The Board of Directors took notice of the information on the Company’s readiness for the peak load of late 2010 – early 2011 and on the measures required for ensuring sustainable gas supply to domestic consumers over the winter period in the long run.

It was highlighted that the Unified Gas Supply System (UGSS) was generally ready for the forthcoming autumn/winter period. At the same time, successful operation during this period will largely depend on the availability of backup fuel reserves (fuel oil, coal, etc.) at power generation facilities and large industrial enterprises as well as on the regional gas consumption discipline and compliance with Schedule 1.

The meeting noted the unsatisfactory preparation of certain regions for the winter period – some of them have not stockpiled the sufficient amount of backup fuel so far. Meanwhile, average temperatures in the upcoming winter period are forecast to be below normal. In particular, as of October 1, 2010 the Tver Oblast is 10.7 per cent behind the backup fuel accumulation plan, considerable backlogs are observed in the Krasnodar Krai, the Volgograd and Vladimir Oblasts; Moscow and the Moscow Oblast have not reached the planned level as well.

Background:

During preparation for the 2010–2011 winter period underground gas storage (UGS) facilities have been replenished with the same gas volume as was withdrawn during the last autumn/winter period. Marketable gas reserves in UGS make up 64 billion cubic meters, identical to the amount of the same period in 2009. The UGS facilities deliverability is at a required level: the maximum daily gas sendout in the beginning of the withdrawal season will make up 620 million cubic meters of gas, while the average daily gas sendout from December through to February will make up 500 million cubic meters of  gas.

As of October 1, 2010 all the selected gas treatment units at the gas production facilities undergone preventive maintenance and booster compressor station shops were fully repaired. 404 wells were overhauled and 87 wells were commissioned including in the Zapolyarnoye field, the Zapadno-Pestsovaya area of the Urengoyskoye field and the Yareyskaya area of the Yamsoveyskoye field.

16 sets of scheduled maintenance and repair operations were implemented at  UGSS facilities in 2010.

The distribution networks of regional and local gas distribution companies were prepared for the winter period on schedule. At present, the subsidiary and affiliated gas distribution companies of Gazprom Group maintain 611.7  thousand kilometers of gas pipelines, 39 thousand boiler houses, over 17.6  thousand industrial consumers and 198 thousand household consumers.

To secure uninterrupted gas supply to the residential and utility sectors, the schedule for converting Russian industrial consumers to backup fuels (Schedule 1) is endorsed annually by regional authorities.

Schedule 1 is applied under Article 19 of the Regulations on Gas Supply in the Russian Federation approved by the Russian Federation Government Directive No.162 dated February 5, 1998. Schedule 1  stipulates partial conversion of industrial consumers to backup fuels (fuel oil, peat, coal, etc.) under abnormally low temperatures in order to save a certain amount of gas and to use it for meeting increased demand of the residential and utility sectors.

Conversion to backup fuels and their timely procurement are provided for in the gas supply contracts made with all industrial consumers.