27.08.2007
The topical questions and answers as regards the 2007 Investment Program
Why have you reduced capital expenditures in 2007?
The reduction in capital expenditure volumes is due, among other factors, to a refinement of investment projects and the overall necessary volume of investment in 2007.
Which projects have experienced expenditure reductions?
Investment into the Shtokman gas condensate field (in the form of borrowing by development license holder Sevmorneftegas) has been reduced. from 17.1 to 8.6 billion rubles.
The following projects have seen a rescheduling of investment period:
Expenditure into the development of the Pestsov section of the Urengoisk field has been rescheduled from 2007 to 2009. Investment policy concerning exploitation of the Valanzhinsk area of the Zapolyarny gas condensate deposit have also been reassessed: where earlier plans provided investment between 2007 and 2009 has now been slated for the period before 2011.
Funds directed towards reaching production capacity (30 billion cubic meters) at the Harvutinsk deposit of the Yamburgsk gas condensate field have been rescheduled from 2008 to 2010. The revised investment program for 2007 also reschedules the start of exploitation works at the Priraslomnoe field from 2008 to 2009, as a result reducing expenditures on the project in 2007.
At the same time, the refinement of Gazprom’s investment program for 2007 anticipates an increase in spending on the development of the Bovanenkovo field (in particular on constructing the Obskaya-Bovanenkovo and Bovanenkovo-Ukhta railways).
The majority of investment reductions concern gas transportation system development and reconstruction projects. However, the investment decreases have not affected Gazprom’s priority gas transport projects.
At the same time, in comparison with the investment program approved by Gazprom’s Board of Directors in December 2006, expenditure on developing the SRTO-Torzhok, Sohranovsk PS-Oktyabrskaya PS, and Kasimovsk UGSF-Voskresensk pipelines, as well as on the expansion of the Urengoisk gas transport hub, has risen.
Are these reductions permanent or temporary in character?
The decrease in expenditure relates to Gazprom’s investment program for 2007.
Are these decreases connected to technical problems? If such problems exist, how do you overcome them?
The reductions are not connected to technical problems.
Do the reductions reflect Gazprom’s overall capabilities in rendering services of a long-term nature?
The work aimed at increasing income growth allows the company to be confident of successfully realizing its long-term projects.
Will the current reductions have an effect on your ability to cover European demand for gas now or in the future?
No. The decision to reassess the company’s investment program for 2007 will not reflect on Gazprom fulfilling its obligations before all gas consumers.
Will similar reductions continue in 2008?
As has already been said, the decrease in spending only applies to the 2007 investment program.
Some analysts note that the company is investing too much effort on takeovers instead of securing gas production. How would you comment on this?
The acquisition of shares in Sakhalin Energy, Beltransgaz and Mosenergo are completely in line with Gazprom’s strategy of transforming into a global energy company. Presence on the Russian electric energy market guarantees Gazprom a significant economic boost. By participating in the gas transport and distribution system of Belorussia, Gazprom secures itself additional guarantees in transporting gas through that country’s territory to Europe, as well as the possibility of acquiring additional profit through participating in the sale of gas to end consumers. In this was, Gazprom has secured substantial profit increases in the long-term perspective, including for the realization of future investment projects into the production and transportation of gas.
Why was a statement not delivered to the British stock market?
We understand the importance to be open with the investment community and therefore we are now providing clarification on our investment reduction.