Blue Fuel Reader, World Hockey Stars Our Communications Department Is Pleased to Provide You with the Most Updated Pg

FUEL ÝÊÑÏÎÐÒ BLUE Gazprom Export Global Newsletter IN THIS ISSUE To Our Readers: Gas is Good Pg. 1 Season’s Greetings Pg. 1 TO OUR READERS: years, more than half of which will come Gazprom and the European Union: directly from government subsidies. These Partnership Reshaping subsidies will not contribute to significant Gas is Good emission reductions but are likely to distort Pg. 2 interfuel competition. On the Occasion of 20 Years of Cooperation The role of natural gas in ensuring with BASF/Wintershall: Cooperation That future energy sustainability cannot be Renewables will only allow EU countries Serves As A Role Model underestimated. For years industry to achieve 62% of their carbon reduction experts have tried to convince political targets. Increasing natural gas usage by Pg. 3 influencers that natural gas is not just the same amount would satisfy 41% of On the Occasion of 20 Years of Cooperation another fossil fuel. While many claim the reduction target at a fraction of the with BASF/Wintershall: Interview with Viktor natural gas contributes to global warming, renewables’ cost. In fact, the EU could Chernomyrdin it can actually help reduce carbon save 800 billion euros by using natural Pg. 4 emissions, boost economic growth and gas to meet its 2020 targets instead of EuRoPol GAZ CEO: An Agreement that ensure energy supply security. renewable energy. Benefits All EU sustainable development targets Gas already provides a fast, reliable Pg. 5 require reducing carbon emissions by and comparatively inexpensive way of Liquified Natural Gas: The Fuel of Choice for 850 metric tons (mt) by 2020. Central and reaching ecological targets, especially Medium and Heavy Duty Trucking? Eastern European economic restructuring given the significant investment a switch Pg. 6 and greater European gas fuel use has to renewable energy would require. already reduced emissions by 465 mt. According to our calculations, Europe Fluxys and Gazprom Export Will Explore Progress has slowed on this since 2000, could reduce its CO2 emissions by up to Cooperation In Natural Gas Storage however, and recent developments show 60% by replacing half of its coal power Pg. 7 the target could be very difficult to meet. plants with gas turbine plants. Journalists Of South Stream Nations While the EU has made efforts to reduce Renewable energy and especially nuclear Visit Gazprom emissions through its new Emissions power will play an important role in Pg. 7 Trading System and renewable energy the campaign against global warming. Bulgaria Joins South Stream project subsidies, progress has been The key will be to combine this energy Pg. 8 limited. Furthermore, the EU’s energy source with other low-emission fuels. industry decarbonization program is not Like renewable energy, natural gas will Friendly Battle of the Giants an effective means of reducing emissions. play an essential role in reducing global KHL and NHL clubs finally meet carbon emissions and cannot therefore Pg. 10 Based on our studies of 12 EU countries, be targeted as an enemy of the green renewable energy development will cost Gazprom Export and GDF SUEZ: economy. over 1.5 trillion euro over the next 20 Preserving the heritage of Russian emigrants in France Pg. 10 Season’s Greetings! A Friendly Match on Ice: Gazprom Export Hockey Team Played With the Dear Blue Fuel reader, World Hockey Stars Our communications department is pleased to provide you with the most updated Pg. 13 and insightful information on Gazprom Export’s continued efforts to provide stable Esimit Europa 2 Proved Its Speed and sustainable energy supplies to its key markets and partners. Pg. 13 This edition of Blue Fuel will feature an array of news, opinions, and academic research on gas industry developments, trends and challenges. We hope you enjoy this newsletter and have a happy Christmas and New Year!

Gazprom Export Global Newsletter ÝÊÑÏÎÐÒ Gazprom and the European Union: Partnership Reshaping Excerpts from the speech by Alexander Medvedev Deputy Chairman of Gazprom Management Committee, Director General of Gazprom Export In Brussels (22 November 2010)

fossil fuels, gas will continue to be a vital interventions, technical failures, natural input to the EU economy for as far ahead catastrophes, or even terrorist attacks. as one can reasonably foresee. Expanding the European gas We at Gazprom are proud of being a infrastructure matches the strategic privileged supplier to our European interests of both suppliers and customers. partners and customers. Extracting and The gap between rising gas demand and then shipping natural gas through the falling European production will create westward-bound pipeline network as an urgent need to ramp up imports. long as the Great Wall of China is by Where is Europe going to find them? all standards a large-scale endeavor. Our calculations show that even with One way of illustrating its scale is that expanded capacity to import Liquified Today we celebrate a remarkable though being pumped at high pressure, it Natural Gas (LNG), and even if — based milestone for the energy industry and takes about five days for a gas molecule on a rather optimistic assumption — for our bilateral relations: 10 years of extracted from the underground field in Iranian gas will be available by that time, the Energy Dialogue between Russia Siberia to reach a customer in Germany. it will not be feasible for Europe to fill this and the European Union. We should looming gap without Russia. Given the Russian natural gas has been flowing always bear in mind that Russia and projected demand growth, there is room to European customers for more than Europe share much more than energy for many projects and many suppliers. 40 years, and this flow was steadfast, ties: we are organically linked by Therefore we do not see any reasons to monotonously stable and uninterrupted history, culture, religion, psychology oppose new pipelines intended to bring – throughout the Cold War and the times and behaviour patterns, as well as by gas to Europe implemented by our peers of economic turbulence following the economics and trade. Energy is more in the industry, including Nabucco, TAP, demise of the Soviet Union. The only than ever at the core of our economic and ITGI. exceptions were the blockades of Russian partnership: nowhere else is our mutual gas exports to Europe by the previous Gazprom is making its own substantial interdependence and common interest in government of Ukraine in January contribution. Together with European stability and security more evident. The 2006 and 2009, which were principally partners, Nord Stream and South Stream question now is how to further upgrade motivated by a desire to put pressure on have brought together a formidable team this relationship, and develop together the Gazprom in order to secure subsidized of global energy companies showing agenda of the future EU-Russia energy prices for domestic use. determination to address the future cooperation. gas demand surge in the most efficient Fortunately, the last notorious two-week fashion. We also welcome Europe’s plans conflict was effectively solved on the Addressing Europe’s energy needs to expand its interconnection and delivery basis of Ukraine’s acceptance of the First and foremost, in today’s globalized infrastructures, which will also contribute need to move to market prices for gas economy, growth and material well-being to enhanced security by providing more – something long urged by the EU and of any nation and its citizens depend flexibility to the supply network. other international bodies – as well as to on interchange and trade. This is fully terms and conditions in line with normal applicable to the rapidly expanding and international practice and European Gas green credentials integrating global market for natural gas. regulations. One factor which will increasingly drive According to recent forecasts of demand for natural gas is that it is by independent international consultancies, Expanding energy infrastructure far the cleanest burning fossil fuel, with Europe’s demand for natural gas will grow foremost regard to CO2 emissions. The The most effective contribution energy significantly over the coming decades, to accelerated substitution of natural gas for companies can make to long-term face an indigenous production gap of 70% units now fuelled by coal and oil products energy security and stability is to provide by 2030. This, coupled with decreasing would play a major role in cost-effectively infrastructure. Lessons learned last internal production, will force Europe to achieving carbon reduction goals. The year pinpointed the urgency of putting import more natural gas: 380 bcm in 2020 annual capacity of South Stream alone efforts into the diversification of supply and 440 bcm in 2030. Whatever progress routes to mitigate dangers from political the EU achieves in moving away from Continues on page 11 www.gazpromexport.com | [email protected] | +7 (499) 503-61-61 | [email protected] December 2010 | Vol. 3 | Issue 4 2 BLUE FUEL

Gazprom Export Global Newsletter ÝÊÑÏÎÐÒ On the Occasion of 20 Years of Cooperation with BASF/Wintershall Cooperation That Serves As A Role Model

Gazprom and BASF with its oil and gas subsidiary Wintershall celebrated 20 years of German-Russian economic history together at an anniversary event in Berlin on 22 November. The companies laid the foundations for their cooperation in the fall of 1990 with a long-term agreement to market Russian natural gas in Germany. Today, the partnership between the world’s leading chemical company and the world’s largest producer of natural gas extends from exploration and production of natural gas in West Siberia to transportation through the Nord Stream pipeline and the sale of natural gas in Germany and Europe, by the jointly owned natural gas trading company WINGAS. At the time of the agreement signing in 1990, this example of German-Russian cooperation was unprecedented in the gas industry. What began with a shared declaration of intent on cooperation solved more than one difficult task: is our strategic partner. The Nord in the gas sector, shortly before the we have begun developing the hard- Stream pipeline strengthens our trade reunification of the two German states, to-access Achimov deposit of the relations with Russia,” Brüderle said. has now matured into a solid and equal Urengoy reservoir and we are building “The cooperation between BASF and partnership. the Nord Stream gas pipeline, which Gazprom serves as a role model. It can is important for the European market,” encourage other energy companies “From today’s perspective, the said Gazprom Chairman Alexey Miller. to undertake new German-Russian cooperation represents a historic step “We now work along the entire value endeavors.” towards securing Europe’s energy creation chain – from production to supply,” said BASF Chairman Jürgen Guest speaker and former German sales. Our relationship is based on Hambrecht. “When Gazprom and BASF Chancellor Gerhard Schröder mutual trust and appreciation. Our signed the first agreements at the congratulated BASF and Gazprom on employees and business partners are beginning of the 1990s, hardly anyone the successful cooperation and likened increasingly becoming good friends. I could have imagined how successful the corporate partnership to a perfect firmly believe that new success stories this partnership would become. Today blueprint for a successful partnership lie ahead of us, and just as many we are very proud of what we have between Germany/Europe and Russia. outstanding and interesting projects,” accomplished and can look to the Miller emphasized. “In Europe we should strive to create future with optimism. After all, there is the closest possible economic and still a great deal we intend to achieve Rainer Brüderle, the Federal Minister political ties with Russia”. This would together,” Hambrecht concluded. for Economics and Technology, create trust, security and stability for the described Russia as an important “The two decades of partnership future, added Schröder. “Russia plays partner for the supply of gas. “The between Gazprom and Wintershall a central role in how we secure the reasons for this are obvious: Russia exemplify the success of cooperating energy supply in the global context.” lies practically on our doorstep. Russia in business. Over the years we have

Gazprom Export Global Newsletter ÝÊÑÏÎÐÒ On the Occasion of 20 years of Cooperation with BASF/Wintershall Interview with Viktor Chernomyrdin: It Was A Real Breakthrough prepared by Tribuna newspaper and Gazprom Export staff

Final interview of Gazprom founding father which gas had to be transported to reach and former Prime Minister of Russia Viktor the end user, telling him about the costs Chernomyrdin recorded a few days before it would incur and how we could reduce he passed away. such costs. I assured him that we did not only produce gas but also guaranteed Question: 20 years ago a new milestone uninterrupted gas supplies. Hans-Dietrich of cooperation between Russia and Genscher promised to solve the issue and Germany was marked: the Agreement on Cooperation in the Gas Industry, which kept his promise. Cooperation in the Gas Industry gave rise gave rise to close cooperation between to a totally new phenomenon – cooperation Eventually, two joint ventures were set energy enterprises in Russia and Germany. between companies working in the up in cooperation with Wintershall: WIEH Via WIEH, WINGAS and WIEE, our energy industry. How was the decision on and WINGAS. Then, as we were denied partners have been effectively operating launching cooperation of this format made? access to existing pipes, we had to build on the market for the past 20 years. our own gas transportation infrastructure in Viktor Chernomyrdin: Within the Now let’s look at more recent examples. In Germany. framework of Gazprom, which was 2010, construction of the Nord Stream gas created in 1989, we developed and Question: What do you think is pipeline was launched. This project was adjusted intercommunication between the importance of cooperation with implemented in a joint effort by companies particular structures, remaining a reliable Wintershall? from Russia, Germany, the Netherlands and predictable supplier of natural gas and France – our partners understand very Viktor Chernomyrdin: It was a real on the markets. At that time there was no well the importance of uninterrupted blue breakthrough. For the first time we were possibility to attract large-size loans, so fuel supplies to Europe. able to directly offer our products to foreign this development was done with our own consumers. This cooperation opened Question: In your opinion, what are the resources. another door to the German market. Today main problems Russia will have to solve? We supplied gas to Germany at $170 per it is difficult to imagine gas markets, both Viktor Chernomyrdin: Now, the EU is thousand cubic meters which our buyers in Russia and in Germany, without this making its best effort to put into effect the marketed at $400. Given this differential, cooperation. so-called “Third energy package,” which, we offered direct sales, however our Question: How has this cooperation been among other things, implies reducing the initiative was not welcomed by our developing in the last two decades? Can it supplier’s influence on transport systems. counterparties as it was interpreted as one be regarded as productive? In my opinion, this is overbearing and will that challenged their interests. So, we had do no good in promoting competition nor to look for an alternative. Viktor Chernomyrdin: Almost from the in ensuring reliability of energy supply very day of their foundation our joint The alternative was establishing partnership because it will put at risk the fulfillment of ventures were distinguished by their relations with the BASF Group. Gazprom long-term contracts that secure reliability. growth performances, which were far received direct access to the German At the same time, long-term contracts ahead of the average index in the industry. market and BASF was able to make safe require equivalent long-term agreements Sometimes growth was realized despite provisions with the blue fuel. on provision of capacities. Otherwise, the the general downtrend. In 2009, if I am gas delivered by the supplier from many Question: What were your impressions of not mistaken, WINGAS again managed to thousands of kilometers away may not be the first meetings with representatives of push up sales notwithstanding the financial “released” to the end user. German partners? You were the head of and economic crisis. What is it if not Gazprom at that time. What problems did productivity? Question: Would you proceed today as you face? you did 20 years ago? Question: What do you think is the Viktor Chernomyrdin: To enter the significance of international joint projects Viktor Chernomyrdin: We made a wise German market we needed approval of in the gas and energy field? Is there any decision and it is a satisfactory feeling to the state authorities. We managed to meet recipe for success of cooperation? realize that we did. I hope the event we with the Minister of Foreign Affairs, Hans- are celebrating with our German partners Viktor Chernomyrdin: Let’s go back Dietrich Genscher. I showed him on a map this year will pave the way for continued 20 years. Not long before German where the fields were located and routes by success. reunification, we signed the Agreement on www.gazpromexport.com | [email protected] | +7 (499) 503-61-61 | [email protected] December 2010 | Vol. 3 | Issue 4 4 BLUE FUEL

Gazprom Export Global Newsletter ÝÊÑÏÎÐÒ EuRoPol GAZ CEO: An Agreement that Benefits All Interview with Miroslaw Dobrut, President of EuRoPol GAZ

Blue Fuel: EuRoPol GAZ. Disputes concerning the partners in the gas What has prices and pricing formulas lasted for business, then they been achieved four years. However, we were able to would already have with the new come to an agreement, which settled signed agreements. agreement the rates for 2006-2009, as well as Do you think that between Poland established a tariff effective since March some aspects of the energy dialogue and Russia 2010. At the same time, the document between Poland and Russia are often on natural gas stated that the Polish and Russian politicized and are therefore detrimental delivery and governments would do their best to to companies and their shareholders? transit? Please ensure that the companies sign a new Miroslaw Dobrut: Negotiations before tell us about contract that will extend Gazprom signing the intergovernmental agreement the changes that have been made in the Export’s gas transit through the Yamal- were rather peculiar, so to say. The Russian-Polish gas contract - what are Europe gas pipeline to Europe from 2020 EU at some point in the process joined the new provisions? to 2045. our negotiations, with the European Miroslaw Dobrut: The relationship Until now, EuRoPol GAZ had two transit Commission presenting its own opinion between Poland and Russia in the gas contracts: one contract with Gazprom on the agreements. I believe that industry and, in particular, between the Export that will end in 2019, and the basically, everything turned out well countries’ gas companies, is the best it’s second contract with PGNiG that will end and that negotiations were conducted ever been. After the crisis in 2009, we in 2022. between governments and not only started negotiations first at the company between companies. This is because With regards to EuRoPol GAZ, the level, then at the state level, and within representatives of the Polish and Russian agreement states that the company’s 18 months, the parties were able to sign ministries and companies, as well as the shareholders will make efforts to an intergovernmental agreement. This Polish regulator, had the opportunity to make changes in the composition of agreement constitutes a package of hold talks with envoys of the European shareholders so that the shares of PGNiG agreements that regulate all points of Commission, who looked at the natural and Gazprom become equal at 50%-50%. contention that have accumulated over gas market in a different way. the years. For us it is very important Another issue that was introduced It is positive that this agreement was not that the parties were able to sign the in the intergovernmental agreement between companies but was taken at agreement. We hope that after its concerning EuRoPol GAZ is a change intergovernmental level. Let’s once again signing, our joint work will become more in the company’s Charter, which should review the facts of the story; we have efficient. Let us think not only about facilitate the decision-making process signed not a new intergovernmental the future, but also about the present. at the company’s management and agreement but a supplement to the Perhaps joint projects await us ahead. supervisory board level. intergovernmental agreement of 1993, The intergovernmental agreement itself It was decided that in accordance with under which the Polish part of the can be divided into two components. the intergovernmental agreement, the pipeline was established and the issue of The first package includes an agreement Polish company Gaz-System S.A. will gas transit through the territory of Poland between Gazprom Export and PGNiG, operate the Polish part of the Yamal- was resolved. which opened the way for the signing of Europe gas pipeline. This complies with Blue Fuel: To what extent does a supplementary contract for increased Polish energy law, as well as with EU compliance with EU laws contributes to Russian gas deliveries to Poland. This directives, which call for independent the reliability and flexibility of Russian agreement and supplementary contracts operators to operate the gas transport gas supplies to Poland? outline the provisions for gas supply system. until 2022. With regards to PGNiG, this Miroslaw Dobrut: One of the key points In general, the final agreement is a agreement allowed the company to settle of the agreement is the decision that package of important agreements. Of its difference with RosUkrEnergo, which Gaz-System S.A. will be the independent course, how these agreements will be did not fully comply with its contractual operator of Russian gas transit through actualized is another question. obligations to Poland. Polish territory. In particular, during Blue Fuel: Before the signing of negotiations, the parties agreed on the The second package addressed issues agreements, your colleague Mr. Szubsky related to the activities of our company said that if everything depended only on Continues on page 12 www.gazpromexport.com | [email protected] | +7 (499) 503-61-61 | [email protected] December 2010 | Vol. 3 | Issue 4 5 BLUE FUEL

Gazprom Export Global Newsletter ÝÊÑÏÎÐÒ Liquified Natural Gas: The Fuel of Choice for Medium and Heavy Duty Trucking? Thomas A Aubee, Vice President of Applied Technology at Pace Global

Natural gas, Exhibit 2 particularly Compressed Natural Gas (CNG) is often used as an alternative to gasoline and diesel motor fuels. CNG, however, can only support a limited range of vehicles because of its low density. Medium and heavy duty trucks that require greater fuel capacity and vehicle range often use Liquified Natural Gas (LNG) instead. European awareness of the environmental compatibility, abundance Exhibit 2 depicts the standard setting performance characteristics of Daimler’s Econic NGT and practicality of natural gas is growing. heavy duty truck line. Natural gas produces virtually no particles or fine dust when it combusts. The Econic NGT clearly undercuts the EEV and Euro V particulate limits (0.004). Increasingly stringent European Union (EU) vehicle emission standards boost standards will come into effect in 2013, of diesel fuel contains approximately the popularity of natural gas. Euro VI mandating a 50% reduction in particulate 35,000 btu energy, a liter of CNG contains matter and a 77% reduction in nitrogen only 7,865 btu, which is roughly 22% that Exhibit 1 shows how EU transportation sector oxides for heavy duty vehicles. of diesel. This limits CNG use to smaller emission standards have become increasingly passenger or commercial vehicles that rigorous since 1999. Under the new standards, member have limited travel requirements such states will be required to refuse as city buses, garbage and delivery the approval, registration, sale and trucks. CNG also requires the installation introduction of vehicles that do not of enough fuelling facilities to make it comply with emission limits. While convenient for drivers to refuel their natural gas vehicles are close to meeting vehicles. the new standards today, diesel trucks will likely require modification. The limited use of CNG in medium and heavy duty motor freight transport Natural gas currently fuels nearly 1.4 is particularly unfortunate since these million vehicles in 40 European countries vehicles have the largest engines, travel including Russia. While only 11% of the longest distances and produce the these vehicles are buses and 9% most emissions, making their transition medium and heavy duty trucks, buses to cleaner fuel particularly impactful. and trucks account for more than 70% of natural gas consumed by vehicles in the LNG use is a promising solution to the region. This is not surprising since such range limitations of natural gas trucks. vehicles operate daily, carrying heavy Natural gas, when chilled to -160ºC loads across long distances. forms a cryogenic liquid that occupies roughly 1/600th of its original gaseous While CNG is well established as a lower- volume. Stored onboard trucks in emission substitute for conventional fuels such as gasoline and diesel, it comes up short in fuel density. While a liter volume Continues on page 9 www.gazpromexport.com | [email protected] | +7 (499) 503-61-61 | [email protected] December 2010 | Vol. 3 | Issue 4 6 BLUE FUEL

Gazprom Export Global Newsletter ÝÊÑÏÎÐÒ Fluxys and Gazprom Export Will Explore Cooperation In Natural Gas Storage

Fluxys and Gazprom Export have instance if a natural gas source becomes announced that they will examine the temporarily unavailable to the Belgian options for Gazprom Export to reserve market.” long-term storage capacity at Fluxys’ underground storage site in Loenhout. Fluxys and Gazprom Export The two companies have signed a investigate project feasibility Memorandum of Understanding to that In 2007, Fluxys started work to increase effect. capacity at the underground storage Fluxys and Gazprom Export agreed Alexander Medvedev, Director General facility in Loenhout. Over a period of four to investigate the economic and legal of Gazprom Export, stated: “The usage years (2008-2011), workable storage feasibility of Gazprom Export reserving of underground natural gas storage capacity will be gradually increased by long-term storage capacity. Talks will be facilities in Europe is a high priority for 15% from 600 to 700 million cubic metres. conducted with Belgian federal regulator Gazprom as a way to ensure the security In Belgium, Gazprom Export is a system CREG to see how such a capacity of Russian gas supply. Our efforts in user for border-to-border transmission of reservation can be implemented in the the UGS sector are focused on fulfilling natural gas, while Gazprom Marketing framework of an open, transparent our obligations within the framework & Trading is active on the Zeebrugge procedure. of long-term gas supply contracts with spot market and has a licence to supply our customers to respond to peak or Under a long-term contract, in case of an natural gas on the Belgian market. emergency demands.” emergency, Gazprom Export will provide Under the current legal framework, natural gas that it has in storage directly Walter Peeraer, Chairman of the Fluxys must give priority allocation to Fluxys. As such, the agreement will Executive Board and CEO of Fluxys, of storage capacity to grid users who work in favor of both parties: Fluxys will stated: “A long-term storage agreement supply distribution system operators. have immediate emergency access to with a natural gas producer would Since Gazprom Export is active in additional volumes of Gazprom Export’s significantly enhance security of supply. border-to-border transmission and does natural gas as a strategic reserve for the As system operator, Fluxys could count not supply natural gas to distribution Belgian market, and Gazprom Export will on certain and immediate access - for a system operators, the company cannot have a buffer capacity for its supplies to period of 20 years - to a large strategic make use of storage in Belgium. In northwestern European markets. gas reserve in case of emergency, for the Memorandum of Understanding, Continues on page 9

Journalists Of South Stream Nations Visit Gazprom

On 17 November 2010, Alexander project, relations with the EU in Medvedev, Deputy Chairman of the context of South Stream, views Gazprom Management Committee, about the Nabucco pipeline, to the Gazprom Export CEO, and Leonid final route and the financial side of Chugunov, Head of the Gazprom the endeavor. Project Management Department, “I wish you luck all along the way – hosted a group of 18 journalists with South Stream you will always representing major media have a good topic to write about. organizations from South Stream We will invite members of the media member-states at Gazprom’s to cover events as they happen headquarters in Moscow. in the course of implementing this The issues raised by the reporters truly European project”, Alexander ranged from the participation of Medvedev said. different European countries in the

Gazprom Export Global Newsletter ÝÊÑÏÎÐÒ

Bulgaria Joins South Stream Off–Shore Section: Marine Surveys Complex marine engineering surveys Alexey Miller, were conducted by Peter Gaz Ltd. Chairman of (authorized by Gazprom) Gazprom’s Management Surveys encompassed: Committee, and Maya Hristova üü Obtaining permits for works in the and Jordan EEZ of Russia (20.03.2009), the Georgiev, EEZ of Bulgaria (06.07.2009) and Executive the EEZ of Turkey (01.12.2009) Directors of üü Hydrographic survey Bulgarian Energy European scale. South Stream will boost üü Geophysical survey Holding EAD, signed the Shareholders’ the amount of Russian gas transported üü Geological survey Agreement and the Articles of Association through Bulgaria by as much as five times. üü Hydrometeorological survey for the South Stream Bulgaria AD in üü Ecological survey As noted by one of Bulgaria’s most the presence of Russian Prime Minister prominent national newspaper, 24 chasa 3 vessels “Professor Shtokman”, Vladimir Putin and Bulgarian Prime Daily: “Bulgaria’s national interest with “ACADEMIC” and “Vessel K.PIRI. Minister Boyko Borisov on 13 November regard to the South Stream project REIS’’ were chartered to enable 2010 in Sofia (Bulgaria). South Stream sounds much like ‘the more, the better’ conduct of the surveys Bulgaria AD will engage in implementing and should rely on the balanced the pre-investment stage of the project capitalization on the country’s key as well as financing, constructing and On-Shore Section: IGAs & geopolitical situation.” operating the gas pipeline on Bulgarian Corporate Agreements territory. In an interview with Austria’s Standart 2008 ─ 2010: Intergovernmental Daily, Bulgaria’s Minister of Economy agreements on cooperation in “Today’s signing of the documents with and Energy Traycho Traykov said that construction and operation of the our Bulgarian partners confirms the “Bulgaria will become a key factor respective sections of the gas pipeline mutual interest of the parties in meeting on Europe’s energy map. I hope the signed with Bulgaria, Serbia, Hungary, the growing needs of continental analysis will be ready by March 2011 Greece, Slovenia, Croatia and Austria. Europe for natural gas,” Alexey Miller and then I will be able to give you the noted. “Participation of Bulgaria in the The Intergovernmental agreements exact figures about the project’s cost,” South Stream project proves it is timely provide for establishment by OAO Minister Traykov continued. “According and necessary to create additional Gazprom and the authorized to preliminary estimates it will cost about infrastructure of a trans-European scale.” national company of the joint venture € 800 million, which means Bulgaria’s companies (JVCos) for the purpose Bulgarian Prime Minister Boyko Borisov share will be approximately € 400 million. of design, financing, construction, also hailed South Stream as “a true The project’s paying off depends on operation and maintenance of the European project,” with all agreements many factors such as the final price of respective section of the gas pipeline. reviewed in advance with EU Energy the project on the Bulgarian territory, Commissioner Güenther Oettinger – as future prices of natural gas and transit 2009 ─ 2010: In elaboration of the IGAs reported by international wire service, fees, whose formation is based on gas the corporate agreements signed with Agence France Presse. AFP also price. Projects of this type usually pay off Hungarian, Bulgarian, Serbian, Greek, reported that Prime Minister Borisov in 10-15 years,” Minister Traykov added. Austrian and Slovenian partners. stressed the “pragmatic, mutually Recent projections indicate that South The corporate agreements, in beneficial” approach in the talks but Stream may be completed four months particular, govern the relationship added that Bulgaria worked on Nabucco earlier than its current target of Dec. 31, between OAO Gazprom and national with the same speed... so that Bulgaria 2015, since work is currently progressing participating companies at the will indeed become an energy hub in the ahead of schedule. South Stream’s costs feasibility stage. Balkans.” will be determined in the first quarter In accordance with the provisions The participation of Bulgaria helps to of next year, and Gazprom is prepared of the corporate agreements an underscore the fact that South Stream to advance payment for work on the arrangement for development of project is timely and necessary to create Russian-Bulgarian joint venture. national feasibility studies is in additional infrastructure on a trans- progress. www.gazpromexport.com | [email protected] | +7 (499) 503-61-61 | [email protected] December 2010 | Vol. 3 | Issue 4 8 BLUE FUEL

Gazprom Export Global Newsletter ÝÊÑÏÎÐÒ

Liquified Natural Gas Fluxys and Gazprom Continued from page 6 Continued from page 7

super-insulated vessels, LNG contains fueled vehicle scarcity. Fueling Coordinated approach approximately 21,000 btu per liter (60% infrastructure will, however, The agreement between Fluxys and the fuel density of diesel fuel and roughly gradually develop as motor transport Gazprom is a result of the Fluxys 270% that of CNG) and can easily fleets increasingly start transitioning “vision memo” that Federal Energy vaporize for heavy duty gas engine to LNG. Minister Paul Magnette submitted to combustion. the Council of Ministers in October, • Market acceptance of LNG vehicles focusing on favorable pre-conditions Efficient “benchmark” diesel engines and related technologies is also to further develop Belgium as a benefit from decades of development growing. Major truck manufacturers natural gas crossroads for North and are well suited for hauling heavy report that customer interest is Western Europe. One of the key loads. While natural gas fueled engine very strong and that LNG is rapidly points was to develop a coordinated options are still limited compared to becoming the alternative fuel of approach between policymakers, diesel offerings, heavy duty natural choice in the heavy duty and long government, regulators and system gas engines are proving to be reliable, range truck sectors. Moreover, LNG operators, based on a joint long- efficient to operate, and quieter than vehicles are good for business since term vision of Belgium’s role as a their diesel engine counterparts. they are exempt from the restrictions crossroads. These LNG fueled trucks can cost- and operating bans that apply effectively satisfy range and duty cycle to diesel trucks in “low emission requirements while attaining new levels zones.” Long-term contracts: building of environmental compatibility. Exhibit 2 blocks for a low-carbon future • EU regulators are becoming depicts the standard setting performance Fluxys currently has long-term increasingly aware of the significant characteristics of Daimler’s Econic agreements for the liquified natural long-term economic, environmental NGT heavy duty truck line. Natural gas gas terminal in Zeebrugge and for and societal benefits of natural gas produces virtually no particles or fine border-to-border transmission of seeing fuel as playing a greater role dust when it combusts. The Econic NGT natural gas in Belgium. The latter in the European energy landscape. clearly undercuts the EEV and Euro V contracts are important because particulate limits (0.004) . • Until recently, LNG has primarily every cross-border flow also opens constituted an alternative means of up a new source for the Belgian As noted earlier, diesel fueled trucks will delivering natural gas to Europe, market. Long-term contracts for not be able to meet Euro VI standards. where re-gasification facilities natural gas storage would be an As a result, this presents a major vaporize the liquid; allowing for it to additional building block in developing challenge for diesel truck technology be consumed through conventional a solid future for natural gas as a that will undoubtedly increase the cost of gas distribution systems. Natural key element in the energy mix with these vehicles due to the improvements gas suppliers now see the LNG a view to reducing greenhouse gas and modifications required. Vehicle transportation market as an emissions at an acceptable price. producers such as Mercedes-Benz, attractive opportunity, expecting Iveco, and Volvo are aware of LNG’s significant growth of LNG production value as a heavy duty vehicle fuel and About Fluxys resources. are increasing their production capacity Fluxys is the independent operator to introduce more LNG fueled trucks into The movement towards the use of LNG of the natural gas transmission and the heavy duty market. as a transportation fuel for heavy duty storage infrastructure in Belgium. vehicles offers tremendous opportunities. Through its subsidiary Fluxys LNG, Challenges to the expansion of heavy Heavy duty truck (Class 7 & 8) traffic the company also operates the duty LNG vehicles remain but are alone is estimated to grow at roughly Zeebrugge liquified natural gas (LNG) steadily being overcome: 2% per year over the next two decades. terminal. Driven by its first mover • The rate of acceptance and Many have argued that diesel is too well approach, Fluxys has developed widespread adoption of LNG as established and widely available to be its infrastructure into a central a transportation fuel has been displaced as the fuel of choice for heavy crossroads for international gas flows somewhat dampened by limitations duty vehicles but change may come as in North-Western Europe. on European LNG supplies. Lack Europe gradually embraces LNG for its of LNG distribution and fueling environmental compatibility, abundance station infrastructure and LNG and practicality. www.gazpromexport.com | [email protected] | +7 (499) 503-61-61 | [email protected] December 2010 | Vol. 3 | Issue 4 9 BLUE FUEL

Gazprom Export Global Newsletter ÝÊÑÏÎÐÒ Friendly Battle of the Giants Gazprom Export and KHL and NHL clubs finally meet GDF SUEZ:

In October, two exciting exhibition games important advantage in the long run. The Preserving the heritage of between clubs from the Kontinental advantage was defended with difficulty Russian emigrants in France Hockey League (KHL) and the North by the entire team, both with technical America-based National Hockey League skills as well as with fists. In September 2010, the (NHL) took place in St. Petersburg “Save Reminiscences” Dinamo (Riga) vs. Phoenix Coyotes - 1:3 and Riga. Negotiations between KHL international scientific President Alexander Medvedev and 6 October 2010 — At this meeting, Mike conference took place NHL Commissioner Gary Bettman and Nealy the president of the Phoenix in the House Museum Deputy Commissioner Bill Daly during Coyotes acknowledged that it was an of Marina Tsvetaeva to the Olympic Games in Vancouver honor for his team to participate in such mark the publication allowed the St. Petersburg and Riga fans a historic game: “The hockey players of the long-awaited to see their teams meet two different were intrigued by the future match second and third NHL clubs, the Carolina Hurricanes and against Dinamo. I told them there are volumes of Russian Expatriates in France. the Phoenix Coyotes, on the ice. great fans in Latvia. I was in Latvia Biographical Dictionary. 1919-2000. seventeen years ago, and spent several SKA vs. Carolina Hurricanes - 5:3 This unique dictionary consists of three weeks traveling.” volumes, each listing the names of 4 October 2010 — The fairy tale The match was particularly difficult about 5,000 Russian emigrants who atmosphere of the evening hovered for Riga. In the first half of the first distinguished themselves in the scientific, under the ice rink roof. First, like a good period, the teams were equal, but the cultural and social life of France from aperitif, the spectators who filled the account was opened by the guests. 1919 to 2000. The project was jointly Palace to capacity were treated to a No mater how hard Riga tried, goalie supported by the museum, Gazprom colorful laser show. The main course Ilya Bryzgalov was unable to be foiled. Export and GDF SUEZ. was, of course, the game itself. The puck only flew into the Phoenix Lev Mnukhin, one of the lexicographers On that night, SKA displayed all of its goal in the second half of the game, who compiled the dictionary, stated that creative drive, from the brilliant play when Jason LaBarbera was at the gate. the purpose of the edition is “to give a full of the goalie Nabokov to the young Riga goalkeepers had a serious ordeal: and comprehensive idea of the extent defenders Berdyukov and Golovkov. Mikael Tellqvist and Chris Holt deflected to which Russian emigrants contributed But there would have been no victory 39 shots for two, conceding three. Holt personally to the social, scientific and without the double from the team was named the best Dinamo player of cultural life of France in general and, captain Sushinsky, who early in the the match. in particular, to the life of the Russian third period again gave his squad an expatriate community in France.” The dictionary offers more than Indeed, 4 October was a 16,000 reference notes, which provide information on the names of not only the symbolic day, not only because first, but also the second and third rows. it was the first time after 20 This level of detail, emphasizes Mnukhin, “gives a more clear idea of the complex years that NHL returned to and multicolored panorama of the lives of Russia. I can assure you that Russian expatriates who left their mark, though not always noticable, on both we will not rest on our laurels Russian and French history and culture in and will compose a calendar of the 20th century.” interesting games between the The edition was compiled by Russian specialists with participation of several NHL and KHL. French scientific and educational — Alexander Medvedev, president of institutions, including the University of the Kontinental Hockey League the Sorbonne, the Institute of Slavonic Studies, the International Library of Modern Documentation and the Turgenev Library in Paris. www.gazpromexport.com | [email protected] | +7 (499) 503-61-61 | [email protected] December 2010 | Vol. 3 | Issue 4 10 BLUE FUEL

Gazprom Export Global Newsletter ÝÊÑÏÎÐÒ

Gazprom and the European Union Continued from page 2

would provide enough energy to allow natural gas can be the primary fuel for predictable prices linked to oil-indexation. Europe to shelve the construction of 25 fleet vehicles such as delivery trucks, In the specific conditions of the European nuclear plants, to cancel the deliveries of buses, and even large 6- and 8-wheel gas market, where the bulk of supplies 160 oil tankers, or to take 58 coal-fired trailer trucks. depend on expensive fixed pipeline electricity plants off the grid. infrastructure linked to single suppliers as The invitation to European investors to a matter of geography, oil price indexation It has been calculated that by only take advantage of the modernization offers safeguards to both parties. The replacing every second coal-based power program in Russia could focus on formulas are transparent and objective plant with modern gas-turbine units, developing “Blue corridors” – a system and the results are verifiable. They cannot Europe could achieve practically half of of transportation networks between EU be manipulated by either the seller or its 2020 CO2 emission reduction targets. member states and Russia which would the buyer. A gas supply system not built This could be done with small upfront offer a corridor of natural gas stations. on long-term contracts is bound to be investments and in a short period of time. inherently more volatile and unpredictable. Increasing the natural gas share in the EU Long-term supply contracts It might be more exciting for market energy mix by just 1% would reduce CO2 The complex legislation on energy which traders, but it will mean less security emissions by more than 3%. the EU has put in place in recent years, for producers, consumers and serious Gas has a crucial role in the transition including the Third Energy Package, puts investors. to a green economy. Gas-fired power the emphasis on breaking up integrated generation is not only a cost-effective supply systems based on long-term Third Energy Package way of emission abatement; it is also relationships in the name of creating an The other aspect of concern to us is the complementary to renewable energy open internal market. We can support Third Energy Package implementation, such as wind and solar by providing the goal of removing barriers to energy and in particular the issue of capacity the necessary backup during peak trade between EU countries, but from rights. We believe that it is of crucial consumption periods. Natural gas could our viewpoint the approach being taken importance that capacity rights for provide the necessary breathing space for runs the risk of eroding the EU’s energy companies who have the ability to the deployment of more mature renewable security in the longer term. successfully and continuously supply the energy technologies than those currently The reality is that Europe’s energy safety market are fully upheld. All shippers with available. net does not result from numerous capacity rights should be able to manage small investment decisions, as in the their flows to supply customers; otherwise Natural gas for transportation United States. Whatever niche shale we would find ourselves in a paradoxical Gas has the potential to reduce the use gas may eventually find in Europe, the situation in which suppliers would not be of petroleum in transportation because in bulk of Europe’s future gas supplies are able to honor their commitments to end the near- and longer-term it can substitute to be found in large foreign gas fields users because of legislative hindrance. As the use of petroleum as the dominant which require tens of billions of dollars a result, shippers will not make the long transport fuel, both for the transport of of investment capital for development, term bookings which network companies people and goods. Beyond the well-known gas processing and pipeline and LNG need in order to justify investment in and well-established use of Compressed transportation infrastructure. Once infrastructure. Natural Gas (CNG) as a motor fuel in the built, these international supply chains As for the unbundling clause, we believe EU, Gazprom is now conducting research typically require decades of stable gas that an integrated system, alongside in two very promising areas: sales revenue to show a worthwhile long-term contracts, offers the best basis return. To attract the necessary financing, • first, on the conversion of natural gas for effective supply management and these projects need a greater degree to liquid fuels through gas-to-liquids for raising the investment needed to of predictability and certainty over the (GTL) technology, resulting in supply of build badly-needed new capacity. We amount of gas they are to deliver, and the diesel fuel made from gas for direct use suspect that breaking up the system prices to be realized, than shorter-term in vehicles [which is cleaner and more could prove counter-productive, whatever industrial investments. efficient than oil-derived diesel]; the presumed benefits of the change. Gazprom, like other major gas exporters, Overturning long-established ownership • second, on developing vehicle continues to advocate long-term contracts technologies and infrastructure so that based on predictable volumes and Continues on page 12 www.gazpromexport.com | [email protected] | +7 (499) 503-61-61 | [email protected] December 2010 | Vol. 3 | Issue 4 11 BLUE FUEL

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infrastructure which, as the European compatible, and technically and politically Gazprom and the Commission keeps reminding, Europe secure. badly needs. European Union As for Gazprom, we shall do our bit. I can Continued from page 11 All in all, we expect the new regulations assure you that we are truly committed to intended to ensure Europe’s energy enhanced energy security of Europe. One rights in respect of vital infrastructure security to have a sound economic of the founding fathers of the European assets, which in some cases are rationale which will not confuse and Union, Robert Schuman, speaking in protected by bilateral intergovernmental perplex operators by shifting the balance Strasbourg in May 1949, observed that, agreements, is bound to raise some of power in favor of speculative traders “The European spirit signifies being difficult questions. Existing owners have and intermediaries at the expense of the conscious of belonging to a cultural family a right to be compensated for the full providers and ultimate customers. and to have a willingness to serve that value of the assets in terms of their future community in the spirit of total mutuality.” revenue potential. In this context, it is a Looking into the future That spirit is what Gazprom aspires to little ironic to see countries which have in its partnership with Europe, a set of I would like to share my belief that successfully privatized their gas supply customers we are privileged to supply. together with the European partners and systems re-nationalizing parts of them in peers we have the intellectual potential My sincere hope is that neither prejudice the name of EU liberalization policy. and willpower to tackle in earnest all nor misperceptions will tarnish or We are also concerned that the new the arising challenges for the sake of undermine the existing meaningful independent network operators could maintaining sustainable and efficient partnership between purveyors of natural serve their own interests rather than energy cooperation with and within gas from Russia and our European peers those of consumers and suppliers -- using Europe. We have all the good reasons and customers. assets, which we as suppliers have to expect the emergence of a European financed and built -- in order to generate energy system that does not mistreat the revenues from their regulatory functions. proven business models and is responsive None of this, in our view, is conducive to market needs, environmentally to the large investments in supply

EuRoPol GAZ CEO: Continued from page 5

so-called “Operator’s Agreement.” This interests of Poland and Russia in the negotiation process. As for the Third agreement was thoroughly analyzed energy sector intersect? What are the Energy Package, I think discussions will by the European Union, which was prospects of this cooperation for the next go on a long time. Alexander Medvedev particularly interested in the rules ten to twenty years? said at the Gas of Russia Forum that a governing third-party access and working group of Russia and EU will be Miroslaw Dobrut: There is no need to methods of providing information on organized that will address the issue of stress that a compromise was reached. available capacity. the Third Package, among other issues. The parties agreed on a package of I hope the Polish side will participate in After lengthy negotiations, an agreement arrangements that benefits all sides, these negotiations with the European with Gaz-System S.A. was signed. putting long disputes and claims that Commission. Representatives of Gazprom Export and accumulated over many years to an end. PGNiG, were present at these talks. The I believe that the agreement signed by I believe that this agreement opens “Operator’s Agreement” was signed, us will often be cited as an example of a new stage of cooperation between and now EuRoPol GAZ, as the owner effective cooperation. our companies. On this basis, we can of property rights to the gas pipeline, discuss possible future projects that will in accordance with Polish energy further the development of the Polish law, applied to the Office of Energy energy sector. Regulation for Gaz-System S.A. to be designated as the operator. And that’s Blue Fuel: Do you agree that the what happened. Russian-Polish agreement is exemplary in terms of the Third Energy Package? Blue Fuel: Do you think that the compromise reached is in the interests Miroslaw Dobrut: I think all parties gain of all parties? Where exactly do the important experience from the whole www.gazpromexport.com | [email protected] | +7 (499) 503-61-61 | [email protected] December 2010 | Vol. 3 | Issue 4 12 BLUE FUEL

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A Friendly Match on Ice: Gazprom Export Hockey Team Played With the World Hockey Stars

A friendly match between the Gazprom Stars played with Jari Kurri, Export Team and the World Hockey Alexei Gusarov, Mikhail Stars was played on 17 December in Shtalenkov, Milan Novy, Jiri the Megasport Arena (Khodynka) in Bubla, Oldrich Valek, Bedrich Moscow. These goodwill matches have Serban, Jiri Sejba and Anders become a positive new tradition. Karlsson. The Russian team was also represented by At the First TV Channel Cup, top stars: Andrei Kovalenko, veteran players -- who only recently Maksim Mikhailovsky, Fyodor had demonstrated their brilliant Kanareikin, Lev Berdichevsky, gamesmanship in official matches -- Igor Varitsky, Ravil Yakubov. displayed the same youthful sporting The Russian team wouldn’t spirit. These masters on ice showed off be complete without its their expert skating and stick skills and a irreplaceable captain strong will to win that withstands the test The Russian team managed to tune in Alexander Medvedev, Director General of time. These friendly matches have and play a good game: the battle ended of Gazprom Export and President of the nothing to do with “figure skating with with the victory of the Gazprom Export Kontinental Hockey League. sticks.” Just like the matches of active veterans 10 to 6! Goals were delivered professional teams, the ice arena still The match was rich in highlights and by Gomolyako, Berdichevsky, Boriskov, runs hot with passion. was a truly superb show: high-speed Yakubov, Teplyakov (2), Kovalenko (2), passes of forwards and fantastic play of Gordiyuk, Shtepa. The scoring shots of The match played on 17 December was goal-keepers. The spectators enjoyed the visiting team were made by Nad, no exception. Fans were looking forward the game to the fullest; it was first-class Byakin, Sejba, Rotenberg (2), Reinl. to a spectacular show, even more so hockey. At times it seemed that it was Irrespective of the score, the main thing since the heroes of the match lacked not a match of veterans but a battle for a was that for both spectators and players, anything but mastery and excellence! prestigious world trophy. it was hockey at its best. Judge for yourselves: the World Hockey

Esimit Europa 2 Proved Its Speed

Esimit Europa 2, the super-yacht under the patronage of the European sponsored by Gazprom Group, had an Commission, which underscores the key unbelievingly good season, recording concept of this broad-spectrum project: 11 wins in five of the world’s most promoting ideas and values of integrated prestigious regattas. Europe, blurring borders and developing cooperation among European nations in The yacht and its crew -- consisting of all spheres of human activity. experienced top-class professionals -- set two world records in the Palermo- An essential component is support from Monte Carlo and Barcolana regattas. European Energy, an environmental They were awarded the title of the World movement standing to improve the Champion among boats of its class, and quality of life and preserve the European the yacht was rightfully pronounced to be ecological equilibrium. the fastest sailing boat worldwide. The 2010 season is over and now the Esimit Europa 2 is an embodiment of yacht crew is at full speed getting ready not only sport; it is also a symbol of for the next season to attain similar cooperation. The boat is honored to fly ambitious targets. the flag of the European Union and sail