Libya

Strategy

The development strategy of Gazprom as a global energy company is aimed at creating the entire chain from hydrocarbons production to their sales on new markets on the basis of production facilities located beyond Russia.

In pursuance of the strategy, the Company is developing hydrocarbon resources offshore Venezuela, Vietnam, India, Bolivia, Algeria, Libya and the Caspian Sea, and is studying the opportunities of participating in oil and gas projects in Egypt and Pakistan.

Libya’s petroleum potential

North Africa is a region of Gazprom’s strong presence. This primarily refers to Libya which is the largest holder of proven reserves of light sweet crude oil (5.1 billion tons) in Africa and the fifth largest among OPEC member states (after Saudi Arabia, Kuwait, UAE and Iraq).

Libya also possesses abundant gas reserves. However, the country is deemed to be deficiently explored. Libya is rather attractive in terms of oil and gas production prospects due to a considerable amount of resources, low petroleum production costs, proximity to European markets and a well-developed infrastructure.

Cooperation

On April 17, 2008 Gazprom and Libya’s National Oil Corporation (NOC) signed the Memorandum of Cooperation. Pursuant to the Memorandum, the parties will study the possibilities of implementing joint projects in the energy sector.

Projects with Gazprom in Libya

In 2006 and 2007 Gazprom was an active participant of international bidding procedures for the right to explore the most geologically promising licensed blocks. Based on the bidding results Gazprom obtained exploration rights for licensed blocks 19 and 64.

In addition, following the asset swap deal with BASF in December 2007, Gazprom acquired a 49 per cent stake in Libya’s oil concessions C96 and C97.

Licensed block 19

On December 20, 2006 Gazprom Libya B.V., a special subsidiary company set up to operate in the country and to represent Gazprom Group’s interests in Libya, was declared the winner of the third open gas tender for the right to explore and produce hydrocarbons at licensed block 19 (sections 1, 2, 3 and 4).

On March 26, 2007 based on the tender results, the Production Sharing Agreement (PSA) was signed with Libya’s NOC. According to the PSA, within approximately 5 years Gazprom Libya B.V. is to carry out the minimum scope of geological exploration activities comprised of 3D seismic survey of 5,000 square kilometers and 6 prospecting wells drilling.

In late 2008 the on-site seismic survey of block 19 was successfully completed and new work was initiated on seismic data processing, basin modeling and preparation for the drilling operations to start in July 2010.

Licensed block 64

On December 9, 2007 Gazprom Libya B.V. was declared the winner of the fourth open gas tender for the right to explore and develop hydrocarbons at licensed block 64 (sections 1, 2 and 3, Ghadames Basin) located 300 kilometers south of Tripoli. The PSA provides for the following minimum scope of geological exploration activities to be carried out within approximately 5 years: 2D seismic survey of 1,500 line kilometers and 3D survey of 1,750 square kilometers, as well as 6 exploration wells drilling.

In order to achieve higher exploration results the seismic survey program was modified by replacing 2D with 3D SPARSE in coordination with the Libyan party. The on-site seismic survey at block 64 is to be completed in June 2009. Drilling operations are planned to start in mid-2010 after the processing and interpretation of the obtained seismic data.

Concessions C96 and C97

In December 2007 following the asset swap deal with BASF Gazprom obtained a 49 per cent stake in Libya’s oil concessions C96 and C97 owned by Wintershall AG. The respective agreements are effective till 2026. The concessions include nine fields with As Sarah as the largest. The current production volume is about 6 million tons of oil per annum. The geological exploration is still in progress and the work is underway to boost the declined production at concession C96 and to ramp up production at concession C97.

Aggregate resource estimation at blocks with Gazprom’s participating stakes:

Licensed block 19 – 300 billion cubic meters of gas, Gazprom’s stake – 10 per cent.

Licensed block 64 – 20 million tons of oil, Gazprom’s stake – 9.8 per cent.

Concessions C96 and C97 – 90 million tons of oil, Gazprom’s stake – 49 per cent.