Alexey Miller's message during a conference call dedicated to Oil and Gas Industry Workers Day

Today Gazprom's Management Committee Chairman Alexey Miller held in Orenburg a conference call dedicated to Oil and Gas Industry Workers Day.

The conference call was broadcast for 57 companies of Gazprom Group from a new administrative building of Gazprom dobycha Orenburg whose inauguration also took place today.

Senior management of Gazprom transgaz Tomsk, Sakhalin Energy, Gazprom transgaz Yugorsk, Gazprom dobycha Noyabrsk, Gazprom neft and Gazprom energoholding reported on the performance results.

Verbatim transcript of the message delivered by Gazprom's Management Committee Chairman Alexey Miller at a conference call dedicated to Oil and Gas Industry Workers Day

Dear colleagues,

On behalf of Gazprom's Management Committee and my personal behalf I congratulate you on Oil and Gas Industry Workers Day!

I am holding this conference call from Gazprom dobycha Orenburg's new office that has been inaugurated today. I am sure that this beautiful and comfortable building will help increase our Company's operating efficiency in the region.

It is a pleasure to celebrate our professional holiday with good news and results. Today I would like to speak about our work this year.

Export supplies are gradually reaching the pre-crisis level which is very important for us. Even with account for the second wave of the crisis in some European countries, we expect gas exports to reach 140–145 billion cubic meters in 2010. Given that the average gas price in the European market is growing, we expect our export revenues to reach USD 45 billion this year versus USD 42.5 billion in 2009. In other words, our financial performance is expected to be better than last year.

Of equal importance is growing domestic gas consumption which is primarily induced by the economic recovery factor. I am going to specify the sectors where growth is observed – these are Russia's economic expansion flagships – the power generation industry, metallurgy, agrochemistry, cement industry (which means the construction sector is growing) and household sector. Domestic gas supplies over 8 months of 2010 exceed the same figure in 2009 by 14 billion cubic meters.

Speaking about the domestic market I would like to make a focus on gas prices. The prices are still state-regulated. There is gradual price growth for the industrial sector though we have just reached the break-even level of domestic gas supplies. But even this fact is a relief for us as most recently we have delivered gas to the domestic market at a loss. We have a very crucial period ahead – a transition to the gas price formula for industrial consumers from January 1, 2011. This issue is of paramount importance since the Government of the Russian Federation has taken the decision to increase the Severance Tax rate next year. Thus, domestic price behavior related issues will, of course, be extremely important for us.

Domestic and foreign market demand for gas determines positive dynamics of Gazprom's major performance indicator – gas production.

This year we hope to offset more than a half of the last year's drop in production. We are positive that increasing demand for Russian gas is inevitable in the near future. That is why Gazprom is focused on implementing its largest production and gas transmission projects.

The implementation of these projects is progressing at full speed. In 2010 the Company started building the Nord Stream gas pipeline. Construction work is already underway on its linear part as well as on the unique Portovaya compressor station in the Leningrad Oblast. Preparations are in progress for another essential transnational gas transmission project – South Stream.

This year we have already constructed the offshore and onshore sections of the Dzhubga – Lazarevskoye – Sochi gas pipeline. This facility is included in the Olympic venues construction program and is under close attention and control of the Government of the Russian Federation and Gazprom's leadership.

Among the strategic production projects I would like to highlight the ongoing implementation of the Yamal megaprogect. The Obskaya – Bovanenkovo railroad is already operational and the Bovanenkovo – Ukhta trunkline is currently under construction.

Dear colleagues,

This year will go down in the history of Gazprom and the entire Russian gas industry due to the launch of our country's first coalbed methane production in Kuzbass. In essence, we have obtained a new sub-industry of the Russian fuel and energy sector. We associate with it certain prospects for the Russian gas market development.

There is no doubt that gas production and transmission facilities projected under the Eastern Gas Program will also be taken into operation as scheduled.

By now, over 750 kilometers of the Sakhalin – Khabarovsk – Vladivostok gas transmission system have been welded, trenched and backfilled. In parallel with the linepipe, a head compressor station is being built on the Sakhalin Island. Construction is also underway on medium-pressure gas laterals including a lateral from Vladivostok to the Russky Island. You know that this project is also very important for the Company as it is an integral part of the preparations for the APEC summit to be held in Russia.

In January this year the Sakhalin II project has met a major milestone when the hundredth LNG cargo was delivered to consumers in Japan.

The Sobolevo – Petropavlovsk-Kamchatsky gas trunkline construction is coming to an end in the Kamchatka Krai. We intend to ceremonially commission this pipeline in September. Comprehensive tests are currently performed at the linear part of the gas trunkline, an automated gas distribution system of Petropavlovsk-Kamchatsky and a gas lateral from the AGDS to CHPP-2. Pre-commissioning operations are underway at the startup complex to secure gas supply from the Kshukskoye field.

Exploration drilling is carried out in the Krasnoyarsk Krai, Yakutia and Sakhalin in strict compliance with the program which was adopted by us as part of the 2010 investment program.

Dear colleagues,

Our oil and power businesses rapidly develop along with the gas business.

Gazprom has increased its share in Gazprom neft to 95.7 per cent and thus initiated the consolidation of the holding company's oil reserves within a single subsidiary. We are also focused on boosting the refining volumes: we expect to record good results in this segment at the year end. In addition, Gazprom neft develops its marketing business: its fueling stations are currently in the rebranding process accompanied by the sales growth. Other retail segments also perform well.

As for the power generation business, Gazprom has taken a strong position of the leading investor in this sector. At the same time, comparing to 1.1 GW of new facilities commissioned during the past two years, in 2010 Gazprom Group will increase this figure to some 2 GW.

Strengthening its positions of a recognized leader in the global and domestic energy sectors, Gazprom actively implements socially significant projects with the Russian Regions Gasification Program on the top of the list. Millions of citizens all over Russia significantly improve their living conditions every year by virtue of the Gasification Program implemented by our Company. Gazprom has increased its investments in gasification by one-third this year – the Company will invest over RUB 25 billion in Russian regions for these purposes in 2010.

Dear colleagues,

Considerable efforts have already been taken so as to make Gazprom one the world's energy market leaders. But there is still a great amount of work ahead of us on this way. I am sure that the experience, knowledge and professional skills of Gazprom's experts will allow us to reach this challenging goal.

I congratulate you on the coming professional holiday! Wishing you happiness, health, prosperity and every success!