Speech by Alexey Miller at pre-New Year telephone conference

The Gazprom headquarters hosted today a pre-New Year telephone conference moderated by Alexey Miller, Chairman of the Company’s Management Committee.

The conference was broadcast for 57 companies of Gazprom Group.

Esteemed colleagues!

On behalf of the Gazprom Management Committee and on my personal behalf, I would like to congratulate all the executives and employees from the Gazprom Administration and the Company’s subsidiaries as well as the gas industry veterans on the coming New Year and Christmas!

As the year 2010 winds down to a close, we feel satisfied with the work done. Our Company demonstrates steady development, implements strategic projects and promptly responds to market changes.

In the outgoing year the economy of Russia and most European countries started to gradually recover after the global financial crisis giving a positive impact to gas consumption, which grows both on Gazprom’s domestic and foreign markets. We are convinced that this trend will remain in the future.

We were expecting this course of events. Therefore, in 2010 Gazprom kept on implementing the projects related to the resource base expansion, new gas production centers creation in Russia and gas transmission system development. We have been implementing these projects both in our country and abroad, but the crisis slightly changed the planned schedules.

The 2010–2012 Geological Exploration Program was adopted in 2010. The Program focuses on shaping the resource base for new gas production centers in eastern Russia and on further geological exploration abroad. These activities have already yielded positive results. Thus, Gazprom discovered hydrocarbon reserves in Africa in 2010.

New gas production centers are being built at a rapid pace in Russia. The Bovanenkovo field with its largest gas reserves on Yamal undergoes pre-development in parallel with the new generation Bovanenkovo – Ukhta multi-line gas transmission system construction.

During telephone conference
During telephone conference

During telephone conference

Large-scale development of the Yamal Peninsula implies a reliable transport infrastructure. Regular operation of the Obskaya – Bovanenkovo railroad was started in the outgoing year. A new trunk railway will ensure rapid, year-round, cost effective and all-weather delivery of cargoes and personnel.

Creation of a new gas production center on Yamal is of crucial importance for the Russian gas industry development. Therefore, Gazprom is going to further keep it in focus. In 2011 Yamal will account for more than a quarter of the overall planned capital investment.

Esteemed colleagues!

The Company is gradually moving eastwards.

The first inter-regional gas transmission system, Sakhalin – Khabarovsk – Vladivostok, is being placed in the Far East. This strategic trunkline will connect the Sakhalin gas production center to consumers in the Khabarovsk and Primorsky Krais, and initiate large-scale gasification of the Far Eastern region.

By now, the gas pipeline is at the final construction stage – more than 1,100 kilometers, i.e. over 80 per cent of its total length, have been welded.

In September the Sobolevo – Petropavlovsk-Kamchatsky gas trunkline was put onstream. Natural gas arrived in the Kamchatka Krai capital for the first time ever. This gas pipeline opens up the way for gasification of the entire Peninsula and reduces its dependence on the fuels delivered from other regions. Kamchatkan natural gas became a resource base for the new gas pipeline.

In parallel with conventional gas reserves development, Gazprom is active in mastering gas production from alternative sources. Among other things, the year 2010 will be marked in the Russian gas industry history for bringing onstream the first domestic coalbed gas production facility. Russia has immense forecast resources of this hydrocarbon, around 84 trillion cubic meters, which is commensurate with one-third of the entire natural gas resource base in our country. This event is significant as in addition to the resource base replenishment coalbed gas extraction considerably increases labor safety for miners. I think this is the most important social effect of the project implementation in Kuzbass. It has recently been agreed that our activities will not be confined to Russia only. Gazprom is going to implement a similar project in Ukraine.

Moreover, the Russian gas transmission system is being rapidly developed within Gazprom’s largest social project – the Russian Regions Gasification Program.

This year the amount of the Company’s investments in the domestic gasification process hit record high – over RUB 25 billion.

We have fully met our obligations relevant to the Gasification Program. As a result, millions of our citizens, just like in previous years, attained better living standards by gaining access to the most easy-to-use and environmentally-friendly fuel. The Company will certainly proceed with this important work.

The Russian market has always been and still remains the key market for Gazprom. Gradually approaching the equal profitability level, it is currently becoming the main competitor of the European market.

Starting from 2011 the gas price for industrial consumers will be based on free market principles. This is an important step towards creating a civilized and rapidly developing gas market in Russia.

The Russian gas market is number one priority for us. However, this does not mean we are disregarding the obligations to our European customers. Therefore, one of our Company’s most important objectives today is to increase reliability and ensure growth of gas supplies to Europe. Nord Stream construction operations have begun in the Baltic Sea. Bypassing transit countries, the gas pipeline will deliver Russian gas directly to Europe for the first time ever. So far, more than a half of the first gas pipeline string has been laid. In the coming year 2011, Nord Stream will be put into operation considerably enhancing the European energy security.

Implementation of another most important trans-European gas trunkline project – South Stream – was underway in the expiring year. A number of countries expressed their interest in joining the project throughout the year, namely Romania, Macedonia, Croatia and Austria. Gazprom, Eni and EDF signed the trilateral Memorandum stipulating specific steps for the French company’s entry in the project for constructing the South Stream offshore section. Joint ventures were established in Hungary, Greece and Bulgaria for the project implementation. Before long, national feasibility studies for the South Stream project will be completed in each and every host country. In the year 2011 we will start geological exploration for the offshore gas pipeline section.

Esteemed colleagues!

In 2011 we are going to face the following major challenges: Yamal development, Eastern Gas Program execution, South Stream and Nord Stream projects implementation, Russian regions gasification, Unified Gas Supply System reliability enhancement. I am sure we’ll have a success as our team is highly professional and we clearly see our mission which is to make Gazprom a leader of the global energy market, one of the largest global energy companies worldwide.

Esteemed colleagues! My Season’s Greetings!

This year we celebrated the 50th anniversary of our subsidiary, Gazprom avtomatizatsiya, which is a leading company in the field of the gas industry processes automation. From the bottom of my heart, I would like to congratulate the Gazprom avtomatizatsiya team on the jubilee!

During telephone conference
During telephone conference

During telephone conference

Dear friends, esteemed colleagues!

Starting from January 1, 2011 wages of all the employees in the Gazprom Administration and the Company’s subsidiaries will be indexed by 7.9 per cent. I think it’s a good New Year present for everybody.

I sincerely thank all the executives and employees of Gazprom for the work done in 2010. Let the coming year be lucky and fruitful. I wish robust health, happiness, well-being and all the best to you! I am sure the goals and objectives we set for 2011 will be reached.

Happy New Year’s Eve!