Board of Directors Considers Question of Mutual Relations with Ukraine

A meeting of the board of directors was held today at the headquarters of OAO Gazprom.

The board is considering information about the state of settlements for natural gas on the part of gas consumers in Ukraine and Gazprom’s strategy in its relations with NAK Naftogaz Ukrainy.

The company’s management committee has been instructed to organize work to implement the provisions of contracts to supply gas to Ukraine and transit gas through Ukrainian territory, as well as to inform the board of directors about the progress in this matter in September 2009.

Background Information:

On January 19, OAO Gazprom and NAK Naftogaz Ukrainy signed separate new long-term contracts on the transit of Russian gas to Europe through Ukraine and the supply of gas to Ukrainian consumers. The contracts do not stipulate brokers between the companies. The contracts are valid from 2009 through 2019 inclusive.

The transit contract stipulates that Ukraine will continue to be paid a special transit rate of $1.70/tcm for every 100 km in 2009. On January 1, 2010 the transit rate will be reduced to the market rate calculated according to the formula generally accepted in Europe.

Pursuant to the contract to supply gas to Ukraine, the price of the gas is calculated according to the European price formula with a reduction factor of 0.8. Thus, in the 1st quarter of 2009 the price of gas for Ukraine amounts to $360/tcm. The price will change quarterly according to the formula. The total volume of gas supply to Ukraine in 2009 will be 40 bcm. On January 1, 2010, Gazprom will begin to sell gas to Ukraine at the European market price without discounts.

The gas supply contract stipulates measures to increase the payment discipline of NAK Naftogaz Ukrainy. In particular, if Naftogaz Ukrainy fails to pay in full for gas by the 7th (inclusive) of the month following the month during which it is supplied, the parties shall switch to an advance payment system of settlements until the contract expires.

According to the signed documents, Gazprom’s strategy in its relations with NAK Naftogaz Ukrainy is based, in particular, on the following principles:

·         ensuring the supply of natural gas to Ukraine and transit volumes through Ukraine to European consumers

·         monitoring the timeliness of payments for the supply of gas to Ukraine and applying measures to ensure such timeliness

·         maintaining a presence on the Ukrainian domestic market through the company’s wholly-owned subsidiary OOO Gazprom Sbyt Ukraina.

OAO Gazprom Press Center

www.gazprom.ru