The Gazprom Management Committee Chairman moderated a briefing today with regard to the Company's performance in the first quarter.

According to Alexey Miller, “Gazprom finished the first quarter of 2011 demonstrating the apparent success in major segments of the gas business.

By April 1 the Company produced 142.6 billion cubic meters of gas – nearly 2 billion cubic meters in excess of the planed level. This parameter is equal to the production level demonstrated by Gazprom in the first quarter last year against the background of the growing consumption in all of its sales markets after the global crisis. It is safe to say that the growing demand trend will sustain in the long run.

A considerably high level of natural gas consumption has been maintained in the domestic market and recent information indicates that Gazprom delivered over 103 billion cubic meters of gas to Russian consumers in the first quarter.

As for gas export by Gazprom within and beyond the FSU, including LNG deliveries from the Sakhalin II project, in the first three months of 2011 they showed almost a 30 per cent increase versus the same period of the last year: from 57 to 73 billion cubic meters. At the same time, the demand for Gazprom's gas beyond the FSU and, therefore, its purchases showed a 12 per cent increase according to the updated information: from 39.4 to 44.1 billion cubic meters.

I should highlight that spot gas prices in Europe leveled Gazprom's contract prices and even exceeded them over the last year. Thus, between January and March 2010 the average gas price under Gazprom's export contracts was at USD 293 which is 50 per cent higher than the spot price but in the first three months of 2011 the gap between the average contract and spot prices narrowed to 8 per cent (USD 346 and 320 for 1,000 cubic meters accordingly) while in some periods the gas price at the European trade floors exceeded the one of Gazprom reaching USD 400 for 1,000 cubic meters! As a result, linking of a portion of the contracted volumes to gas indexes, as European partners of Gazprom insisted, may have an inverted effect.

Thus, the first quarter results demonstratively show the soundness of our gas demand forecasts. Moreover, our experience has proven once again that the required balance of interests between the gas producer and the gas purchaser may only be ensured in case of deliveries under long-term contracts. There is no doubt: in the future reality Gazprom will see the buildup in all of its downstream operations on the basis of the existing long-term export contracts system.”