Press Conference Mineral and Raw Material Base Development. Gas Production. Gas Transmission System Development May 21, 2013

MODERATOR: Hello, colleagues. You already know that ’s Board of Directors passed the resolution today to hold the annual Shareholders Meeting on June 28. And we, as usual, on the eve of the Meeting, hold the series of meetings with journalists and representatives of financial and investment companies in the form of Press Conferences. Today we have the first of the six scheduled Press Conferences which will be related to industrial topics. We’re going to talk about the mineral and raw material base, gas production and gas transmission system development.

Participating in the Press Conference are: — Vitaly Markelov, Deputy Chairman of the Management Committee; — Vsevolod Cherepanov, Member of the Management Committee, Head of the Gas, Gas Condensate and Oil Production Department; — Dmitry Lyugai, Member of the Management Committee, Head of the Prospective Development Department; — Sergey Alimov, First Deputy Head of the Gas Transmission, Underground Storage and Utilization Department.

We are going to answer your questions at once, but first I would give some time to Vitaly Markelov for the opening address.

VITALY MARKELOV: Good afternoon, dear colleagues. As an introduction I’d like to mention the way we spent the year 2012. It’s worth mentioning that 2012 was very saturated with industrial developments: it’s true for gas production, commissioning of facilities, treatment and underground storages. I’d like to tell you that our work is determined by the winter season. And the 2012–2013 winter was quite difficult. We all clearly recognize what December is. That was an exceptional December in terms of temperature — the average temperature reached 21°С below zero in . To my mind, there had been no such heavy frost in our country for decades. Accordingly, fuel consumption increased drastically. And Gazprom for all that time showed maximum production volumes — we produced about 1,658 million cubic meters of gas a day and extracted exceptional gas volumes from underground gas storages — nearly 671 million cubic meters. This, basically, happened due to the stable operation of our fields and, secondly, we put the Bovanenkovskoye field into the operation last year. And Bovanenkovo gave us about 86.5 million cubic meters a day in winter time. This resource we had obtained late that year enabled us to pass through autumn and winter time rather calmly. We introduced no state-wide limited consumption schedules, we had no prerequisites to impose limits upon Russian consumers, especially those who generate electricity. I’d like to stress once again, last year we put in operation largest field of the recent years, that is the Bovanenkovskoye field. It’s worth saying it’s currently at the next stage of development. We commissioned GF-2 (gas field No.2) comprised of two stages. GF-2 production capacity is nearly 60 billion cubic meters of gas annually. Along with the field we commissioned the Bovanenkovo – Ukhta and the Ukhta – Torzhok (linear section) gas trunkline system, the SRTO – Torzhok gas pipeline capacities and the second string of the Gryazovets – Vyborg gas pipeline. About 3,200 kilometers of gas trunklines, as well as 13 compressor shops and 10 compressor stations were put into operation late previous year. Surely, toiling at facilities commissioning allowed us to prepare production and transmission facilities for autumn-winter time. 1

I’m going to address the slides.

(Slide 2). This slide shows our reserves. It should be noted that our reserves come to about 35.1 trillion cubic meters of gas.

(Slide 3). The great scope of geological exploration activities was carried out. Mr. Cherepanov will represent it in details, if you wish. Generally, the major activities were performed at our traditional fields — these are, basically, the fields of the Yamal, the Krasnoyarsk Territory and offshore fields, particularly in the Sea of Okhotsk.

(Slide 4). Here we show the results of reserve auditing. According to 2012 results, we built up over 570 billion cubic meters of gas, which exceeded production volumes. Due to Gazprom’s strategy, the reserves should rise with ―one‖ and higher ratio in relation to production volumes.

(Slide 5). The slide displays our production volumes. It should be noted that 487 billion cubic meters was produced last year. Our production capabilities including the Bovanenkovskoye field come to nearly 600 billion cubic meters, that is we may produce about 600 billion cubic meters of gas annually. The plan for 2013 envisages some increment versus 2012. We clearly understand what market determines, that’s why we hope that gas consumption in Europe and Russia will keep growing.

(Slide 6). The slide shows our liquid hydrocarbons production, it goes on rising, both for oil and condensate.

(Slide 7). The slide displays that Gazprom reaches figures recommended by the government for associated gas utilization, which is 95 per cent this year and the following ones.

(Slide 8). The Russian gas transmission system, as I’ve already mentioned, extended by 3.2 thousand kilometers in 2012 and reached 168.3 thousand kilometers of gas trunklines in total. It’s worth saying that the gas transmission system was developing in the North of our country — it’s a mighty system laid now from Bovanenkovo to Vyborg, as well as in the Russian East that resulted from the Sakhalin— — gas pipeline development.

(Slide 9). Here you can see the sections I’ve mentioned above. Gryazovets—Vyborg. Here is its characteristic features.

(Slide 10). The Bovanenkovo — Ukhta and the Ukhta — Torzhok gas transmission systems, which will be developed based on the Bovanenkovo production growth. The second string of the Bovanenkovo — Ukhta (we started constructing some sections of the system) and the Ukhta — Torzhok along with compressor stations are to be constructed.

(Slide 11). The SRTO — Torzhok gas pipeline was commissioned in 2006. We also put three compressor stations into operation in 2012. The SRTO — Torzhok has reached the scheduled transmission volume.

(Slide 12). We started implementing the Southern Corridor project that is going to feed gas into the which we started implementing, as you know, on December 7, 2012. There was a ceremony of welding the South Stream’s first joint. The Southern Corridor consists of the western and eastern routes. We are now dealing with the western one. Its length comes to nearly 880 kilometers. About 230

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kilometers of the linear section of the gas trunkline has already been welded and everything falls within the schedule. We’re going to proceed to the eastern route a bit later, now preliminaries are in progress.

(Slide 13). The investment decision within the Eastern Gas Program for the Chayandinskoye field and the Power of gas trunkline development are known to have been made. We approved the investment rationale and proceeded to real project implementation. The project will provide gas supplies to and to our plant planned for construction in Vladivostok, known as Vladivostok LNG. The gas pipeline construction is to commence this year: we expect the ceremony of the first joint welding to take place in late September – early October. The preliminaries for the 4,000 kilometer gas trunkline system are currently underway; the production potential of the Kovyktinskoye and Chayandinskoye fields will amount to some 48 billion cubic meters of gas.

(Slide 14). The slide shows our activities related to underground gas storage development.

(Slide 15). The slide represents gas extraction from our ―undergrounds‖. Here you can see the peak consumption fell on December 20, 2012 — it amounted to 670.7 million cubic meters of gas.

(Slide 16). Currently we are busy with securing the buildup of active gas reserves. The slide displays that we ought to have nearly 69 billion cubic meters of active gas reserves by the withdrawal season, and the maximum daily capacity by the withdrawal commencement should be about 728 million cubic meters of gas.

(Slide 17). Besides, I’d like to mention that Gazprom merged the Belarusian gas trunkline system. Thus, Beltransgaz turned into Gazprom Transgaz Belarus, Gazprom’s subsidiary. It acts as the relevant component for securing uninterrupted gas supply to Western Europe. The system embraces the Yamal — Europe gas pipeline, that currently operates with maximum capacity both in winter and summer seasons. And developing Belarusian UGS facilities appears to be very important for us. We are dealing with this company as well and the slide shows the Belarusian underground gas storage system. The maximum daily output of the Belarusian UGS facilities comes to nearly 18 million cubic meters of gas. Moreover, the Program for the Belarus UGS facilities development is drawn up.

That’s all in brief. Thank you.

QUESTION: Anastasia Goreva, Argus Media agency. I have a few questions. The first one relates to the Bovanenkovskoye field. Could you, please, tell us about the activities to increase the number of gas production and transmission facilities of the Bovanenkovskoye field this year? And how much do you expect to produce at Bovanenkovo by the forthcoming winter season of 2013–2014?

VSEVOLOD CHEREPANOV: Dear colleagues, as for the Bovanenkovskoye field. Firstly, the current accrued production of the field since early 2013 amounts to nearly 6.8 billion cubic meters of gas. As to the whole 2013, we expect about 29.5 billion cubic meters of gas. Initially the planned figures were somewhat higher, and the previously announced volume was considerably higher as well. We planned about 46.3 billion cubic meters of gas for 2013. But due to the decrease in gas consumption, our business development strategy in terms of production was adjusted as well. That’s the reason for such figures. The pre-commissioning of the second module of GF-2 (gas field No.2) is nearing completion at the Bovanenkovskoye field. 151 production wells are currently onstream and 50 more wells will soon be put into operation. There will be 201 production wells in service enabling the full load of the first module. The aggregated daily production by the first and second modules is expected to reach 166 million cubic meters of gas. 3

We keep on drilling at the Bovanenkovskoye field. About 325 wells out of the total 755 have already been drilled. Of these wells about 260 have already been tested (and the downhole equipment has been run). Generally, the well stock is quite huge now and designed to produce more gas than we are producing now. In 2014 we are to commission GF-1 (gas field No.1) with the annual design capacity of 30 billion cubic meters of gas. The plans stay unchanged and the 2014 deadlines will be met.

QUESTION: Denis Pinchuk, . You said there would be 30 billion cubic meters more in 2014?

V. CHEREPANOV: Yes. The design capacity envisages plus 30 billion cubic meters of gas annually. But production volumes are most likely to be adjusted according to demand. Of course, we’re going to upload the Bovanenkovskoye field first of all.

ANASTASIA GOREVA: Tell us, please, will the Bovanenkovo — Ukhta facilities be capable of conveying the additional 30 billion cubic meters, respectively?

VITALY MARKELOV: No. This year we are going to commission all the compressor stations of the Bovanenkovo — Ukhta. These are the Yarynskaya, Gagaratskaya, Vorkutinskaya, Usinskaya, Intinskaya, Syninskaya and Maloperanskaya compressor stations. Two compressor stations were put in operation last year, that is the Baidaratskaya and Chikshinskaya ones. Seven more compressor stations will be put onstream by this year’s end. Thus, the design capacity of Bovanenkovo — Ukhta will be reached.

ANASTASIA GOREVA: Thank you a lot. Tell us, please, how many exploratory wells are planned for drilling at the Yuzhno-Kirinskoye field this year? And how much proven reserves should the Yuzhno- Kirinskoye field contain, according to your forecasts, to ensure gas supply and construction of Phase 3 of Sakhalin II?

VSEVOLOD CHEREPANOV: This year we plan to drill two exploratory wells at the western wing of the Yuzhno-Kirinskoye field. We approved the accelerated geological exploration program for the Yuzhno-Kirinskoye field that assumes about RUB 15 billion for the field exploration. It’s the most significant program out of the whole volume of exploration works scheduled. As to the reserves: since 2011 the reserves we’d augmented have not changed and we have about 560 billion cubic meters of С1+С2 reserves. We hope these two new exploratory wells (we attribute them to С2) will enable us to increase the C1 explored reserves. But the total volume is likely to stay as it is — about 600 billion cubic meters of gas. The program envisages drilling two more wells in the field in 2014. These are edge wells. One of them is to be sunk in the eastern wing, and here discovery is possible. I don’t want to anticipate, but the initial data after processing allow us to suppose there will be some increment as well, and probably quite serious. Although, the occurrence conditions and reservoir properties of the eastern wing are much worse.

ANASTASIA GOREVA: Thank you. Another question concerns the Chayandinskoye field. The investment decision was approved last year, and what has been done during this period and what should be done; how many wells should be drilled to put it into operation in 2018? Thank you.

VSEVOLOD CHEREPANOV: The geological exploration program up to late 2014 is in progress. Every year about seven to ten exploratory wells are drilled at the Chayandinskoye field resulting in 75 billion cubic meters of gas increment. But the field is quite complex in terms of its block structure and the field prospecting was not even. Currently we have nine wells under drilling at the Chayandinskoye field. A certain part of conversion wells are under testing.

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As to the wells tested, they showed 60 per cent success, it’s a very good figure. We’ve got inflows and positive results. The works are currently focused generally in the southern part of the field — it’s the so called Samanchakitsky block and the southern part of the Chayandinskoye field. Moreover, we have already provided for the investments into exploratory wells drilling in 2014. This will be pilot commercial development of the oil rim and two development wells to be sunk. Thus, the work keeps going on. The investments into the Chayandinskoye field amount to nearly RUB 7 billion.

QUESTION: Denis Pinchuk, Reuters. RUB 7 billion this year?

VSEVOLOD CHEREPANOV: Yes.

QUESTION: Rustam Kaliev, NHK broadcasting company. The question relates to the LNG plant in Vladivostok in terms of the rising competition with Australia and the American shale gas. Does Gazprom plan if not to force, but to adjust the LNG project in Vladivostok?

VITALY MARKELOV: We started implementing the project in Vladivostok called Vladivostok LNG: the investment decision was made, the Investment Rationale was considered and we proceeded to actual implementation. Recently we have established a special-purpose company to implement the project. This company is under structuring now and for a while it will stay fully-owned by Gazprom. We are going to share the project implementation with foreign partners, which ones exactly we cannot say yet, because the issue is being currently negotiated. As for the implementation term, it is 2018. This is the investment cycle during which we suppose to bring our plant to the design capacity. The first train is scheduled for 2018, the second one — for 2020. The resource base for the Vladivostok LNG are, as mentioned above, the Kirinskoye and Yuzhno-Kirinskoye fields. In autumn this year we will face an outstanding event related to putting into operation one more field at the country’s East, I mean the Kirinskoye one.

QUESTION: Anna Shiryaevskaya, Bloomberg. I have three short questions. The first one: This year you plan to produce 495.7 billion cubic meters of gas. What is the possibility that the forecast will be adjusted provided that, as you said, production in the Bovanenkovskoye field has already been revised for lower volumes due to sagging demand? Are you going to revise the plan based on current situation? The second question is: what is the current status of Shtokman? How soon should we expect any resolution on the field development plan and partners? And the third one: provided that construction of the Power of Siberia gas pipeline is to commence as soon as this autumn — to what extent will the financing be covered by advance payments of Chinese consumers? What share of the total project investments may be covered by advance payments? Thank you.

VSEVOLOD CHEREPANOV: The production plan for 2013 provides for 495.7 billion cubic meters of gas. The revision is surely possible. But so far it’s assessed to be 5 billion cubic meters of gas more or less. Time will show what happens.

VITALY MARKELOV: I’d like to add that Alexander Medvedev will tell you at his press conference about gas supply to Western Europe. These issues are likely to be touched in detail there. Moreover, production and transmission capabilities come to nearly 600 billion cubic meters of gas annually. It depends on the market demand.

VSEVOLOD CHEREPANOV: It’s an absolutely true comment regarding the capacities. Indeed, production capacities amount to nearly 600 billion cubic meters of gas annually, and transmission and 5

treatment capacities exceed one trillion cubic meters annually. But we, undoubtedly, are directed to execute the plan and not to expose people to frost in winter time. Peak loads are surely the reference point that we always adhere to in terms of our capacities. As for Shtokman: not many things have changed since Shtokman was announced to be revised with regard to capital costs adjustments and optimization. As part of Phases 2 and 3 we are going on designing the offshore and onshore sections. The LNG plant terms of reference have been approved to the moment. Preliminary qualification of design and construction contractors for the plant is in progress. So far, the project under discussion is designed for four lines of 7.5 million tons of LNG each. The construction assumes two stages. As for the time-schedule: the term we announced, which is 2019, remains unchanged. We may fall within the schedule in case of making the decision and accelerating. But, to my mind, the planned volume is surely still optimal due to the fact that a large volume is unlikely to be swallowed by the market, whereas a small volume of LNG is much easier to manage. That’s why we proceed with design and offshore investigations within the well construction area are in progress this year. Now we are revising and improving the previous investigations based on the expertise comments.

VITALY MARKELOV: This year we are starting the Power of Siberia project implementation based on Gazprom’s investments. We provided for financial resources in our investment program to start the project implementation in 2013. There are going to be preparations for entering and pre-developing the field, as well as for constructing the gas trunkline. This will be done at Gazprom’s expense. Currently we are negotiating gas supply issues with Chinese consumers and CNPC. As you remember, the relevant memorandum for gas supply to the Republic of China was signed. Two documents are pending to be signed – the Basic Terms of Supply and the Gas Supply Agreement, stipulating all the investment details as you have mentioned. We cannot reveal it now, because the negotiations are in progress. And we proceeded to implementation at Gazprom’s expense.

QUESTION: Olga Dedyaeva, . I have a few questions as well. The first one is: how is Gazprom going to agree with Rosneft upon the disputable offshore blocks? What has been done and what will be done? As for the Bovanenkovo: what is the estimation of damage caused by the GF-2 pop? And I also have a question to Mr. Lyugai: could you describe the team building process? Do you really have to start from scratch, hire people and did you appoint your deputies? Thank you.

DMITRY LYUGAI: I’m glad that interest is expressed in the Department itself. I have to say that everything’s ok and we don’t start from scratch, naturally. The team we had under the Strategic Development Department was wholly transferred to the Prospective Development Department. Moreover, the Department was reinforced in the analysis and expertize field. New directorates were established within the structure and new experts are being hired. I guess it will result in the enhancement of prospecting and analyzing quality. Thank you.

VSEVOLOD CHEREPANOV: I’m going to comment on licensing. Gazprom is well-known to have a large-scale licensing program. In particular, we are planning to obtain a lot of licenses for the Russian offshore blocks. Our interests overlapped with Rosneft ones in relation to some of these blocks. But it’s a usual and not an extraordinary situation. As to solving the disputable issues, we have always agreed with Rosneft in the past and we will in the future. We have no insoluble contradictions. First of all, we are going to agree based on the state interests in the investment volume, scope of works accomplished and engagement of Russian manufacturers. Taking into account our programs and Rosneft’s programs, we coordinate the terms of subsurface use with

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state bodies and reach some mutually beneficial agreements. I’m about to state that in the nearest future we and Rosneft won’t have any disputable blocks. We’ll agree on this matter. As for the GF-2 (gas field No.2) pop: the damage is under estimation. We have got preliminary figures and lists of deficiencies. We don’t have the final figures yet. I don’t want to comment on the preliminary ones, because they will change up or down. The only thing I have to say is that it didn’t result in substantial damages of course. Wall panels and cable trestles were destructed. As to casualties: of course, there were no such at all, some injuries were reported, particularly, barotraumas of contractor’s employees. According to the preliminary conclusions, human factor contributed much to the incident. Currently, if a stranger comes over there he won’t notice any evidence of the accident, because nearly all of them have been removed. The deadline is specified, on September 1 all the works are to be wholly completed, that is, everything will be restored.

QUESTION: Dina Khrennikova, Platts. I’d like to know about your plans on the development of the field of the Tambey group. If I clearly understand it, previously it was planned to perform development in cooperation with NOVATEK. Now these plans seem to be rejected. Are your plans connected with a new partner or do you plan to make it alone? And are you going to produce pipeline gas or LNG?

VSEVOLOD CHEREPANOV: Dear colleagues, of course, developing the Tambey fields in cooperation with NOVATEK was just one of the potential options. But those long-term programs for the Tambey group of fields approved by the government and ministries provided for step-by-step development with further gas injection into the trunkline after 2020s closer to 2030s. Why? Because the Bovanenkovo group and Kharasavey will show depletion by that moment, namely pressure drop and production decline. That means that our strategy for the gas industry development considered the Tambey group, Tasiyskoye and Malyginskoye fields as gas suppliers into the pipeline. I suppose there’s irrefutable logic here. To my mind, NOVATEK with its resource base, including the extension of the latter with the Yuzhno- Tambeyskoye field, has enough reserves to provide long-term production and LNG manufacturing during 25 years. That’s why, to my mind, we are going to feed gas into a pipe. What activities are in process there? Geological exploration is currently underway, all the surface works have been completed including 2D and 3D geophysical surveys. To the moment, the filling provided for this season is completed. Four heavy machines were brought to the Zapadno-Tambeyskoye, Severo- Tambeyskoye and Malyginskoye fields. Currently, equipment and drill pipes procurement is in progress. The work goes on and assemblage is being accomplished. We are going to drill the nearest reserves in summer, autumn and the next season.

QUESTION: Polina Stroganova, RBK Daily. My question relates to geological exploration. Arkady Dvorkovich has recently sent an order to the Ministry of Natural Resources and Rosnedra to ban the prolongation of geological exploration activity time frames. The Ministry of Natural Resources does not really deny that fact and states that a certain part of applications have already been rejected; and such applications are then submitted to the Government to decide on disputable issues of whether to grant prolongation or not. And the question itself is, have these instructions already affected Gazprom with regard to any fields or not?

VSEVOLOD CHEREPANOV: I guess these instructions just proved the then-existing nature of the activity, because that’s exactly how Rosnedra establish their relationships with subsurface users. Gazprom has never had any preferences in this regard due to being a large public company. On the contrary, there were a lot of companies that obtained some subsurface areas by speculation and performed no activity, but controlled these areas for quite long.

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In fact, Gazprom has always – we analyzed the situation as long as 10 years ago – had about 40 per cent of rejections. This means we have delays in work progress but we try to comply with the basic terms and conditions, though due to funding obstacles… but the state authorities have never treated the lack of funds as a justification for shifting field commissioning schedules. That’s why we try to cooperate with the Federal Subsurface Use Agency in substantiating our strategy and logistics; we reveal the availability of new geological exploration methods providing for no extra works, that is to say, indirect remote control procedures sometimes make it possible to avoid the direct ones such as drilling and testing. This resulted from high operational expenses, never mind our entering the regions that are too hard-to-reach for vehicles to secure reliable logistics. That’s why we undoubtedly acknowledge and meet the Governmental requirement to our Company. If we are behind some schedule we try to settle the matter routinely with the Agency. But we don’t have any unsettled issues at the moment.

MODERATOR: We also have questions put via the Internet. Mikhail Korchemkin asks: ―Gazprom’s Management Committee made a lot to enhance gas supply reliability; nowadays the number of failures per a thousand kilometers of a gas pipeline is nearly three times lower than that reported in late 1990s. Could you, please, disclose the relative figure for 2012?‖

SERGEY ALIMOV: We finished 2012 with a 0.1 failure rate per 1,000 kilometers. It’s more than 2.5 times lower than that reported in 2002–2003. We monitor the current situation and the number of failures reported during this year is below the 2012 figure. Thus, the implementation of our industrial programs enables us to be sure of reliable operation of our gas transmission system.

QUESTION: Denis Pinchuk, Reuters. You say you expect production growth at the end of the year but so far you showed a five per cent production decline for the four months, according to the Central Dispatching Department of Fuel and Energy Complex. When do you expect the trend to reverse and the growth to start? And the second question is, what is the latest cost assessed for South Stream’s offshore section? Thank you.

VSEVOLOD CHEREPANOV: As to production, you must have missed it; I didn’t say there would be production growth. We said production capacities might provide about 600 billion cubic meters of gas annually. But the plans we approved for this year provide for 495.7 billion cubic meters of gas with a possible adjustment up to 5 billion cubic meters. That’s what we said. It’s more than last year. But let’s watch it during the year; for now the prospect is such. Let’s meet again. The data is available and accessible.

VITALY MARKELOV: We’ve operated for four months only. It’s quite difficult to forecast based on just four months. I’d like to say that we monitor not only the absolute index for production capabilities, the most important thing for us is to be aware of daily production rates, that is, daily production capabilities of our fields. And this figure will come to 1,680 million cubic meters daily by the end of this year. There will be some increment due to not only Bovanenkovo, but also to three more transmission lines to be commissioned within Bovanenkovo — Ukhta, as it was previously mentioned. Thus, we increase the daily capacity in terms of gas production and supply to consumers. As for South Stream, I cannot tell now how much it will cost, because we are still at the preliminary stage. Yesterday we negotiated with pipeline manufacturers the possibility of their procuring the construction of the onshore and offshore sections. The meeting for considering and implementing the South Stream project is underway now. I’ve just left it to come here. And I’m going to proceed with further negotiations on South Stream as soon as I’m finished here. 8

QUESTION: Mikhail Serov, Kommersant. I have two questions as well. The first one is related to the Power of Siberia. You mentioned the Kirinskoye group of fields as a resource base for Vladivostok LNG, but the same goes for the Chayandinskoye field too, that’s why gas for Vladivostok LNG should, at least partially, be transferred through the Power of Siberia. Today, its announced capacity amounts to 38 billion cubic meters of gas, that strictly equals the volume you are going to supply to China. Does it mean that this pipe will be larger? And the second one relates to joint ventures of Gazprom and NOVATEK in Yamal and Gydan. Is it certain by now that these joint ventures will not come about?

VSEVOLOD CHEREPANOV: Gazprom signed an agreement on the possible entering into Yamal LNG project in 2010. Time passes, the project does not stand still and NOVATEK has an investment decision approved. As to Gydan: we, Gazprom as a whole, had never considered the possibility of joint venture establishment in Gydan, because that strategy for gas industry development provided for Gydan development far beyond 2025. Gydan requires a tremendous scope of preliminary work, drilling and geological exploration. NOVATEK holds the Geofizicheskoye and Utrenneye fields while Gazprom has no resource base on the other side of the Ob Bay. As to the Yamal resources I’ve already said that we stand for putting them into a gas trunkline. And as to the joint venture, NOVATEK is likely to develop the Yamal LNG project with its old partners. We have an opportunity to perform a feasibility study for the project extension. So far we are working on it, we are assessing economic and technical conditions for the project extension. I cannot state for sure that we won’t set up a joint venture with NOVATEK, because we have to wait until the work is nearly completed to give a clear response.

MIKHAIL SEROV: Excuse me, when you discussed the joint venture establishment with NOVATEK, did you talk of your stake into the Yamal LNG?

VSEVOLOD CHEREPANOV: In 2010, when we signed the agreement, we considered the matter exactly this way. The situation is altering now, and it’s evident we may talk about the project extension.

VITALY MARKELOV: As for the Power of Siberia, it’s the system of gas trunklines from the Kovyktinskoye to the Chayandinskoye field, from the Chayandinskoye field to Belogorsk (where we are going to build a gas chemical complex) and a branch from Belogorsk towards and further to China. This is the first stage of the project. The second stage provides for the Power of Siberia extension to Khabarovsk and, therefore, gas supply to the third train of Vladivostok LNG. The signed memorandum provided for gas supply to China in the amount of nearly 38 billion cubic meters of gas annually with the possible extension up to 60 billion cubic meters of gas annually. This substantially means two pipelines from the Chayandinskoye field to Blagoveshchensk. Due to the complexity of the fields — both the Chayandinskoye and the Kovyktinskoye field hold helium and hydrocarbons of category С3 and higher – it’s important to base chemical production on these extractable heavy hydrocarbons and helium. A gas chemical complex is to be constructed in Belogorsk as well. Our process flow diagram envisages on-site helium extraction to feed the helium plant with helium volume sufficient to satisfy the market needs. In case of extra demand we will produce more helium at the field. Such process flow will enable us to optimize gas production, helium production and marketing, production of hydrocarbons of category С3 and higher as well as to base the chemical process on extractable valuable components.

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In case of successful operation of two Vladivostok LNG trains, we, after consideration, may transfer gas from our eastern fields to provide for the Vladivostok plant extension. Thus, we have the lay-out that supposes gas supplies both via pipeline and in liquefied form.

QUESTION: Dmitry Bandura, Nikkey newspaper. Tell us, please, are you going to involve foreign partners in the Chayandinskoye field development? And one more question: what is the current state of discussions concerning the construction of the third train of the LNG plant in Sakhalin?

VSEVOLOD CHEREPANOV: As to inviting foreign partners to the Chayandinskoye field – we don’t have such plans. But such an option exists for our licensed satellite fields, such as the Tas-Yuryakhskoye, Verkhnevilyuchanskoye, Sobolokh-Nedzhelinskoye and Srednetyungskoye. Yes, we think it possible to invite a foreign partner for developing these relatively small (compared to Chayandinskoye) fields. It may happen.

VITALY MARKELOV: As for the third train of Sakhalin II, it’s worth mentioning that the bay nearby Korsakov is an ice-free bay of the plant location, which allows year-round LNG shipping. That’s why we chose this bay for the Sakhalin II construction, constructed an oil and gas trunkline system from the Sakhalin II fields southwards and, accordingly, located the Sakhalin II plant there. As to the extension, Sakhalin Energy is now preparing the Investment Rationale, we’ll get acquainted with its details and decide upon the third train before year end. We cannot yet talk about it because we have no Investment Rationale.

MODERATOR: Thank you very much, the Press Conference is over.

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