On November 1–2, 2009 led by Alexander Medvedev, Deputy Chairman of the Gazprom Management Committee, the Company’s delegation had in Shanghai a round of commercial negotiations with China National Petroleum Corporation (CNPC) relevant to the arrangement of Russian natural gas supplies to China.

The parties thoroughly discussed the issues of pricing, amounts, routes and deadlines of supplies. Alexander Medvedev and Wang Dongjin, Vice President of CNPC agreed upon formation of the working groups of experts from Gazprom and CNPC to address joint participation in the projects for setting up gas chemical complexes in the Far East.

The parties will continue discussing the key issues of Russian gas supplies to China and the potential joint projects during the next round of negotiations scheduled before the end of 2009.

Background:

China National Petroleum Corporation (CNPC) is the largest state-owned petroleum corporation of China (the Chinese Government holds a 100 per cent stake) and is one of the leading integrated oil and gas production companies of the world.

Incorporated in 1998 on the platform of the former China’s Ministry of Petroleum Industry, today CNPC is comprised of the companies dealing with oil and gas exploration, production, transmission, storage, as well as oil refining, petrochemicals and research. CNPC is the largest crude oil producer and supplier, and retains a dominating position in oil and gas production, processing and marketing in China. CNPC and its subsidiaries supply 79 per cent of the domestic oil market, control 95 per cent and 40 per cent of China’s natural gas and petroleum derivatives markets, respectively, and are involved in international investment projects in 28 countries. Natural gas accounts for 3 per cent in China’s energy consumption structure.

Gazprom and CNPC signed the Agreement of Strategic Cooperation on October 14, 2004. The Agreement covers a wide spectrum of joint businesses including scrupulous discussion of the issues related to the arrangement of Russian natural gas deliveries to China by Gazprom. The opportunities for implementing joint gas processing and gas chemical projects in eastern Russia and in third countries are being studied.

On October 13, 2009 as part of the official visit by the Russian Federation Prime Minister Vladimir Putin to China, Gazprom and CNPC signed in Beijing the Framework Agreement on major terms and conditions for natural gas supply from Russia to China.