??? Gazprom issued its audited statutory consolidated financial reports for the year 2004.

The table below presents the profit and loss account for the years 2004 and 2003. All amounts are presented in million Russian Roubles, unless otherwise stated.

In 2004 sales of goods, products, works, services (net of VAT, excise tax and other similar payments) increased by RR 170,307 million, or 20%, to RR 1,010,698 compared to 2003.  More detailed information on our sales for 2004 and 2003 is presented in the table below.  

In 2004 net sales of natural gas increased by RR 119,989 million, or 19%, to RR 767,458 million compared to 2003.

In 2004 net sales of natural gas to Europe increased to RR 448,250 million, or by 8% compared to 2003.  This was primarily due to a 9%, or 12.6 bcm, increase in sales volumes.  The increase in sales volumes was primarily due to increased volumes sold to Germany, France, Italy and Great Britain under existing and new contracts on gas supplies.

Net sales of natural gas to FSU countries increased by RR22,181 million, or 48%, to RR68,763 million in 2004 compared to 2003. This is explained primarily by the increase in volumes of gas sold to FSU countries, in particular due to a 8.3 bcm increase in sales volumes to Ukraine and a 5.1 bcm increase in sales volumes to Kazakhstan.

In 2004 net sales of natural gas in the domestic market increased by RR62,833 million, or 33%, to RR 250,445 million compared to 2003.  This was due to the increase in domestic gas tariffs set by the Federal Tariffs Service and the fact that excise tax natural gas produced after 1 January 2004 was abolished, which was slightly offset by the 1%, or 3.4 bcm, decrease in sales volumes.

In 2004 total excise taxes on natural gas sales decreased by RR149,057 million, or 98%, to RR 3,687 million compared to 2003. The decrease was due to the fact that excise tax on natural gas produced after 1 January 2004 was abolished.  This decrease was offset by the RR 148,183 million increase in customs duties to RR177,526 million in 2004 compared to RR29,343 million in 2003.

In 2004 sales of gas condensate and oil and gas products increased by RR29,792 million, or 32%, to RR121,972. This increase was primarily due to increased volumes and prices for sales on the domestic market and consolidation of additional petrochemical companies in the six months ended 31 December 2003.  Sibur and our other petrochemical companies accounted for 59% and 63% of sales of gas condensate and oil and gas products in 2004 and 2003, respectively.

Cost of goods, products, works and services sold (including selling and management costs) increased by RR152,119 million,or 28%, to RR702,953 million in 2004 compared to 2003. These costs accounted for 70% and 66% of sales in 2004 and 2003, respectively.

This increase in the cost of goods, products, works and services sold (including selling and management costs)was primarily due to higher cost of purchased gas (RR 42,401 million), taxes other than on income (RR37,217 million), higher staff costs (RR21,047 million), materials (RR19,701 million) and depreciation (RR10,358 million) which were partially offset by lower cost of processing services.  The increase in the cost of purchased gas was primarily related to purchases of Central Asian gas, both in Central Asia and in Europe, for resale to customers in Western Europe and FSU.  The increase in taxes other than on income was primarily due to changes in tax legislation related to natural resources production tax.  The increase in staff costs was primarily due to the increase in average base salaries and other payments, and the increase in the average number of employees. The increase in the cost of materials was primarily related to the acquisition of controlling interests in a number of petrochemical companies in 2003 and higher prices of materials. 

Changes in the lines Other Operating Income and Other Operating Expenses result from the agreements signed with NAK Naftogaz Ukraine in August 2004.  The effect of the transactions on the net profit totaled RR 24,001 million. 

In 2004 our profit before profit tax totaled RR 283,540 million which is RR 32,275 million, or 13%, higher compared to 2003.  

Current profit tax increased by RR 14,303 million, or 34%, to RR 55,868 million in 2004 compared to RR 41,565 million in 2003.  Our overall effective tax rate increased from 17% in 2003 to 20% in 2004.

In 2004 net profit increased by RR29,809 million, or by 17%, to RR200,686 million compared to 2003.  

The RAR statutory consolidated financial (accounting) reports for the year 2004 can be found on OAO Gazprom web site(www.gazprom.ru).

                                                                                                                                               OAO GAZPROM DIVISION FOR WORKING WITH MASS MEDIA

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fax:                                  (095) 719-90-08

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