Letter to Shareholders by the Chairman of PJSC Gazprom’s Board of Directors and the Chairman of PJSC Gazprom’s Management Committee

Chairman of the Gazprom Board of Directors Viktor Zubkov

Chairman of Gazprom's Management Committee Alexey Miller

Dear Shareholders,

In 2020, Gazprom successfully overcame the headwinds faced by the entire global economy. We have rapidly and effectively redesigned our large-scale operations to respond to new challenges. As a result, the Company has fully delivered on its commitments to supply gas to domestic and international consumers. We have secured a strong position across key markets and continued delivering on our strategic development plans.

As consumers opt for affordable, reliable and green energy, Gazprom’s supplies of natural gas meet these demands in full measure. In 2020, the Group’s fields produced over 450 bcm of gas. Our pipeline exports to far abroad countries exceeded 179 bcm, representing a top 5 result over PJSC Gazprom’s operating history.

The launch of the TurkStream offshore pipeline across the Black Sea in 2020 significantly improved the reliability of supplies to Europe and Turkey. Characterised by its low-carbon footprint, this new high-tech trunk pipeline already supplies the gas needs of seven countries. Our Nord Stream pipeline across the Baltic Sea is another low-carbon project, it has transported a record quantity of gas during the year – over 59 bcm of natural gas. These form part of Gazprom’s tangible contribution towards Europe’s own environmental goals.

China has set an ambitious target to achieve carbon neutrality in its energy sector. A key role in achieving this target will be played by natural gas, and demand for gas continues to grow in the country. PJSC Gazprom is ramping up gas supplies via the Power of Siberia gas pipeline under a long-term contract with CNPC. In Q4 2020, supplies were increased at the request of the Chinese side, exceeding the previously planned volumes. In addition, our bilateral agenda includes a number of other promising pipeline projects, including via Mongolia.

Some important decisions were made in 2020 to accelerate gas infrastructure expansion in Russia. For Gazprom, this is a priority CSR project, which directly improves the quality of life for Russians while reducing our environmental footprint by eliminating the use of coal and fuel oil Gas supply and infrastructure expansion programmes spanning the period from 2021 to 2025 were agreed with 67 Russian regions. The pace and scope of related activities have been significantly increased. The programmes will allow 538 thousand homes, mostly in rural areas, to connect to gas infrastructure, along with over 3 thousand boiler houses and businesses. As a result, the level of gas infrastructure penetration in Russia will reach 90.1% of the level technically feasible.

In order to cater for the interests of our international and domestic consumers, we continued to systematically strengthen Gazprom’s resource base and production capabilities. In 2020, our gas reserve replacement ratio exceeded 100% of gas production for the sixteenth year running. The 75 Years of Victory field, discovered offshore the Yamal Peninsula in the Kara Sea, was one of the highlights of our successful exploration campaigns. The new field containing over 200 bcm of gas was the largest hydrocarbon discovery in the world in 2020.

Moreover, the new discovery has expanded the mineral resource base of the Yamal gas production hub, a key source of gas for the country for decades to come. The Kharasaveyskoye field, a second crucial field in this region after Bovanenkovskoye, is being prepared. The drilling of development wells at this field was started in 2020 as planned.

The Company is increasingly focusing on gas processing that maximises the extraction of valuable components abundant in Gazprom’s polar and eastern fields. By driving the holistic monetisation of its reserves, the Group is increasing the stability of its gas business while also supplying a valuable resource for the production of a wide range of sought-after products offered by related industries. A complex near Ust-Luga (Leningrad Region) will become an anchor project for the new processing cluster while the Amur Gas Processing Plant will drive the segment’s growth in the Far East. The first process trains of the Amur GPP will be brought online in 2021.

OOO Gazprom energoholding successfully built a high-capacity thermal power plant within a tight timeframe. It was commissioned in spring 2021 and will mainly supply process steam for the Amur GPP.

Gazprom Group’s oil division, PAO Gazprom Neft, is focused on increasing our hydrocarbon conversion rate. In 2020, new complexes, among the best in the world, came online at the Moscow Refinery, as well as at the PanĨevo Refinery in Serbia.

Dear Shareholders, The challenges of the year, especially of its first half, repeatedly put Gazprom to the test. The Group passed these tests with flying colours and was able to allocate almost RUB 361 billion in dividends for 2019, which is close to a record high level in the Company’s history.

The positive momentum observed in the markets in Q2 2020 and continuing into 2021 makes us feel optimistic about our projected financial performance. PJSC Gazprom is expected to reach the target payout level set in the Dividend Policy ahead of schedule.

Our management will continue to do everything necessary to support a balanced and dynamic growth of the Company’s business while boosting its value for shareholders.