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GAZPROM

July 13, 2004

Gazprom’s delegation’s visit to Romania

Gazprom’s delegation leaded by Alexey Miller, Gazprom’s Management Committee Chairman paid today a working visit to Romania. Alexander Medvedev, Gazexport’s Director General was also member to the delegation. In the course of the visit, Alexey Miller met Ion Iliescu, Romania’s President and Dan Ioan Popescu, Romania’s Economy and Commerce Minister.

The parties addressed a whole range of issues of bilateral cooperation, including Russian gas deliveries to Romania as well as potential intensification of gas transit via Romania to South Europe and construction of underground gas storage facilities in the country. The Romanian side backed Gazprom’s intentions to participate in the privatization of Distrigaz Sud SA. The binding proposition to take part in a competitive tender will be submitted by the Company before 15 July.

At the same time, the parties pointed out that economic cooperation between Russia and Romania in the oil and gas industry was of a long-term and mutually advantageous nature. Alexey Miller underscored that being Romania’s major gas supplier, Gazprom was set to meet Romania’s soaring gas needs in the long term, which was particularly topical given the declining natural gas extraction in the country.

Reference:

Natural gas is playing a prevailing role (40.7%) in the Romanian fuel and power consumption, with oil, coal, nuclear and hydropower accounting for 28.5%, 18% and 12.8%, respectively.

Romania possesses its own natural gas resources that accounted for 305 bcm at year-end 2003. Given the existing gas production rate (roughly 12.3 bcm in 2003), Romania’s gas reserves will last it for 25 years.

For the time being, Romania’s overall natural gas consumption averages 18.0 bcm per year, including 5.7 bcm imported, largely, from Russia (as of today, over 89% of total gas imports).

The Romanian Government assumes that domestic natural gas demand will grow by an average of 1.7% year-on-year until 2015. This forecast reflects the Government’s objective – energy-efficient economy.

The state-run Transgas company operates the National Natural Gas Transmission System (NNGTS) comprising 11 thousand km of gas trunk lines and linking with the Ukranian GTS. The NNGTS annually transmits 12 bcm of imported gas and delivers another 28 bcm to Bulgaria, Macedonia, Turkey and Greece. In 2003, Romania transitted 13.6 bcm (14.0 bcm are targeted for 2004) of Russian gas.

In the meantime, Romania is engaged in the talks on the construction of gas pipelines going to a string of countries, Bulgaria, former Yugoslavia and Moldova inclusive.

15 companies are currently operating in the Romanian gas distribution and supply sector. Distrigaz Sud SA and Distrigaz Nord SA are the largest Romanian gas distribution businesses allocating 55% of the total gas consumed domestically.

In 2007, Romania will join the European Union. Due to the mandatory fulfillment of the EU gas directives, the country launched the domestic gas market liberalization, seeking opportunities for European energy companies to expand their presence on the Romanian market and gain access to end-use consumers.

In compliance with the requirements of the International Bank for Reconstruction and Development, Romania is actively involved in the privatization of public companies carrying on business, in particular, in the fuel and power sector.

As of 1 June 2004, some 97.3 bcm of Russian natural gas has been delivered to Romania since 1979. In 2003, Romania received 5.1 bcm of gas going from Russia. Under gas supply contracts concluded for 2004, Romania will recieve a maximum of 6.9 bcm of Russian gas.

Due to the resolution of the Romanian Government to privatize the Distrigaz Sud SA and Distrigaz Nord SA gas distribution companies, Gazprom expressed its intentions to take part in the deal.

On 14 January 2004, Gazprom provided the Romanian Economy and Commerce Ministry with an Application for participation in competitive tenders to buy into 51% stakes of the two businesses.

On 15 March 2004, pursuant to the tender regulations, the Company submitted preliminary and non-binding biddings to buy into Distrigaz Sud SA and Distrigaz Nord SA.

On 23 June 2004, Gazprom’s Management Committee considered it expedient to forward a final binding proposition to acquire a 51% stake in Distrigaz Sud SA.

 

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