From left to right: Mikhail Kuznetsov, Head of the Pskov Region’s Administration and Alexey Miller, Gazprom’s Management Committee Chairman

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Today, at Gazprom’s Headquarters, Alexey Miller, Gazprom’s Management Committee Chairman and Mikhail Kuznetsov, Head of the Pskov Region’s Administration have entered into a Cooperation Agreement and Gas Supply Contract.

Under the Cooperation Agreement, Gazprom and the Pskov Region’s major joint businesses will be as follows:

- Expanding gas deliveries to cities, towns and localities;

- Effecting and improving sustainable gas deliveries to consumers;

- Developing capacities spurring wider use of compressed and liquefied gas as motor fuel;

- Developing and introducing gas saving technologies;

- Ensuring environmental safety and rational nature management;

- Creating a comprehensive automated system of natural gas consumption and quality measurement;

- Implementing a housing construction program for the Gazprom Group’s current and retired employees being re-settled from the Extreme North and identical regions.

The parties will jointly step up measures aimed at improving the Pskov’s Region energy balance, i.e. rationalizing and using alternative energies on a larger scale.

In accordance with the Agreement, the parties will contribute to implementing high-efficiency projects in the Region with the view of promoting the manufacture of competitive output for Gazprom and its subsidiaries.

Gazprom and the Pskov Region’s Administration will also produce and foster the implementation of a power conservation program targeted at reduced gas consumption through the use of innovative power saving technologies and progressive gas-fired equipment.

The Regional authorities will channel timely and full payments for gas deliveries to budget-financed bodies, offset Gazprom’s losses when gas is supplied to privileged customers and redeem in cash the Regional debt for the fuel provided earlier. The municipalities are bound by similar commitments.

At the same time, Gazprom and its subsidiaries will be assisted in timely settling accounts with the consumers providing gas payments from self-run budgets.

Pursuant to the Agreement, the Pskov Region’s authorities will develop and implement together with interested parties a program aiming to furnish the population with gas measurement units, with new customers to be provided with such units in the obligatory order.

The Regional authorities will also assist Gazprom and its subsidiaries in endorsing gas transmission tariffs covering economically underpinned expenses for the gas pipeline maintenance (lease payments inclusive) at the facilities constructed under a gas supply program.

In addition, the Administration will assist Gazprom and its subsidiaries in obtaining land plots for the construction of new facilities and repair & maintenance works.

Gazprom, on its part, will provide secure natural gas deliveries to the Pskov Region’s customers in the predetermined amount given the UGTS capacities, gas quotas annually allocated throughout Russia, existing gas demand, solvent consumers and level of gas payments.

Under the Gas Supply Contract concluded today, as well, the parties will work through an investment project of expanded gas deliveries to the Pskov Region, which includes:

• a feasibility study for the investment project;
• a General Scheme of gas supplies to the Region;
• evaluating the economics for gas pipelines under construction;
• conducting a range of gas conservation measures;
• upgrading gas supply infrastructure;
• creating a gas consumption monitoring, diagnostics and measurement system;
• loading existing and newly commissioned gas branches and other gas supply facilities;
• applying alternative gas supply sources to deliver gas to the settlements located at remote distances from gas trunk lines.

A stage-by-stage program of gas supplies to the Pskov Region will be developed and financing sources and scheme will be identified based on the investment project.

In addition, the Contract stipulates joint implementation of gas saving and motor vehicle (agricultural inclusive) conversion-to-gas programs to be implemented by Gazprom provided the economics are not less 12%.

Reference:

Gazprom and the Pskov Region first entered into a cooperation agreement on 7 June 1999.

In 2004, Gazprom provided Regional customers with some 1 bcm of gas and roughly the same amount is slated for 2005.

The gas supply infrastructure of the Pskov Region is developed by 33.2% of maximum gas demand, including by 55.4%, in cities and towns and by 4%, in rural area (the identical Russia-averaged parameters account for 53%, 60% and 34.7%, respectively).

Starting 2001, the Regional consumers’ gas debt to Gazprom has decreased by more than RUR 110 mln, averaging RUR 68 mln, as of 1 January 2005. Nevertheless, the period between January and February 2005 has seen the debt growing to some RUR 193 mln (as of 1 March) largely due to non-payments on the part of utilities and the population. In addition to it, there still remains an outstanding debt for gas shipments to privileged customers.

DIVISION OF RELATIONS WITH MASS MEDIA