Address to shareholders

First Deputy Prime Minister of the Russian Federation, Chairman of the Gazprom Board of Directors Viktor Zubkov

 

Chairman of Gazprom's Management Committee Alexey Miller

Dear shareholders!

The most noticeable characteristic of 2010 was surely the strong recovery of the world economy after the global crisis, which brought with it a concomitant increase in natural gas consumption. Fortunately, Gazprom had envisaged such developments. It is now apparent that previous forecasts of increased natural gas demand will undoubtedly come true. As a result, the company worked hard over the past year to meet the new demands of the market. Gazprom further developed its resource and production base and gas transportation infrastructure as well as diversified the regions of production and variety of products on offer. Innovative technology and practices were key to the company’s success.

In natural gas production, the Yamal Peninsula remained the focus of our efforts to implement advanced technologies and solutions in 2010. Production wells at the Bovanenkovskoye field were constructed using heat-insulated pipes that prevent permafrost thawing during the development of subsoil resources and production of natural gas. For the project, Gazprom used state-of-the-art drilling rigs produced domestically. Last year, 67 gasproducing wells were drilled at the Bovanenkovskoye field.

Gazprom’s attention was also focused on developing conventional projects on the continental shelf. The Kirinskoye field was developing as a part of the Sakhalin-3 project and an order was placed to construct an underwater production complex, which will make it the first natural gas production site using offshore technologies in the country. This is a substantial breakthrough for Russia’s efforts to develop the continental shelf.

In term of gas transportation, the commissioning of the trunk gas pipeline from Sobolevo to Petropavlovsk-Kamchatsky was a significant achievement in 2010. Reliable natural gas supplies to the capital of the Kamchatsky territory has been made possible by technological advances used in the construction of the gas pipeline, particularly those ensuring its seismic stability.

In line with company goals to diversify gas transportation routes, Gazprom launched the construction of the unique Portovaya compressor station in 2010, which is unparalleled in terms of its technical characteristics and will ensure natural gas transportation through the Nord Stream gas pipeline. The first line of this pipeline – the world’s longest underwater trunk gas pipeline – has been laid.

Gazprom’s work to diversify gas resource base wrote a new page in the history of the country’s gas industry development in 2010, as the company launched Russia’s first coal gas production at the Taldinskoye field within the project “Methane of Kuzbass”. Gazprom has also managed to diversify the range of its products as well: Russia’s first LNG production plant was brought to design capacity in autumn 2010.

Technological advances are an integral part not only of Gazprom’s gas business development, but also of its oil and electric power business development. Last year, Gazprom Neft prepared to launch its Electronic Field project – a smart system for managing the development of subsoil resources. The project will make it possible to increase oil field profitability and extraction ratios significantly. Based on the number of innovative projects in electric power and heat production, Gazprom energoholding which manages the Group’s generating assets in Russia, is Russia’s most forward-looking company. These projects will minimize the use of energy resources while simultaneously increasing production.

We have laid a solid foundation to implement advanced technologies and technical solutions further: the company intends to adopt OAO Gazprom’s innovative development program this year. It will define all the technical, economic, financial and organizational measures necessary to meet the company’s requirements for state-of-the-art equipment, machinery and technologies.

By actively developing all of Gazprom’s business areas and finding advanced technical solutions, the company is ensuring its long-term competitiveness and guaranteeing its successful implementation of the strategy of the world’s energy leader as well as maximizing Gazprom’s value and shareholders’ income.