Gazprom reports its consolidated interm condensed financial results under Internationl financial reporting standards (IFRS) for the three and nine months ended 30 September 2003

On 28 January 2004 Gazprom issued its unaudited consolidated interim condensed financial information prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (IAS 34) for the three and nine months ended 30 September 2003.

The table below presents the unaudited IFRS consolidated interim condensed statement of operations for the three and nine months ended 30 September 2003 and 2002. Amounts for the three and nine months ended 30 September 2002 are expressed in terms of the equivalent purchasing power of the Russian Rouble as of 31 December 2002. As the characteristics of the economic environment of the Russian Federation indicated that hyperinflation had ceased, effective from 1 January 2003 we no longer apply the provisions of International Accounting Standard 29 “Financial Reporting in Hyperinflationary Economies” (IAS 29). All amounts are presented in millions of Russian Roubles, unless otherwise stated.

For the nine months ended 30 September 2003 sales (net of excise tax, VAT and customs duties) increased by RR155,872 million to RR597,382 million, or 35% compared to the nine months ended 30 September 2002. Total sales for the three months ended 30 September 2003 increased by 30% to RR175,555 million compared to the three months ended 30 September 2002. More detailed information on our sales for the three and nine months ended 30 September 2003 and 2002 is presented in the table below.

Net sales of gas increased by RR 110,628 million, or 30% to RR 478,172 million in the nine months ended 30 September 2003 compared to the nine months ended 30 September 2002. This increase was primarily due to higher prices and volumes for sales both in Europe and Russia in the three and nine months ended 30 September 2003.

Average price of gas exported to Europe increased by 30% and 24% in the three and nine months ended 30 September 2003, respectively, compared to the same periods in 2002. The increases in the average prices of gas exported to Europe followed the increase in U.S. dollar oil prices in 2002. Sales volumes to Europe increased by 2% and 7% in the three and nine months ended 30 September 2003, respectively, compared to the same periods in 2002, primarily related to sales under existing long-term contracts. The increase in average constant RR prices for domestic gas sales in the three and nine months ended 30 September 2003 compared to the same periods in 2002 followed the increase in domestic gas tariffs set by the Federal Energy Commission.

Sales of gas condensate and oil and gas products increased by RR 26,356 million, or 73% in the nine months ended 30 September 2003 compared to the nine months ended 30 September 2002, primarily due to higher oil products prices and the fact that OAO AK Sibur (“Sibur”) increased its level of operations.

Our operating expenses increased by 21% to RR 415,360 million in the nine months ended 30 September 2003 as compared to the nine months ended 30 September 2002. This increase was primarily due to increase in staff costs (RR 16,976 million), costs of purchased gas (RR 13,552 million), transit costs (RR 8,280 million), repair and maintenance (RR 7,237 million), costs of electricity (RR 5,164 million), costs of processing services (RR 4,918 million) and depreciation (RR 2,781 million). Increases in these items more than offset decreases in taxes other than on income (RR 5,816 million) and cost of materials (RR 2,037 million). The increase in the cost of purchased gas was primarily due to increased volumes of purchases of gas from Central Asia by Gazprom’s foreign subsidiaries for resale to customers in Western Europe. The increase in transit costs was primarily due to the increased volumes of gas sales to Europe, new transit contracts for gas from Central Asia and higher transportation tariffs in Poland. The increase in processing costs was primarily related to increased levels of operations at Sibur.

Our profit tax expense decreased by RR 35,057 million to RR 55,198 million in the nine months ended 30 September 2003 compared to the nine months ended 30 September 2002. The decrease primarily resulted from the fact, that as from 1 January 2003 we no longer apply the provisions of IAS 29, which in prior periods increased the book value of our fixed assets compared to their tax basis and resulted in a deferred tax expense.

Net profit for the three and nine month periods ended 30 September 2003 amounted to RR 22,678 million and RR 126,439 million, respectively.

More detailed information on the IFRS consolidated interim condensed financial information for the three and nine months ended 30 September 2003 can be found here.

Information Directorate, OAO Gazprom