also involved in the comprehensive design, construction and operation of gas transmission systems. In early 2003, the major German energy company E.ON AG acquired Ruhrgas as a sole shareholder. At the request of the German regulator, the company was divided into a trading and transportation company. E.ON Ruhrgas AG imports natural gas from Russia, the Netherlands, Norway and Denmark, providing more than 50% of the total volume of gas delivered to the German market. E.ON Ruhrgas AG delivers Russian natural gas to Germany and Switzerland under several long-term contracts. Since October 1, 2001, a long-term agreement with transport company E.ON Gastransport GmbH on Russian natural gas transportation through Germany to the Netherlands and Belgium has been in force. A series of other short-term contracts are also in effect. In late 2010, the company was renamed to Open Grid Europe. Since the beginning of exports, as of present, E.ON Ruhrgas AG has received a total of more than 570 billion cubic meters of gas. In August 2006, Gazprom Export and E.ON Ruhrgas AG extended four prime contracts from 2020 till In order to improve the efficiency of Russian gas sales and increase their share on the Germany market, Gazprom and Wintershall (100% owned by BASF AF) created two joint ventures in Germany WIEH (1990) and WINGAS (1993). Several long-term contracts have been concluded with WIEH and WINGAS. Gazprom Export has signed an agreement with WIEH, WINGAS and WIEE extending these contracts till Once Gazprom Export s granddaughter company - Gazprom Marketing & Trading Ltd. (GMT) was founded in Britain, it began to develop cooperation with WINGAS concerning gas sales on the British market. The first small deliveries began in Shipments were made using the Gazprom-owned reverse flow capacities of the Interconnector gas pipeline. Following 2011, Gazprom Export s delivery volume in Germany, Belgium and the Britain through WINGAS and WIEH was more than 20 billion cubic meters. 12

15 GREAT BRITAIN In December 1994, Gazprom became a shareholder in the company Interconnector (UK), which operates the Interconnector gas pipeline connecting the European continent to Britain. Today, Gazprom owns two billion cubic meters per year of this pipeline s direct flow capacities (which flow toward the continent). The reverse flow capacities (flowing back to Great Britain) stand at 6 billion cubic meters per year. In order to optimize utilization of the capacity of this gas pipeline and to further trade activities in the liberalized markets of Europe, a 100% Gazprom subsidiary Gazprom UK Trading (now known as Gazprom Marketing & Trading, hereafter referred to as GM&T) was created in Britain on 6 May The main lines of GM&T activities include: Trading operations conducted on Europe s main gas trading hubs. These operations include gas trade, electric power, oil and oil products, and the sale of CO2 emissions permits; Sale of gas to end consumers in Great Britain and France through subsidiary companies; Developing electric power business of Gazprom Group; Developing LNG trade operations conducted through its 100% subsidiary, Gazprom Global LNG (GGLNG), which ensures that LNG is traded on the markets of both the Atlantic and Pacific Basins; Involving its subsidiary company GM&T USA in the sale of gas to final consumers in the North American market; Developing LNG trade and emission reduction projects in the Asia Pacific region via GM&T Singapore; Providing end-users with services on recording of the consumption of gas, electricity and other products. Starting with just 260 million cubic meters, Gazprom Group now delivers around 8.16 billion cubic meters of Russian gas to the British market per year (based on 2011 results). Besides Russian gas, the GM&T portfolio also includes gas of other producers. GM&T has thus concluded contracts with DONG (Denmark) for natural gas purchases from Ormen Lange gas field in the North Sea. Furthermore, GM&T purchases significant gas volumes directly on the market. In order to ensure better reliability and flexibility of gas deliveries to Britain, the company is currently optimizing the utilization of its capacities in the Interconnector gas pipeline and further leasing the capacities available in the BBL gas pipeline. Another measure taken to improve reliability and optimize deliveries involves gas swap deals. These deals help lower transmission costs and ensure a larger share of a particular market s gas volume in the company s overall portfolio, regardless of the extent to which the transmission capacities are utilized in a particular section. GM&T also performs other trade operations such as the exchange of pipeline gas for liquefied natural gas (LNG). Another strategy pursued to improve the reliability of gas deliveries to consumers involves optimizing and balancing of the company s own product portfolio. These measures include such transactions as hedging and signing of multiple-component contracts involving bundled products (gas electric power greenhouse gas emissions permits). The gas sales to end consumers is a lucrative gas business segment that allows a company to diversify its sources of revenue. Moreover, direct gas deliveries to end consumers provide an additional guarantee that Russian gas is sold on the liberalized British market. In 2011, gas sales to final consumers in Britain (through GM&T s subsidiary - Gazprom Marketing & Trading Retail) amounted to 2.6 billion cubic meters. 13

16 GREECE Russian gas exports to Greece began in 1996 based on a contract between V/O Soyuzgazexport and the Public Gas Corporation of Greece DEPA, signed in 1988, which provides for the delivery of up to 3 billion cubic meters of gas annually for a period of up to 2016, inclusive. DEPA - Public Gas Corporation was founded in 1988 to diversify the energy balance of Greece. It has exclusive rights on regulation and formation of the country s natural gas market. Greece is gradually bringing its gas market functioning model in line with EU standards and requirements. The first steps in this direction was the separation of the transport component of the national gas corporation DEPA as an independent specialized company and provision of potential new players of the Greek gas market with access to the Greek transmission system. For the development of the Russian-Greek cooperation in the gas industry, Prometheus Gas S.A. was created in 1991 with equal equity participation of Gazexport and Copelouzos Broz Group Ltd. Prometheus Gas S.A. operations primarily deal with the construction of energy facilities in Greece, in accordance with the Supplement to the Intergovernmental Agreement of At present, 7 branch gas pipelines and thermal power station Florina of 300 MW capacity have been put into operation. Construction of branch gas pipeline at Chalcis and a compressor station at Nea Mesimvria is underway. As of January 1, 2011, more than 26.7 billion cubic meters of gas was exported to Greece. In 2011, deliveries to the country exceeded 2.9 billion cubic meters. In June 2010, Gazprom and DESFA S.A. signed the Charter of joint venture South Stream Greece, created on a parity basis between Gazprom and DESFA S.A. for the implementation of the Greek section of South Stream project. HUNGARY Cooperation with Hungary began in Until 1998, Russian gas was exported in accordance with the Intergovernmental Agreement on the development of the Orenburg and Yamburg gas fields. Panrusgaz, a joint Hungarian-Russian gas venture, was set up in 1994 to help Hungary reliably meet its long-term needs in imported natural gas. The venture aims to promote the development of mutually beneficial trade ties based on strategic partnership relations. The company s core operations focus on importing Russian gas. Panrusgaz is Hungary s natural gas leading provider (65%). In 1996, long-term contracts for Russian natural gas deliveries were signed with Panrusgaz for the period between 1996 and Under these contracts, gas is delivered to Hungary along two directions via Austria and Ukraine. A total of about billion cubic meters of natural gas have been exported to Hungary as of January 1, Deliveries to this country for 2011 reached 6.26 billion cubic meters. Promising directions of long-term cooperation between Hungary and Russia in the oil and gas sector include the creation of new Hungarian gas transporting capacities, which could boost Russian gas deliveries and their transit to European countries. Thus, the planned laying through Hungary of a segment of the South Stream pipeline has gained special importance. On February 28, 2008, Hungary and Russia signed an Intergovernmental Agreement on the South Stream gas pipeline. Further to this agreement, on 10 March 2009, an agreement was concluded between Gazprom and the Hungarian Development Bank (MFB), whereby a joint venture South Stream Hungary was created on a parity basis on January 29, 2010 for examination of project s feasibility as well as for financing, construction, and operation of the Hungarian part of the gas pipeline. Later MFB was replaced by MVM (Magyar Villamos Muvek Zrt.). 14

17 ITALY ENI, which was created in 1953, is Gazprom Group s main partner on the Italian market. The company s corporate structure has three business divisions: Exploration & Production, Gas & Power, and Refining & Marketing. Gas purchases and sales are made by ENI Gas & Power S.p.A., which is a part of the second division. Gazprom Group supplies natural gas under three long-term contracts with ENI. Also, export of gas to Italy is carried out by other companies operating in its market, such as Sinergie Italiane, EGL, ERG. In addition, Russian gas shipments to Italy are also conducted through the joint ventures JSC Promgaz (which was created on a parity basis by Gazprom and ENI in June 1993) and PremiumGaz (created in 2008 jointly with A2A S.p.A. and Iride S.p.A. By the end of 2011 the deal on the full acquisition of Promgaz by Gazprom Group was finalized. In 2011, billion cubic meters of natural gas were delivered to Italy under all contracts. About 500 billion cubic meters of Russian natural gas have been shipped to this country since Gazprom and ENI have been jointly implemented the Blue Stream project within their strategic alliance based on the Agreement signed in The pipeline system is operated by a specialpurpose Russian-Italian company called the Blue Stream Pipeline Company. The gas pipeline s capacity is divided between Gazprom and ENI on a basis. In 2010, the pipeline reached its designed capacity of 16 billion cubic meters. Gazprom/Gazprom Export signed a Strategic Partnership Agreement with ENI on November 14, As a result, since April 1, 2007, Gazprom Group has also been able to make direct Russian gas deliveries to the Italian market through the ENI company s concession of its TAG gas pipeline capacities and gas volumes to Gazprom Export. Delivery volumes reached 3 billion cubic meters per year by The document also provides for extending the current Italian gas delivery contracts till On June 23, 2007, Gazprom and ENI signed the Memorandum of Understanding on implementation of the South Stream project. The Memorandum stipulates the directions of cooperation between the two companies in designing, financing, construction and management of the South Stream. The special purpose company South Stream AG was registered in Switzerland on January 18, Gazprom and ENI founded the company on parity basis. On May 15, 2009, Gazprom and ENI signed the second Amendment to the Memorandum of Understanding (signed on June 23, 2007) concerning further steps on implementation of the South Stream project. This document envisages the increase in productivity of the offshore section of the gas pipeline from 31 to 63 billion cubic meters per year. MACEDONIA Cooperation with Macedonia s gas industry began with the signing of a contract in 1991 with Makpetrol A.D. on construction of main and branch gas pipelines in this country on general contract terms. The construction was completed in Russian gas exports to Macedonia began in 1997, and as of January 1, 2011, a total of about 1.05 billion cubic meters of the blue fuel have been exported, and in about 130 million cubic meters. 15

18 NETHERLANDS Gas and oil deposits were first discovered in the Netherlands at the start of the 20th century, with their commercial development beginning after World War II. To help create an efficient national gas supply system, N.V. Nederlandse Gasunie (Gasunie) trading company was created on April 6, It received the right to purchase gas from producers, transport it and sell it both inside the country and abroad. Gasunie signed its first export contract with Belgium s Distrigas in Despite its relatively small size and population, the Netherlands is currently Europe s fifth-largest consumer of natural gas, which comes on the back of its high rate of gasification in the domestic, industrial and power sectors. In general, gas share in the country s energy balance stands at around 48% (EU average 24%). The total length of the country s gas transmission networks stands at around 11,000 kilometers. The foundations of Gazprom s business cooperation with Gasunie were laid in the framework agreement of 1996, which besides Russian natural gas deliveries to the Netherlands also foresees various types of partnerships in transmission, storage, securing of natural gas shipment flexibility, etc. In September 2000, a contract was signed to sell Russian gas to the Netherlands, for a period no less than 20 years. The first Russian gas deliveries to the Netherlands were shipped on October 1, 2001 using the Yamal Europe gas pipeline system. In 2011, Gazprom Export supplied Netherlands with 4.37 billion cubic meters. The current contract is of great interest to Gazprom since it assigns a mechanism for more efficient use of transportation facilities in accordance with the needs of the supplier. This allows the company to optimize the loads of the Yamal Europe gas pipeline to a certain degree at its own discretion. The Netherlands government is currently restructuring Gasunie company in accordance with EU directives. The legal unbundling of the company s transmission and marketing units was completed on July Today, the state owns 100% stake in the newly-formed transmission company N.V. Nederlandse Gasunie. Shares of the marketing division, which on September 1, 2006 became known as GasTerra, are still held by the old Gasunie shareholders, with the distribution of shareholder capital also remaining the same (Energie Beheer Nederland B.V. 40%, Exxon Mobil 25%, Shell 25%, and the state 10%). According to its new business structure, GasTerra is now the owner and operator of the Russian gas delivery contract to the Netherlands. N.V. Nederlandse Gasunie displays keen interest in cooperating with its Russian partner within the framework of the Nord Stream project. In this context, a Memorandum was signed between Gazprom and Gasunie at the end of 2007 on the Dutch company s participation in the project. At the same time, the document stipulates for Gazprom s potential participation in the BBL project a pipeline that links the Dutch and British gas transmission systems. The Nord Stream AG company further transferred 9% of its shares to Gasunie in June

19 POLAND Poland has been a traditional purchaser of Russian gas since 1944, and in 2010 was ranked first by volume in Eastern Europe among the importers of this product. Some 80% of the country s gas demand is met by Russian deliveries. Russian natural gas export to Poland and its transit through its territory is carried out under long-term contracts concluded through an Intergovernmental Agreement dated August 25, It provides for both Russian gas delivery to Poland and the creation of a gas pipeline system for the gas transit through Poland to Western European counties. These contracts were signed with PGNiG S.A. and EuRoPol GAZ S.A. companies. Polskie Gornictwo Naftowe i Gazownictwo (PGNiG) is Poland s largest oil and gas company. It is involved in oil and gas field development, production, storage and transmission of these primary energy products, construction and development of the country s oil and gas transmission system, and gas import and export. The company was established as a state enterprise in In 1990, it was transformed into a joint-stock company with 100% stake held by the state. Following a partial privatization, the government presently holds 72.41% of the company s shares. EuRoPol GAZ, a Russian-Polish joint venture which Gazprom and PGNiG should own on equal footing, was created in 1993 to design, finance and construct Polish gas transit pipeline systems. The company owns the 684-kilometer stretch of the Yamal Europe gas pipeline that runs through Poland. Construction of the first leg of the Yamal Europe gas pipeline was completed at the end of Its capacity currently stands at around 33 billion cubic meters per year, with five compressor stations now in operation. As of January 1, 2012, about billion cubic meters of Russian natural gas was exported to Poland, including billion cubic meters in In October 2010, arrangements were made at the intergovernmental and corporate level to strengthen the Russian-Polish cooperation. A gradual increase in supplies to Poland before the end of the term of the contract between Gazprom Export and PGNiG was agreed. Issues relating to the activities of EuRoPol Gaz S.A., especially tariff for transportation of Russian gas through the territory of Poland, and relating to the corporate governance of EuRoPol Gaz S.A were addressed. ROMANIA The start of cooperation with Romania s gas industry is linked to the development of the Orenburg gas condensate field and the construction of the Orenburg Western Soviet Border gas pipeline, which was stipulated in the 1974 General Agreement of member states of the former Council for Mutual Economic Assistance (CMEA). Russian natural gas export began in 1979, and its share of the Romanian market has at various times made up between 20 and 25% of the total consumption volume. Gas deliveries from the Russian Federation are executed under long-term contracts with WIEE and Conef Energy companies. New contracts were signed with both companies in 2007 providing for Russian natural gas deliveries to Romania till As of January 1, 2012, more than 122 billion cubic meters of gas was delivered in Romania, including in billion cubic meters. 17

20 SERBIA Russian natural gas deliveries to former Yugoslavia began in After the collapse of the Socialist Federal Republic of Yugoslavia (SFRY) in the early 1990s, separate Intergovernmental Agreements on cooperation in the gas industry were signed with new sovereign states. Russian-Serbian intergovernmental agreement was signed on 07 February To strengthen Gazprom s position in the region, a new joint venture Russian-Serbian Yugorosgaz A.D. (Belgrade) was established in July 1996 in accordance with the Intergovernmental Agreement dated April 11, 1996 (Gazprom s share 50 percent). Yugorosgaz performs the phased implementation of a project on constructing the southern branches of Serbian gas pipelines, gasification and gas supply to customers in southern Serbia, as well as participation in joint energy projects. Since 2007, this company has been Serbia s buyer of Russian natural gas. As of January 1, 2012, about 8.9 billion cubic meters, including in billion cubic meters were delivered under a contract with this company. Transmission, distribution and storage of natural gas inside Serbia is performed by state-owned enterprise Srbijagas, which was created on October 1, 2005 by the government of the Republic of Serbia in the process of the restructuring of the state-owned enterprise Naftna Industrija Srbije (NIS). On January , a comprehensive Intergovernmental agreement on the South Stream project and the underground storage (UGS) project Banatski Dvor was signed. In 2010, a joint project company for implementation of the project in Serbia - South Stream Serbia (Gazprom s share - 51%, Srbijagas - 49%) was founded. SLOVAKIA Gazprom Export s partner on the territory of the Slovak Republic is the company SPP. SPP s shares are held by a consortium of companies made up of E.ON Ruhrgas and Gaz de France (49%) and the government of the Slovak Republic (51%). SPP was officially restructured on July 1, This resulted in the creation of two new subsidiary companies: SPP Distribucia, which purchases, sells and distributes gas across Slovakia; and SPP Preprava (later renamed eustream a.s.), which became the operator of Slovakia s gas transmission network. Eustream a.s. company oversees the transit of Russian natural gas that arrives from Uzhgorod. The flow of Russian gas branches out along two lines in western Slovakia: the first part transits through the Czech Republic to Germany and France, and the second part goes to Austria, France and Italy. Following the expiration of the contracts, a new 20-year Agreement was signed on November 11, 2008 establishing the terms of Russia s delivery of 6.5 billion cubic meters of gas to Slovakia effective from January 1, Another agreement was also signed with eustream a.s. concerning gas transits for the same period, which provides for the overall transport of about one trillion cubic meters of gas (around 50 billion cubic meters per year). In 2011, 5.89 billion cubic meters were delivered to Slovakia, and 48,72 bcm were transited through the republic, including 0.83 bcm earmarked for compressor stations. 18

21 SLOVENIA Russian natural gas deliveries to Slovenia began in After the break-up of the former Yugoslavia, cooperation has been based on an intergovernmental agreement signed on November 5, It provides for the delivery of up to 830 million cubic meters of gas a year to Slovenia. The Slovenian Geoplin d.o.o. Ljubljana company was founded in It has been purchasing, transporting and selling Russian gas on the territory of Slovenia since This company is the largest importer of Russian natural gas in Slovenia. The current contract is valid until 2017, inclusive. As of January 1, 2012 Slovenia received more than 11 billion cubic meters of natural gas, including 0.53 billion in Following Russian-Slovenian negotiations in the presence of Prime Ministers of both countries on November 14, 2009 an agreement was signed between the Government of the Russian Federation and the Government of the Republic of Slovenia on cooperation in the creation and operation of the South Stream pipeline in Slovenia. TURKEY In February 1986, based on an intergovernmental agreement dated September 18, 1984 a contract was signed with the Turkish company BOTAS, providing an incremental supply of gas for 25 years ( ) of up to 6 billion cubic meters per year. The first deliveries of Russian natural gas to Turkey from the Soviet Union began in June 1987 via Romania and Bulgaria by the specially constructed Trans-Balkan pipeline. In 1998, a long-term contract for delivery of an additional 8 billion cubic meters per year to this region through 2022 was signed. Until 2003, Russian gas only entered Turkey in transit through Ukraine, Moldova, Romania and Bulgaria. In 2003, in accordance with the contract agreed on December 15, 1997 by Gazexport and BOTAS, based on an intergovernmental agreement on gas deliveries to Turkey via the Black Sea, gas began flowing through the Blue Stream pipeline. The maximum delivery capacity to this area during the plateau period is 16 billion cubic meters per year. The state pipeline company BOTAS was founded by the state oil company TPAO in 1974 in accordance with the decision of the Turkish government. BOTAs has focused on trade and transportation of gas since Until recently, BOTAS had exclusive rights over the control and formation of the gas market in Turkey. In an effort to join the European Union, the Turkish government introduced a Natural Gas Market Act, providing for the gradual elimination of the monopoly right to import gas by BOTAS transferring (with the consent of the seller of the gas) already contracted volumes of gas to other firms on the terms of a tender. 19

22 In a liberalized gas market in Turkey, Gazprom Export has agreed to transfer part of the volume of one of the contracts during the tender organized by BOTAs, and in 2007 signed contracts with four private companies that have the right to import gas to Turkey. Gas has been supplied under these contracts. As of January 1, 2012 Turkey imported over 275 billion cubic meters of Russian natural gas. In 2011, supplies amounted to 26 billion cubic meters. LNG / ASIA Expansion of the LNG market is one of the promising headings for Gazprom Group. Increase of LNG volumes in Gazprom s supply portfolio allows reaching the diversification of supply, reduction of transit risks, and enhancing of export volumes by entering the new markets which are inaccessible for pipeline gas supplies. Main trading activity in LNG sector is carried out by Gazprom s subsidiaries Gazprom Global LNG and Gazprom Marketing & Trading Singapore. LNG portfolio operated by these companies consists of volumes from Sakhalin-2 project as well as of LNG from foreign projects. It allows to optimize efficiently the trading flows and to react promptly on the changes in the market. In the future the main share of LNG volumes will be provided from various Russian projects including Shtokman and the expansion of LNG production in the Russian Far East. Today Gazprom Group companies supply LNG to the biggest gas consumers in Asia Pacific Japan, Republic of Korea, China, and India. At the same time there are new markets of LNG consumption, primarily the booming economies in Asia (Singapore, Thailand, Pakistan, Vietnam etc); Latin America, Middle East which witnessed a remarkable increaseof domestic demand (Kuwait, UAE, Bahrain). All these countries favor the construction of LNG terminals to secure the shift of power generation and a number of manufacturing sectors towards gas; they become appealing markets for LNG supplies from Gazprom Group. LNG from Gazprom portfolio was already supplied to such countries like Kuwait, Thailand and the UAE. The increase of LNG export portfolio by means of the development of Russian LNG projects as well as using the opportunities to take part in projects in third countries and by means of trading operations contributes to the assertion of Gazprom as a global energy company. GAS PURCHASES TURKMENISTAN A contract between Gazprom Export and Turkmengas provides delivery of natural gas from Turkmenistan in the period from 2004 to 2028 under a long-term contract. Turkmen gas exports began in January 2004, from 2010 the calculation of the price formula is based on international quotations of oil products. During the period from 2004 to 2011 Gazprom Export totally purchased about billion cubic meters of gas. 20

23 UZBEKISTAN Gas deliveries from Uzbekistan started in 2003 on short-term contracts between Gazprom Export and Uztransgaz. Since 2009, the parties have calculated the price formula based on international quotations of oil products. Gazprom Export purchased about 23.7 billion cubic meters of gas during AZERBAIJAN In October 2009, Gazprom Export and the Azeri company SOCAR signed a medium-term contract to supply natural gas from Azerbaijan for the period in the volume of 0.5 billion cubic meters per year through the Shirvanovka point of delivery on the Russian-Azeri border. Natural gas supplies from Azerbaijan started in January In June 2010, the parties signed an addendum to the contract providing for increases in purchases of Azerbaijani gas to 1.0 billion cubic meters per year. In 2011, 1.5 billion cubic meters of Azerbaijani gas was purchased. In January 2012 parties signed an addendum to the contract to increase the volume of gas purchases in to 3 billion cubic meters a year. The parties are considering a further increase in the supplied volume, including from Shah Deniz II gas field. 21

24 3. GAS TRANSPORTATION AND STORAGE 22

25 TRANSPORTATION YAMAL - EUROPE The transnational Yamal-Europe gas pipeline passes through four countries, Russia, Belarus, Poland and Germany. This export corridor increased the flexibility and reliability of Russian gas supplies to Western Europe. The European Union treated the Yamal-Europe as a priority Trans-European Networks (TEN) investment project. Construction began in 1994, and with commissioning of the last compressor station in 2006 Yamal-Europe has reached its design capacity of 32.9 billion cubic meters per year. The number of compressor stations on the pipeline is 14, pipe diameter being 1420 mm, and a total length exceeding 2 thousand km. The line originates from the Torzhok gas transportation unit in the Tver region of Russia, where it takes gas from the Northern Tyumen Regions (SRTO) Torzhok gas pipeline. The length of the Russian section is 402 km with three compressor stations in Rzhevsk, Holm-Zhirkovsk and Smolensk. In Belarus there are 575 km of pipelines, with 5 compressor stations: Nesvizhskaya, Krupskaya, Slonimskaya, Minskaya and Orshanskaya. Gazprom is the sole owner of the Belarusian section of gas pipeline. The Polish section is 683 km long with 5 compressor stations: Chehanuv, Shamotuli, Zambruv, Wloclawek, Kondratki. The Polish section of the pipeline is owned by EuRoPol Gas (a joint venture between Gazprom and the Polish company PGNiG). The final western point of the pipeline is the Malnow compressor station near Frankfurt an der Oder near the German-Polish border, where the pipeline connects to the JAGAL-Nord gas transportation system, which in turn connects it with the STEGAL West MIDAL - Rehden UGS gas transportation system and STEGAL East - Olbernhau, where the German and Czech transmission systems meet. The owner of the German part of the gas pipeline is GASCADE (former WINGAS Transport). UKRAINIAN CORRIDOR The Ukrainian gas transport corridor includes the Urengoy-Pomary-Uzhgorod pipeline, which is integrated into the European gas transportation system. The gas pipeline runs through Ukraine to Slovakia. With the expiration of contracts, an agreement was signed on November, on the transit of gas with eustream, a.s., providing for total transport of about 1 trillion cubic meters of gas during a 20 years period. In Slovakia, the pipeline is split and one branch goes to the Czech Republic. Russian gas transported through the Czech Republic flows in the direction of Waidhaus and Hora Svaté Kateřiny via Uzhgorod, as well as from the Yamal-Europe gas pipeline, with Olbernhau as entry point. The maximum amount of gas transited through the both directions is 30.5 billion cubic meters per year. After separation of the gas pipeline in Slovakia, its second branch extends to Austria. This country plays an important role in the delivery of Russian natural gas to Italy, Hungary, Slovenia and Croatia. Transportation of Russian gas through Austria to the border with Italy is carried by the TAG pipeline within the booked capacity. Part of the Ukrainian gas transport corridor travels in the southern direction from Ukraine to Romania. This country plays an important strategic role in the transit of Russian gas to the Balkan countries and Turkey. In accordance with an intergovernmental agreement signed in 1986 a transit pipeline has been built on Romanian territory through which Russian gas has been delivered since 1987 to Turkey, since 1996 to Greece and since 1997 to Macedonia. In order to increase Russian exports to Balkan countries and Turkey an agreement on the expansion of transit pipeline capacity in Romania was signed in From 2002, transit capacity for the export of Russian natural gas through Romania and other countries has been increased to 18.7 billion cubic meters a year. 23

26 In December 2006, Gazprom Export and Bulgargaz signed a Memorandum on the further development of Russian-Bulgarian relations in gas sector. The Memorandum extended the contract for Russian natural gas deliveries through Bulgaria to other countries till 2030, while keeping the booked transit volumes to 17.8 billion cubic meters per year, with a customer option for an additional five billion cubic meters per year. NORD STREAM The Nord Stream pipeline directly links Russia and Germany. This project involves the construction of two lines (with a capacity of 27.5 billion cubic meters/year each) under the Baltic Sea from Portovaya Bay near the city of Vyborg to the German coast near Greifswald, stretching some 1200 km. Gas deliveries started in The Nord Stream AG (Switzerland) gas transmission company was established for planning, construction, ownership, financing and the operation of the gas pipeline. In September 2006 the final Shareholder s Agreement was signed, as well as the Agreement on the basic conditions of gas transportation. At the end of 2011, equity share of the Nord Stream AG company was as follows: Gazprom (51%), E.ON Ruhrgas (15.5%), Wintershall (15.5%), Gasunie (9%) and GDF Suez (9%). In April 2010, construction of the first line of the Nord Stream project in the Baltic Sea began, which started the operations later in In 2011 the laying of the second line started, which would increase the capacity to 55 billion cubic meters of gas by November 1, The Nord Stream project will play an important role in ensuring reliable supplies of Russian natural gas to meet the additional demand in Europe. This route will make it possible to bypass the not always predictable transit countries. SOUTH STREAM The South Stream gas pipeline project aims to increase exports of Russian gas to Europe and to ensure the reliability of the supply. Its offshore section stretching some 900 kilometres will run along the Black Sea seabed from Russia to Bulgaria, then through Serbia and Hungary and Slovenia to Italy. The design capacity is up to 63 billion cubic meters per year. Commissioning is scheduled for late Gazprom and ENI signed a memorandum of understanding on the construction of the underwater section of South Stream on June 23, The memorandum includes the project feasibility study, and also defines the principles of planning, financing, construction, technical and commercial administration. On January 18, 2008 ENI and Gazprom announced the registration of South Stream AG. During the period from 2008 to 2010 intergovernmental agreements were signed with Austria, Bulgaria, Hungary, Greece, Serbia, Slovenia and Croatia. Bilateral agreements on cooperation in the project with the designated national companies in Serbia, Austria, Bulgaria, Greece, Hungary and Slovenia have been concluded. At the end of 2010 joint project companies to implement the project were established: in Serbia - South Stream Serbia AG (participation of Gazprom - 51%, Srbijagas - 49%), in Hungary - South Stream Hungary ZRT (Gazprom and the Hungarian Development Bank own 50% each), in Greece - South Stream Greece SA (Gazprom and DESFA own 50% each), in Bulgaria - South Stream Bulgaria (Gazprom and the Bulgarian Energy Holding own 50% each). On June 19, 2010 a tripartite Memorandum of Understanding between Gazprom, ENI and France s EDF was signed. This document provides for the entry of EDF as a shareholder (10% stake) in South Stream AG. On March 21, 2011 Gazprom Chairman of the Management Committee Alexei Miller and BASF SE Chairman Jurgen Hambrecht signed a MoU of the South Stream project, providing for the accession of Wintershall Holding GmbH to implement the offshore section of the project. The document defines key terms and conditions of the participation of the German company in the maritime section of the project. In particular, the memorandum stipulates that the share of Wintershall Holding GmbH in South Stream AG will be 15% with the preservation of Gazprom s 50% stake. 24

27 BLUE STREAM The Blue Stream gas pipeline is designed to supply Russian gas directly to Turkey via the Black Sea. The Blue Stream supplements the gas transportation corridor from Russia to Turkey, which passes through Ukraine, Moldova, Romania and Bulgaria. The pipeline has significantly increased the reliability of gas supplies to Turkey and promotes the development of gas market and gas infrastructure in the country. It is also able to cover peak demand growth in Turkey, associated with low temperatures regularly observed during the winter. The total length of the Blue Stream pipeline is 1213 km, design capacity 16 billion cubic meters of gas a year. The main partner in building the Blue Stream was the Italian company ENI, which has extensive experience building offshore pipelines. At the end of 2011 the total volume of gas delivered through Blue Stream exceeded billion cubic meters of gas. In 2011 the total volume transported by the pipeline was about 14 billion cubic meters of natural gas. 25

28 GAS STORAGE To ensure an uninterrupted supply of gas to European consumers, some of which are more than 6000 km away from the main Russian deposits, Gazprom Group has adopted a strategy of development of underground gas storage (UGS). Potential storage facilities should be located strategically, that is, near the pipelines that transports Russian gas. Construction of storage facilities is usually carried out jointly by our company and a local partner. Usually, we own more than 50% of the UGS projects. From 2006 to 2011 our gas storage capacity in Europe has increased from 1.4 to 3 billion cubic meters and the daily output from 18.2 to 35.7 million cubic meters. Currently several projects are underway that will allow the company to increase gas storage capacity in Europe by 2015 to about 5.0 billion cubic meters of active gas. Gazprom Group is involved in projects in the field of underground storage in countries through which the main volume of Russian exports pass: In Germany, our company together with WINGAS operates the largest underground gas storage in Europe - Rehden with a volume of more than 4.0 billion cubic meters; Gazprom Export, WINGAS and RAG company operate Haidach UGS in Austria. Gas volume in the storage facilities after the second phase start amounts 2.64 billion cubic meters. Haidach UGS provides security of Russian gas exports in the direction of Baumgarten, and supplies gas to consumers in Slovenia, Croatia, Hungary, Austria, Germany, Slovakia and Italy; Together with the VNG company, we will implement the construction of Katharina UGS (Germany). After achieving planned production active volume of gas will amount to 629 million cubic meters. UGS will provide reliable supplies to Western Europe at points Mallnow, Waidhaus, Gaspool, NCG, as well as for the Nord Stream gas pipeline; In Serbia, our company is implementing the Banatski Dvor UGS project with an active volume of 450 million cubic meters gas. Gazprom Group s share in this project equals 51%. UGS provides the reliability of Russian gas exports to Hungary, Serbia, Bosnia and Herzegovina; In Netherlands, in 2014 the Bergermeer UGS is to come on stream, which might become the largest UGS in Western Europe. Bergermeer has a strategic location, as well as significant reserves of active gas. Gazprom will book 1.9 billion cubic meters of storage capacity. UGS Bergermeer will be able to ensure the safe operation of the Nord Stream and security of gas supplies. In addition, Gazprom Group is conducting a feasibility assessment of the possibility of participation in projects in the area of UGS facilities in Austria, UK, France, Romania, Slovakia, Turkey, Czech Republic, Belgium and other countries. 26

29 4. EXPORTS OF CRUDE OIL, PETROLEUM PRODUCTS, SULPHUR 27

30 Gazprom Export achieves sales of sulphur gas, oil and stable gas condensate (SGC), gasoline and diesel fuel, liquefied gas and distillate condensate, as well as a number of products of petroleum and gas chemistry. In 2011, the company exported more than 5.5 million tons of products. CURRENT ACTIVITIES OIL AND PETROLEUM PRODUCTS In 2011, Gazprom Export exported over 1.6 million tons of oil, stable gas condensate and petroleum products produced by Gazprom Group. Oil and gas condensate distillate are exported mainly to Europe via Baltic Sea ports. SGC, fuel oil and diesel fuel are mainly exported to the Mediterranean. Gazprom Export also regularly supplies oil products and stable gas condensate to the countries of Central Asia. SULPHUR Gazprom Export is the exclusive exporter of sulphur of the Gazprom Group gas production and according to sales volumes it ranks among the world s largest suppliers. Traditional consumers of Russian sulphur are the countries of North Africa, Mediterranean Basin, China and others. Gazprom Export embarked on the export of sulphur produced by Gazprom in In quantitative terms, 2.9 million tons of sulfur were exported in 2008, in million tons and in 2010 sulphur exports totalled 4.94 million tons which is the highest ever level of sulphur exports from Russia. Given that in 2010 all stock residuals on the Astrakhan gas processing plant were sold, sulphur in 2011 was exported by means of production and export volume in 2011 was 3.73 million tons of sulphur. LIQUEFIED PETROLEUM GAS Liquefied petroleum gas produced by Gazprom Pererabotka and Gazprom Dobycha Orenburg are exported to countries in Central and Southeastern Europe, Finland, as well as to CIS countries and the Customs Union countries. Exports (over 300 thousand tons in 2011) are carried by rail through a major European trader, who provides a range of logistics and other services, as well as direct access to end users under medium- and long-term contracts. Apart from the above mentioned products, Gazprom Export is involved in export sales of helium, odorant, carbon black and other products made by Gazprom Group in the course of oil and gas processing. ACTIVITIES UNDER THE EUROPEAN REACH REGULATION Gazprom Export, through its Special Representative, the subsidiary company Gazprom Marketing and Trading France continues to work under the EU REACH regulation with the products (sulphur, petroleum products, liquefied gases and carbon black) of Gazprom s subsidiaries, bound to EU countries. The REACH project participants worked to design extended Safety Data Sheet in accordance with EU regulations on chemical safety (REACH and CLP). FUTURE ACTIVITIES EASTERN GAS PROGRAM Gazprom s ambitious plans associated with the Eastern Gas Program, besides the gas component imply the creation of a number of large-scale production of polymers, fertilizers and other gas and chemical products in Eastern Siberia and the Far East. Taking into account current and future capacity of the Russian domestic market, the major part of gas and chemical products would be exported. In addition, as the East Siberian deposits are gradually developed, Russia will become one of the world s largest producers of such a strategically important product as helium, and as a result, Gazprom Export is facing a large-scale task of forming a marketing structure for efficient export sales of helium and chemical products which are planned to be produced on the basis of raw materials found in the fields of Eastern Siberia. 28

31 EXPORTS OF STABLE GAS CONDENSATE UNDER NORD STREAM INTERNATIONAL GAS PROJECT Portovaya compressor station, located 60 km from the border with Finland, is a component part of the Nord Stream gas pipeline was commissionedin late Natural gas transported through the Nord Stream gas pipeline produces stable gas condensate at the compressor station. Gazprom Export is planning to start SGC export sales in the 2nd quarter of North-West Europe is considered the main market for the product. KIRIN GAS CONDENSATE FIELD DEVELOPMENT PROJECT Gazprom Export also takes part in Sakhalin-3 project as a potential exporter of gas condensate from Kirin gas condensate field. Launch of export of stable gas condensate to Asia is scheduled on the 2nd half of

32 5. ECOLOGY 30

33 Today, benchmarks for industrial development are changing; there are growing expectations that the leading industrial companies should redouble efforts to protect nature, and comply with international environmental standards. Gazprom Export is acting in this way, knowing that it will be evaluated by these parameters. Therefore, when delivering natural gas special attention is paid to the state of the gas transport network. Extrapolation of the gas leakage measurement results indicates: across the Gazprom Group s pipelines, including production facilities, the total loss of gas is only about 1%. We can say: the supply of blue fuel has a minimal environmental impact. It should be noted that natural gas is the cleanest fuel from an environmental point of view. Modern, energy-efficient equipment can burn gas with high efficiency and minimal emissions, including those of carbon dioxide which causes the greenhouse effect. Protecting the environment and countering the adverse global climate change has become our company s policy. The Kyoto Protocol, which is aimed at gradually reducing carbon dioxide emissions into the atmosphere, provides for trading these emissions. Our subsidiary company Gazprom Marketing & Trading, based in the UK, is developing this business segment. 31

34 6. CHARITY AND SPONSORSHIP 32

35 Business reputation in a modern company is based on, among other things, adherence to certain ethical standards, attention to existing socially significant problems and commitment to lend possible support for their solution. Charity and sponsorship activities are an important part of strategy of Gazprom Export, which is not only a responsible business partner but a company interested in development of a dialogue between business and society in different spheres. Charity and sponsorship strategy is built on the high-grade and long-term development of programs which geography and themes are wedded to the main activity of the company.in terms of the charity and sponsorship programs, Gazprom Export grants help to the vulnerable social groups, supports cultural, educational, health, sports and other projects in Russia and abroad. In 2011 we continued to work with the social institutions and organizations for children and here integrated approach to providing support is emphasized. The main target is not only to establish the comfort living conditions and harmonious development of children but high-graded enhancement of the socio-psychological atmosphere, health care and social growth and psychological adaptation of children. Regular medical examinations and treatment (in conjunction with the International Centre for the Protection of Sight, headed by Professor Igor Medvedev) are organized, psychosocial support is provided (the I learn from you program together with the Centre for Orphaned Children s For the future ), developing communication and creative abilities of children. A special place in our work is dedicated to children with disabilities. In terms of project of support of children with infantile cerebral paralysis, support and rehabilitation were arranged for more than 60 children, special equipment was purchased for several rehabilitation centers, some 500 specialists were trained. One of the most remarkable events of the project was a charity auto marathon Special Cars for Special Children which is organized for the third time to bring the issue of child disability to the attention of public. Among international projects for children the separate place belongs to Children s Social Program Open World which is arranged for several years in Austria and Germany. This project, running under the official patronage of UNESCO and UNICEF, is based on the principle of social inclusion and is targeting the integration of children with disabilities and children of problem groups by encouraging them to be creative and active in social life.. This year a Christmas Ball was organized at Hofburg Imperial palace in Vienna which gathered more than 800 children from European institutions for children, charity, religious and other organizations. The Ball was held under the patronage of the Minister for Social Affairs Rudolf Hundstorfer. In cultural sphere in 2011 a number of unique events was organized and successfully arranged by our company. Among them a series of concerts in European capitals of Russian chamber ensemble Soloists of Moscow under the baton of conductor and violist Yuri Bashmet, when for the first time exceptional instruments by Stradivari, Amati and Guarneri from the Russian State collection of rare instruments were played outside Russia. Also for the first time abroad the concert Russian music and art in 3D format was held. A symbiosis of the greatest Russian treasures a 3D show of masterpieces by Russian painters from museums of Russian Federation jointly with the performance of Russian music played by State symphony orchestra Novaya Rossiya, became the greatest event of Year of Russia in Serbia. Support of educational programs is one of the priorities for our company in the sphere of charity and sponsorship. We take part in several educational projects including scholarship programs. Thus since January 2011 Gazprom Export jointly with Polish partners is implementing the five-year scholarship program for post-graduate students at the University of Warsaw Russian-Polish relations, global energy problems and related issues. 33

36 Among major sporting projects is not only support of Russian sporting organizations but also international projects. For several years Gazprom Group is the sponsor of the The Esimit Europa 2 maxi yacht sailing under the flag of the European Union. The yacht and its crew in 2011 won 11 victories in five of the most prestigious regattas this year, set two world records and were awarded the title of World Champions during Palermo-Monte Carlo and Barcolana regattas among ships of its class. The yacht is rightly called the most high-speed sailing vessel in the world. Relationships with our business partners have long gone beyond the purely pragmatic cooperation, and increasingly we organize joint cultural and charitable events. For example, together with OMV, EconGas, Centrex and GWH we carry out the Children s Social Program Open World in Austria and Wintershall, VNG and GAZPROM Germania in Germany. Traditional December evenings at the Pushkin Museum in Moscow, are organized jointly with E.ON Ruhrgas and GDF Suez, Wintershall, VNG, Gasunie, Vemex and they form part of the Christmas charity activities of our company. 34