Press Conference Mineral and Raw Material Base Development. Gas Production. Gas Transmission System Development May 21, 2013 MODERATOR: Hello, colleagues. You already know that Gazprom’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 Russia. 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— Khabarovsk— Vladivostok 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 South Stream 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 2 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 Siberia 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 China 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.