Yesterday, in the course of the Gazprom’s Management Committee meeting a corporate budget (financial plan), a money raising program, a program on cost reduction and investment tasks were approved for 2004.

In line with the 25 December 2003 resolution issued by the Board of Directors financial guidelines were adjusted integrating Mineconomrazvitie Ministry (the RF Ministry for Economic Development) proposals to review the accounting policy for the balance of payments of Gazprom for 2004. Russian ruble to US dollar exchange rate was redesigned, and gas export (to the European countries) price outlooks were finalized. In addition, a reimbursable Value Added Tax related to new assets introduced was calculated on a more conservative base.

The changes resulted in the RR 10.76 billion corporate budgetary surplus.

In 2004, borrowings are accounting for RR 150 billion. So, debt repayment, including loans provided, debentures and bills issued, interest and coupon yield, was figured at RR 166.2 billion.

Balance of payments for 2004 was engineered with the RR 30 billion costs reduction. Operating expenses and investments would be cut by RR 20 billion and RR 10 billion respectively. Major costs reduction will be effected through new technology implementation and energy saving, non-core business optimization, current business and administrative expenditures cuts, construction expenditures reduction.

The Management Committee approved the RR 212.3 billion Gazprom’s investment program for 2004. Of this figure, capital expenditures were RR 192.3 billion, long-term capital expenditures, RR 20 billion.

Gas transmission is a priority in the investment program with 54% of total capital expenditures planned, in contrast to gas production with stubborn 26%.

Gazprom’s investment program for the current year was formulated based on priority investment projects aimed at following strategic tasks of the Company:

• 542 bcm of gas production in 2004 and a build-up of gas production in the years to come;
• uninterruptible gas supply to the Russian consumers, the residential sector primarily, and long-term gas export contracts commitments fulfillment;
• gas reserve base strengthening and license agreements solidification;
• secure gas transmission system operation avoiding cut-offs;
• widening corporate presence on the international markets;
• financial soundness of the Company and the corporate capitalization build-up.

These financial guidelines will be submitted to the Board of Directors for approval.

The Management Committee issued a resolution on the corporate investment and budget advance programming based on a 3-year time span, beginning from 2004.

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