Principles

Efficiency

Responsibility

Improvement

Meeting interests of shareholders

Diversification of markets, ...

... diversification of routes, ...

... diversification of products.

Gazprom’s mission

Gazprom views its mission in providing maximally efficient and balanced gas supply to Russian Federation consumers as well as securing a high degree of reliability when implementing long-term gas export contracts.

Gazprom’s strategic objective

Gazprom pursues the strategic objective of becoming a leader among global energy companies by developing new markets, diversifying its activities and securing the reliability of supplies.

Gazprom’s strategy principles:

• enhancing the gas, oil and derivatives production chain efficiency from upstream to downstream;
• diversifying and expanding business activities (new markets, transmission routes, products), including through projects ensuring development of high value-added products;
• meeting interests of all Gazprom’s stockholders;
• streamlining corporate governance, increasing the transparency of financial and economic activities;
• personal responsibility of leaders for their managerial decisions.

Geological survey of subsurface resources will be carried out in areas with established production (Nadym-Pur-Taz region and Precaspian oil and gas bearing province) as well as in new gas bearing provinces: Yamal Peninsula, continental shelf of the Arctic seas, Eastern Siberia and the Far East.

Period before 2010

The gas production level will be maintained by bringing onstream capacities at existing and new fields and sites in the Nadym-Pur-Taz region: Lower Cretaceous deposits of the Zapolyarnoye and Pestsovoye fields, Achimov formations of the Urengoy field, Apt-Albian and Lower Cretaceous deposits of the Nyda area of the Medvezhye field, Cenomanian deposits of the Zapadno-Pestsovoye field, as well as by bringing to full capacity the Kharvutinskaya area of the Yamburg field and the Yuzhno-Russkoye field.

The economic expediency of developing the said fields and sites is driven by their vicinity to well-developed gas production and gas transportation infrastructure.

Period after 2010

New strategic gas production areas are planned for development on the Yamal Peninsula, the continental shelf of the Barents Sea, the Ob and Taz bays, Eastern Siberia and the Far East.

Coalbed methane

Production of coalbed methane is destined to become one of the key directions for the Gazprom resource base expansion strategy. The provisional estimates indicate up to 20 bcmpa of forecast production volumes after 2020 in the Kuzbass basin – the world’s largest coalbed methane basin.

The plan for reaching the 2020 production level implies a stagewise involvement of all the explored fields of Gazprom Neft (inclusive of the Company’s 50 per cent shareholdings in the NGK Slavneft and Tomskneft) in the production process, expansion of the resource base through commissioning oil fields assigned to other companies of the Group, as well as acquisition of new licenses.

The current top-priority projects include construction of the SRTO – Torzhok, Gryazovets – Vyborg, and Nord Stream gas pipelines, as well as the Urengoy gas transmission hub expansion. In addition, Gazprom is implementing the Kasimovskoye UGS facility – Voskresenk and Pochinki – Gryazovets gas pipelines construction projects.

The next major projects targeted for commissioning after 2010 will be the construction of the Bovanenkovo – Ukhta and Ukhta – Torzhok gas trunklines system to transmit natural gas from the Yamal Peninsula fields and construction of the Murmansk – Volkhov gas pipeline to transmit gas from the Shtokman field to Russia’s Northwestern region, as well as construction of the South Stream gas pipeline, which, in parallel with the Nord Stream project, will ensure the diversification of natural gas supplies to the European market. Gazprom is also participating in the gas transmission system development in Central Asia.

The Eastern Program aims to create and develop a gas transmission system in the Far East to ensure reliable gas supply to Russian consumers, entrance to Asia Pacific export markets with the follow-up connection to the existing UGSS of Russia. The first stage will prioritize the construction of the Sakhalin – Komsomolsk-on-Amur – Khabarovsk – Vladivostok gas pipeline, which will allow supplying gas to the Khabarovsk and Primorsky Krais and the Jewish Autonomous Okrug. The Chayanda oil and gas condensate field is to be connected to the system later on.

The reform in the Russian power industry enabled Gazprom to acquire a number of power generating assets. Gazprom Group has already consolidated a controlling stake in Mosenergo and is planning to gain control over TGC-1, OGC-2 and OGC-6, as well as to acquire smaller stakes in a number of other generating companies.

Gazprom Group is exploring possibilities of investing into European power generating assets. Cooperation keeps growing with energy suppliers, which possess a client base and a set of technologies enabling the Group to expand its presence on the global power energy market.

The development strategy for the domestic gas market prioritizes:

• transiting from regulated wholesale natural gas prices to tariff regulation in the gas transportation sector, while securing state-regulated prices in the residential sector
• forming the gas trading sector based on negotiated prices established on the basis of a price formula. The bulk of the gas should be marketed in this sector. A resolution by the Russian Federation Government prescribes gradually bringing domestic gas prices to the level ensuring an equilibrium of returns on domestic and foreign gas sales (taking into account transportation fees and customs duties);
• expanding gas marketing via an electronic trading platform and stock exchange.

These objectives are planned to be achieved by developing the relationships with conventional customers on a long-term contractual basis and using new forms of trade based on short-term and medium-term sales, as well as gas exchange transactions and one-off deals. With the aim of fortifying positions on the European natural gas market and increasing security and flexibility of gas supplies Gazprom is intent to gaining broader access to European UGS capacities and boosting its stake in companies dealing with marketing of gas as well as electricity to final customers.

Gazprom strives for a gradual transition to economically reasonable price levels in the CIS and Baltic countries and expansion of access to ultimate consumers through participation in the privatization of energy facilities. Such policy will help the Group minimize transit risks.

With the aim of securing the possibility of a maneuver when determining field development stages for the new gas producing provinces in Russia, Gazprom strives to develop cooperation in the areas of gas production, upgrade and development of gas transmission systems in Central Asian countries. Gas resources of Central Asia enable to penetrate into new sales markets, while maintaining security of supplies to conventional customers.

To efficiently access the global LNG market, Gazprom is taking the opportunities of engagement into already existing LNG projects. In 2007 Gazprom engaged into the Sakhalin II project. At a subsequent stage of its strategy Gazprom sets out to organize LNG production in Russia and third countries, placing a focus on independent LNG marketing operations. The Shtokman field will be the resource base for the Nord Stream gas pipeline and for LNG production. LNG will be primarily delivered to the markets of the USA, Asia-Pacific and Europe.

Libya

In March 2007, Gazprom and the Libyan National Oil Company signed the Production Sharing Agreement regulating the Company’s participation in hydrocarbon exploration and development on Block 19 on the shelf of the Mediterranean Sea. The Agreement envisages carrying out a seismic survey of the Block and drilling six wells there. Investments will total USD $ 200 mln for the period up to 2012. In 2007 Gazprom won the tender for hydrocarbon development in Libya on Land Area 64 located in the Ghadames Basin. The Group plans to invest some USD 100 mln in geologic exploration work under this project. The oil resources of Area 64 are estimated at 20 mln t. In addition, Gazprom received 49 per cent in Libyan oil concessions C 96 and C 97 in December 2007 under the asset swap deal signed with BASF.

Uzbekistan

Under the terms and conditions of the Production Sharing Agreement (PSA) Gazprom participates in the process of rehabilitating gas production at the Shakhpakhty field (some 500 mcm of annual production). In 2007 the Group re-registered its licenses for geological exploration on seven investment blocks as licenses for the use of mineral resources of the Ustyurt region in Uzbekistan. In compliance with the program for geologic exploration work approved by the Government of Uzbekistan, the Group plans to invest around USD 400 mln in the geological exploration in the region within the coming five years.

Kyrgyzstan

In 2007 the Government of Kyrgyzstan approved the feasibility study and the stage-by-stage program for geological exploration of two promising oil and gas areas located in Kyrgyzstan. In early 2008 the Group received two licenses for the right to use subsurface resources with the view to carry out geological exploration at these areas.

Kazakhstan

At the moment, the Russian party (a joint venture between Gazprom and LUKOIL – TsentrCaspneftegaz) and Kazakhstan continue the construction of exploration well on the Caspian Sea offshore (Tsentralnaya Geological Structure).

Turkmenistan

Gazprom considers the opportunity of getting involved in Turkmen offshore projects in terms of ensuring the sufficiency of resources set forth in the basic contract for Turkmen gas acquisition. Gazprom’s participation in gas extraction projects in Turkmenistan will depend on the geological and geophysical survey results for the Turkmen sector of the Caspian Sea offshore.

India

Gazprom and GAIL continue joint studies in the Bengal Bay. In 2007 the parties completed the well with depth exceeding 4,300 m in depth. The decision was taken to initiate the third phase of the Exploration Program.

Vietnam

The parties have finalized the construction of two offshore exploration wells. During the first exploratory well testing in Bao Wang a commercial gas inflow was reported. Geological exploration is going on.

Venezuela

In August 2005, Gazprom was announced as the tender winner for Stage A of the Rafael Urdaneta project and was awarded respective 30-year upstream licenses for Urumaco-1 and Urumaco-2 blocks in the Bay of Venezuela, with the first four years of operations to see the implementation of a geological exploration program including seismic survey and exploration well drilling.

Iran

Gazprom is engaged in stages 2 and 3 of the South Pars field project executed by the consortium comprised of Total (France) – 40 per cent Petronas (Malaysia) – 30 per cent and Gazprom – 30 per cent. The Iranian side was officially named as the onshore gas processing complex operator in June 2004. The project is currently in the return-on-investment stage expected to be completed in late 2009.

Nigeria

On September 2008, Gazprom and Nigerian National Petroleum Corporation signed the Memorandum of Understanding. The document stipulates the implementation of joint projects in geological exploration, hydrocarbon production and transportation, as well as in associated petroleum gas gathering and processing systems engineering and power industry facilities construction in Nigeria. A joint Russian-Nigerian venture will be set up to achieve the above mentioned goals.