Updated September 11, 2008

   Gazprom Neft will both buy out 51% in Serbia' s

NIS oil monopoly at the state, and 20% of stocks at the minority stockholders – individuals.

The assessment of Deloitte & Touche that estimated NIS (Naftna Industrija Srbije) at €2,2 billion should become the basis to determine the price of the agreement.

Thus, Gazprom Neft has to pay €428 million more for the deal without getting the additional rights.

   As it came out, on Tuesday, September, 9, Serbia's Vice Premier, Minister of Economy and Regional Development Mladjan Dinkic declared that if Gazprom Neft bought out 51% of NIS, it should make the obligatory offer to

the individuals – stockholders of

the company. According to the calculations of Serbia's government, the individuals will own almost 20% of the enterprise's stocks.

   On Tuesday, September, 9, Serbia's parliament ratified the energy agreement with Russia that covers the sale of NIS's controlling interest to Gazprom Neft and guarantees the joint construction of the 400-km-long section of South Stream gas pipeline in Serbia.

NIS owns two oil refineries in Pancevo and Novi Sade with the aggregate capacity of 7,3 million tons and two chains of gas filling stations. The company is the monopolist in Serbia's oil and gas industry (occupies 72% of the wholesale and retail market). According to the protocol attached to the agreement, Serbia agreed to sell 51% of NIS for €400 million plus €500 million of investment commitments. However, then, some representatives of Serbia' s authoritie

s stated that the price was inadequate.

Later, in Gazprom Neft declared that the company was ready to consider the significant increase of the investment amount, but didn't announce the sum.

   On Tuesday, September, 9, the agreement was ratified. However, if Gazprom Neft considered the protocol as signed automatically, Serbia's authorities didn't agree and declared that the price would be discussed additionally taking to account the independent assessment of the enterprise made by Deloitte & Touche (€2,2 billion). The offer became the additional commitment for the citizens of Serbia. NIS's employees and citizens are assumed to get the stocks free of charge.

As the adviser of Serbia's Economy Minister Nikola Papak explained, the stocks' transfer to the employees will be carried out at €200 for one year of employment. So, the enterprise employs 24 126 people with 491 000 years of employment, and they can expect to receive 4,46% of the company's stocks. 15% more will be directed to Serbia's citizens within the framework of privatization (each citizen receives in one stock), and the state will own 29,6% of stocks. According to Mladjan Dinkic, Gazprom Neft is obliged to buy out stocks at the price not less than the assessment of Deloitte & Touche, i.e. it should pay at least €428 million more.

   Gazprom Neft was aware of the obligatory offer for the individuals, but refused to name its price, as declared in Russia's oil company.

"The buyout's terms are one of the many issues that will be discussed with Serbia's party within the preparation of the deal", as say in the company. The gas section of the agreement can become one of

the issues of these talks.

Mr. Dinkic marked that Serbia wasn't satisfied with the capacities of its section in South Stream and wanted to increase the volume from 10 bcm to 18 bcm of gas per year. The project capacity of the overall South Stream attains 31 bcm of gas per year, and the launch of the sea section is planned for 2013.

In Serbia's Economy Ministry did not explain, whether Gazprom's concession on the capacity of the gas pipeline would influence on NIS's price.

   "The final route of South Stream is not approved yet, and its crossing through Serbia's territory is quite favorable, and both NIS and Gazprom Neft can demonstrate their strong positions in the negotiations", as Konstantin Batunin from Alfa Bank considers. Former adviser of Serbia's Energy Vice President Zorana

Z. Mihajlovic Milanovic agrees that the terms of NIS's sale "are closely related to the gas agreement with Russia". In Mr. Batunin's opinion, the parties should reach a compromise to ink

the deal.

Updated September 2, 2009

   The development of Iran's North Azadegan oil field can become the first foreign project of Russia's Gazprom Neft. In fact, the Russian company will execute only the service contract, but, under the certain terms, it can book the oil reserves and get the stake in the extraction of 5,5-6,5 million tons

of oil annually. Gazprom Neft is ready to develop three more oil fields in Iran under the analogical terms.

   As Gazprom Neft's chairman of the board Alexander Dyukov said, in August the company had sent the letter to the Iran authorities in what it had agreed to take part in the development of the North Azadegan oil field under the buyback terms. "There is a certain range of issues that should be clarified and examined. Now we are waiting for the invitation from the Iran party to come and to discuss these issues", as Mr.

Dyukov said. Gazprom Neft received the geological data of the Iran oil field and took an interest in the project, as he explained.

   According to the company's calculations, the North Azadegan's oil reserves total 150 million tons.

If the company agrees

the long-term contract to realize

the extracted oil, it can book the oil reserves. "In fact, it is a service contract.

We are bearing the already agreed losses that will return to us with a certain degree of profitability.

Also, we have to agree on the profitability and on the amount of oil that we will realize", the head of Gazprom Neft specified, and added that oil extracted at this deposit could attain 5,5-6,5 million tons per annum. However, he refused to name the exact stake the company expects to receive from the extraction and reserves. In June Mr. Dyukov supposed that Gazprom Neft could get 60% of the extraction.

The buyback contract is a type of the service contract, as the head of SRP Ekspertiza Mikhail Subbotin agrees.

The expert adds that investors act as a contractor foremost, and the government takes the key decisions.

   The Russian company would like to develop three more Iran's oil fields under the analogical terms – Shurum, Kukh-i-Rig, Dudru, and it is already holding talks with the Iran party. The western companies, vice versa, are leaving Iran – at the beginning of summer, Total left the country, and in spring Repsol and Shell withdrew from the plans of participating in the development of the 13th phase of South Pars gas field. The USA doesn't permit the companies within its jurisdiction to invest in Iran, and is against Iran's request to enrich uranium. Besides, the European Union has applied a range of sanctions against the companies cooperating with Iran.

However, the Russian companies are increasing their presence in Iran. In the mid-summer, Gazprom (owns Gazprom Neft) and National Iranian Oil Company (NIOC) signed the agreement about the cooperation under which the Iran party offered Russia "the full package of projects" on oil and gas extraction.

In addition to Gazprom, Lukoil that owns 25% in the project on

the geological exploration in the Anaran block is also operating in Iran.

Moreover, Tatneft wants to extract oil in this country as well.

   Gazprom Neft has the ambitious strategy of development, therefore it requires the foreign projects, and at the moment, the company is engaged in the extraction on Russia's territory, as VTB Bank's analyst Lev Snykov says.

He adds that from the viewpoint of the geological resources, Iran is a good market. "So, the positive fact is that Gazprom Neft is taking interest in such projects and the company will get them obviously due to its core stockholder", the expert marks. On the other hand, the political risks are very high in Iran, as Mr.

Snykov adds. At the same time, if the Russian companies don't sign contracts here, India and China will fight for these oil fields.

Updated August 22, 2008

The Russian company Gazprom plans to invest the record sum of RUR 1 trillion in new projects on gas extraction and transportation.

That is the way the monopoly responds to the Andris Piebalgs's accusations, the EU Energy Commissioner, of the insufficient financing of this activity area.

This news came out when Gazprom's capitalization was demonstrating the severe fall and resulted in the 1,4-1,6% price rise of the monopoly stocks.

On August, 21 within the meeting devoted to the gasification of the Leningrad area held in St. Petersburg, Gazprom's board deputy chairman Valery Golubev declared that in September the monopoly directors' board would again discuss the increase of the investment program for this year.

"The changes to the investment program for 2008 are not approved yet, but the document is already completed and will be discussed in September", he explained. Only 25% of the addenda to the document are significant, as Gazprom's manager assessed. He explained the record investments by the growth of the sold gas's volumes, as well as by the favorable price situation.

According to the 1H results, the deliveries of the Russian gas to the Western Europe grew to 22% to the level of 1H 2007, to 65 bcm.

Thus, the prices grew from $345 to $410 per 1 000 cm.

This is the second growth of indices for this year. In December, 2007 Gazprom approved the investment program for 2008 of RUR 710 billion; however, the oil prices continued growing at the world markets, and by 1Q end the Russian monopoly's sales volumes considerably grew. Therefore, the investment program was changed, and over RUR 820 billion was allocated to the projects on gas extraction and transportation.

But it wasn't enough. By the RAS standards (Russian Accounting Standards), in 1H Gazprom's unconsolidated revenues from gas sales grew by 47% as compared to the analogical period of 2007, and totaled RUR 1,013 trillion.

This sum exactly Gazprom is going to invest in its infrastructural projects.

Denis Borisov from Solid Investment Company assesses the news about the investment program increase as positive under the condition that the monopoly allocates some facilities to the boosting of Yamal's deposits development, to Bovanenkovskoe in particular.

"This year is the record one for Gazprom by the net income level of nearly $40 billion that corresponds to the size of the changed investment program, so the monopoly doesn't require any borrowings for its realization", the analyst says.

He considers that the monopoly is acting logically, as on the background of the positive market situation, it invests additional facilities in the extraction in order to avoid the deficit of gas by 2011-2012.

Valery Nesterov from Troika Dialog agrees that the facilities will be allocated to Yamal's deposits (now 80% of Russia's gas is extracted in the Nadym-Pur-Tazovsky region, however, the deposits are already exhausted here by 70-80%) and the development of the Arctic Regions, Shtokmanovskoe deposit in particular. "The EU is eager to reduce the dependence on Gazprom.

Recently, it was announced about the prelim inary reached agreements on gas deliveries to the EU through Nabucco bypass ing Russia in 2013, and the construction of terminals for the liquefied natural gas in 2015. Still, in the nearest five years Europe has nothing to set against Gazprom expansion. During this period Gazprom has to offer the sufficient gas amount and to prove the reliability of its projects", he says. Andris Piebalgs, the EU Energy Commissioner, has several times underlined that Gazprom needs to pay special attention to the projects on gas extraction and transportation. .

Valery Golubev made his statement during the monopoly's dire period, when Gazprom‘s capitalization fell from $360 billion to $244 billion. His statement did not cause any excitement, still, the monopoly stocks grew by 1,4% on the LSE, on the MICEX and RTS – by 1,6%, at the market indices' growth by 0,5%.

Updated June 17, 2008

Gazprom continues to cut its presence in affiliated structures. Gas monopolist intends to cut its representatives number in Gazprombank directors' board, and that enables it to exclude the bank from the consolidated reporting. In experts' opinion, Gazprom does so to improve its financial indices and to prepare Gazprombank to IPO.

According to Gazprombank investment memorandum of Eurobonds placement of $10 billion, this year Gazprom will propose only five but not eleven candidates to the bank directors' board. Gazprombank stockholders' meeting will choose the board within the annual

meeting on June, 24.

At the moment 7 representatives of the gas monopoly

are among the bank directors' board. Thus, the rest represents mainly structures affiliated with the gas monopoly.

"There is no a single independent director in directors' board", marks Uralsib Financial Corporation analyst of banking sector Leonid Slipchenko.

Gazprombank enters top three of the largest Russian banks.

According to Kommersant-Dengi journal data, as of January 1, 2008 the bank occupies the 3rd place by equity capital size (RUR 93 billion) and the 3rd place by net assets sum (RUR 796,2 billion). According to IFRS for 2007 (International Financial Reporting Standards), the bank revenue went by 8% down, to $1,2 billion. As of June, 6 the core bank stockholders are Gazprom (41,73%) and non-state pension fund Gazfond (50% plus one stock). Thus, Gazfond owns 7,11% of Gazprombank stocks directly; 17,15% and 17,17% own Gaz-Service and Gazkon respectively. Lider management company (manages Gazfond assets) owns 8,57% of the bank stocks and 6,27% belong to OJSC New financial technologies (Gazprombank subsidiary).

After Gazprom refuses the majority of votes in Gazprombank directors' board, it can officially exclude the bank activity results from the consolidated reporting of Gazprom group. Analysts suppose Gazprom continues to distance from non-core assets.

"Within the last one and a half year Gazprom has been step-by-step reducing control over Gazprombank, just officially perhaps", says Trust bank analyst Aleksey Demkin. In December, 2006 Gazprom stake in the bank was reduced from 45,76% to 41,73% as a result of additional emission

of Gazprombank stocks and operations with them at the secondary market. "However, this did not hinder the gas monopoly to consolidate the bank financial indices in its reporting", as marks Mr.

Demkin. Thus, beginning from 1Q 2007 Gazprom has excluded the controlled non-state pension fund Gazfond from the consolidated reporting. In April, 2008 Gazfond sold 34,3% Gazprombank stocks to its affiliated companies – Gazkon and Gas-Service.

Bank exclusion from Gazprom consolidated reporting improves the group balance sheet ratios, debt load in particular, as supposes Troika Dialog analyst Olga Veselova. According to Mr.

Demkin calculations, by 2007 end Gazprombank input to the consolidated debt of Gazprom group totaled around $7,4 billion or around 12%.

"These simultaneous Gazprom actions show that Gazprombank prepares to hold IPO", is sure Leonid Slipchenko. In February, 2007 chairman of Gazprombank board Alexander Sobol declared the bank would hold IPO not sooner than in June next year. According to analysts estimations, Gazprombank intends to place 15-20% stocks at the public market, and expects to attract $1-1,4 billion within IPO.

Updated June 11, 2008

   Gazprom is holding talks with stockholders of some gas sale companies in the USA

about their controlling stock interests purchase.

The same way the monopoly tries to penetrate into Great Br itain retail gas market that has been carefully protected from it. At the moment Gazprom managed to take 1,5% only, but within 6 years its gas supplies to this country grew from 2% to 8% on the whole.

Experts mark that the same tactic in the USA in terms of the opposition on the country authorities' part is justified, but it does not allow reckoning on a serious market share.

   Director general of the British Gazprom subsidiary Gazrom Marketing & Trading (GMT) Vitaly Vasilev told the company was studying the possibility of a first purchase in the USA within the strategy framework

of North America market entering.

"We can create projects from scratch via partnership, or engage in purchases. Gazprom management takes final decision by year end", explained Mr. Vasilev.

   Gazprom representative Sergey Kupriyanov confirmed that the monopoly "shops around for stakes in sale companies". However, no agreements had been reached yet.

American GMT subsidiary –

GMT USA, established in Texas in 2006 – holds talks. It is not the first Gazprom try to enter the US market. In 2005 Gazprom supplied several LNG (liquefied natural gas) tankers to the USA. In 2006 the monopoly was going to exchange a stake in Sh tokman field for stakes in regasification terminals in the USA and Canada. And then Gazprom was holding talks about stake purchase in the Canadian Sempra.

But later the monopoly declared it would admit foreigners to Shtokman if paid and would purchase stakes in terminal by itself. In Gazprom could not specify whether talks with Sempra continue.

Gazprom head Aleksey Miller said recently the company wanted to take part in Conocophillips gas pipeline construction from Alaska.

   "We are trying to create an opportunity for Gazprom to enter the market by the most favorable way to recover losses the company had due to sales abroad or intermediaries", said in the interview Mr.

Vasilev, whose experience of Gazprom promotion to the foreign markets can be called as successful. Top-manager headed GMT in 2002, when Gazprom stake at Great Britain market was just 2%. Now this index exceeds 8% in a wholesale segment, and already attains 1,5% in retail – on the background the country authorities do not want to accept Gazprom.

   The USA meets Gazprom without enthusiasm, as experts suppose. "Scale energy cooperation between Russia and the USA did not develop", explains Valery Nesterov from Troika Dialog.

"The country authorities hinder the foreign companies that can not be trusted from political point of view to enter its market". East European Gas Analysis director Mickhail Korchemkin consents with him. "Gas monopoly investments in Europe and America remind a satisfaction of political ambitions and a way to influence the world fuel prices", an expert marks.

According to his opinion, Gazprom is trying to purc hase a sale company, as it

has not managed to take part in regasification terminal.

Updated April 1, 2008

    OAO Gazprom wants to purchase at least four energy sales companies at RAO UES of Russia. The purchase of only one JSC Mosenergosbyt can make JSC Mezhregionenergosbyt,

controlled by the monopoly, the largest in the country. On the whole, Gazprom occupies more than 25% of the Russian energy sales market in terms of plans realization.

   The corporate "Gazprom" magazine has quoted JSC Mezhregionenergosbyt head (Mezhregiongaz JSC subsidiary) Denis Fedorov, who has told about the plans to purchase the energy sales companies at RAO UES, as saying that they have been interested in four "sales" planned to tender in the second quarter of the current year, but the final decision would depend on their price.

Mr. Fedorov did not specify what companies exactly JSC Mezhregionenergosbyt was concerned with.

In Mezhregiongaz reported that it went about the companies operating in "areas, where we already have OGC and TGC".

   Gazprom owns Mosenergo controlling stock interest.

The monopoly also receives control in OGC-2 and OGC-6 after reorganization of RAO UES.

Moreover, Gazprom becomes the owner of more than 46% stocks

in TGC-1 in the nearest future. The monopoly has already declared about the concerns with

the purc hase of TGC-7 stocks. If the transaction about joint venture establishment by Gazprom coupled with OJSC Siberian Coal Energy Company (SUEK) takes place, the monopoly will receive stakes in TGC-12 and TGC-13.

   Last year JSC Mezhregionenergosbyt sold 12 billion kWh of electric power

to Gazprom enterprises. This year the company concluded supply contracts for 24 billion kWh of electric power. It was planned that Siburenergomanagement (SIBUR Holding JSC sale company) would amalgamate with Mezhregionenergosbyt.

However, SIBUR source was quoted as saying that the final decision concerning this matter

was not taken yet.

If the transaction takes place,

the sales of Gazprom Sale Company will grow up to 30 billion kWh.

   The branch experts assume that Gazprom will be foremost concerned with "sales" in Moscow, St. Petersburg, Saratov, Samara and Ulyanovsk.

Their sale is planned for the second quarter of this year.

Alpha Bank analyst Alexander Kornilov estimates JSC Mosenergosbyt at $780 million, the Petersburg company – at $67 million, the Samara company – at $114 million, the Saratov Company – at $44 million, the Ulyanovsk company – at $8 million. "Gazprom interest in the "sales" is clear", says Bank of Moscow analyst Dmitry Skvortsov.

"It supplies gas to all OGCs and TGCs, including its own, and it is quite logic that the monopoly controls the energy sale".

   Dmitry Skvortsov marks that JSC Mosenergosbyt purchase will increase the sales of Gazprom sale company more than triple.

Alexander Kornilov adds that if Mezhregionenergosbyt purchases all "sales" listed above, its stake at the Russian sale market will be 25%. Mosenergosbyt, Ulyanovskenergo, Saratovenergo and Samaraenergo auctions are set for April.

Gazprom can also purchase "sales", which RAO UES could not sell last year, and now they are put up for sale in the electronic Istra system. The "sales" comprise the Kola energy sales company, Bryansk sales company, Komi energy sales company, "Energosbyt of Rostovenergo", Oryol sales company, Stavropolenergosbyt and Kostroma sales company.

Actuality March 18, 2008

The Russian corporation is ready to invest billions of dollars into joint gas projects, including construction of transcontinental gas pipeline through South America.

The agreement signed between Gazprom and the state-owned petrol company of Bolivia ( YPFB) presupposes the conduct of geological prospecting at such blocks as Sunchal, Acero and Carohuaicho located in southe astern Bolivia within Subandino Sur oil and gas basin. According to expert estimations, these blocks gas-bearing potential amounts around 300 bcm. Gazprom and YPFB intend to arrange the joint venture within

the transaction framework.

The controlling interest will belong to the Bolivian company.

The parties do not announce the capital investments amount.

However, according to the British Financial Times data, the contract value can attain $2 bln. Gazprom foreign economic activity department head Stanislav Tsugankov said that the "company examines the issue of investing billions of dollars in Bolivia", although the preparatory work is conducted at this stage. "Bolivia possesses large gas reserves and this country interests us more in this region", declared Tsugankov. "I think it becomes the gas leader in its region. And our aim is to take as much advantage of it as possible".

We will remind that the Russian-Bolivian strategic alliance has been started in February, 2007, when Gazprom and YFPB have signed Memorandum of Understanding. This document presupposes the cooperation in the following areas: hydrocarbon prospecting and development in Bolivia, opportunity studying of infrastructural projects participation including liquefied natural gas (LNG) production as well as opportunity of training and advanced training of oil and gas sector specialists.

According to the Bolivian president Evo Morales, "the agreement signed between the Russian Gazprom and the state-owned petrol company of Bolivia (YPFB) in La Pass will arrange terms for gas supplies increase to the neighboring countries, Argentina and Brazil foremost". And the Latin American mass media report that the Russian corporation is also ready to participate in project development and in giant transcontinental gas pipeline construction, which should connect Argentina, Bolivia, Brazil, Venezuela, Paraguay and Uruguay. It is 8 000 km long and construction costs are estimated at $23 bln.

Bolivia occupies the third place in Latin America after Venezuela, Trinidad and Tobago by the natural gas reserves, which amount 1,5 Tcm. The main gas reserves are located in four largest fields, namely Margarita, San Alberto, Sabalo, Itau, discovered in the southeastern part of the country.

Moreover, Bolivia is the main natural gas supplier to such countries, as Brazil and Argentina.

Currently, the Argentina's market gets around 3 mcm of Bolivian gas daily. And Brazil also gets 27-30 mcm of gas from Bolivia daily.

However, Bolivia can not provide such volumes of deliveries lately.

In experts' opinion, Bolivia will be unable to fulfill contractual obligations to the neighbors and provide the growing demand of the internal market without putting into operation the new oil and gas fields. Foreign investments into oil and gas industry have sharply gone down since Evo Morales has nationalized the country by his left-radical policy in May, 2006.

The foreigners, working on the Bolivian territory, were offered very hard terms. Around 50% profit from oil and gas extraction and processing is withheld from the companies, which have signed contracts with the state YPFB.

No wonder that Morales has left nothing but to look for the new partners, as hardly any large European company would cooperate with YPFB under present terms.

As the Independent Consulting Group "2K Audit-Business consulting" management partner Ivan Andrievsky marks the issue of Gazprom keeping is of vital importance for the Bolivian president, thus not only from economic (there is the real threat to disrupt the export supplies to Argentina and Brazil), but also from political viewpoint.

Evo Morales is simply obligated to prove that his "left" government is able to attract favor able foreign investments. And even after the agreement signing he marked he would welcome any transaction with Gazprom.

In his turn, the acting director of YPFB Santos Ramirez Valverde commented the country's head policy and said that "Bolivian gas extraction industry needs partners, but not patrons". "Gazprom will be our partner", he explained.

However, if Bolivian part interests are quite obvious, it is hard to understand the Russian gas corporation motivation, in Andrievsky opinion. Though this Latin American republic disposes the large gas reserves, they are insignificant by the Gazprom standards. And moreover, the financial solvency of the Latin American consumers is far lower than the European ones.

However, Gazprom pursues the international expansion policy and is ready to take a risk and enter the new market outlets. Thus, as Bolivia is interested in the cooperation far more than the Russian corporation, Gazprom can bargain and demand more favorable terms for itself after the prospecting.

Updated April 3, 20

08

   Gazprom placed Eurobonds to the sum $1,5 billion on April, 2. The profitability of issue has been initially declared at the level considerably exceeding the parameters of the securities circulating at the market. The investors were offered over 0,5% bonus. Then the hair-trigger reaction has followed, as investors started to sell bonds of other companies. Thus, Gazprom has started the process of debts revaluation of the Russian companies.

   Interfax agency reported that Gazprombank had declared about the profitability of the planned Eurobonds issue at the $1,5 billion volume placed in terms of two tranche as LPN.

The profitability of issue, repaid in five years, would make 7,5% per annum, in ten years – 8,2-8,5%. "These levels envisage a bonus to the current profitability of the gas monopoly Eurobonds at the 0,8-1% level", MDM-Bank

analysts calculated. They could not recall that the Russian borrowers of such high level had offered the significant bonus for their bonds' initial offering. "The bonus was no more than 0,4% earlier, even during the most unsuccessful market environment", suppose in MDM-Bank.

   The stated profitability level by the new issue of Gazprom Eurobonds aroused the hair-trigger reaction at the Eurobonds market. The quotations of Gazprom and Gazprombank analogical in terms of bonds repayment went only 0,5% down as compared to the average price the day before. But Lukoil securities' prices have fallen 1,3% down. The quotations of Transneft, TNK-BP and Severstal bonds reacted less sharp.

   The access to the global bond market is closed for the majority of borrowers now.

However, the inves tors are ready to provide funds such issuers as Gazprom and Rosneft.

"The market remained accessible for the companies of such level, but the terms of funds attraction became harder there", considers Trust Bank analyst Pavel Pikulev. According to him, the gas monopolist enters the debt market

too often, and investors are not ready to buy securities without a significant bonus in terms of instability at the markets. According to Cbonds agency data, from the moment the Russian market has felt the influence of the world crisis for the first time, Gazprom has placed four issues of Eurobonds at $3,3 billion. 20 issues of the gas monopoly Eurobonds costing around $21,5 billion are in the circulation.

   The planned placement is carried out within the framework of the debt borrowings program with the maximum volume $30 billion. An issue will consist of two series to the total sum $1,5 billion. Fitch Ratings rating agency has given the BBB- rating to the planned issue of Eurobonds. The rating of the whole LPN program was raised to the analogical BBB- level.

   Gazprom does not have specific aims for borrowing.

It needs money for both operating and investment-financial activity, as well as for refinancing the current debts", considers oil and gas analyst Capital Investment Company Vitaly Kryukov.

Gazprom should cancel three syndicated loans to the sum $2,15 billion by the year-end. "Thus, Gazprom debt load is not high", considers the head of MDM-Bank department for bonds market analysis Mikhail Galkin.

Fitch analysts also speak about the strengthening of the monopoly borrowing capacity.

   However, Gazprom has marked the stated levels of profitability down up to 7,25% and 8,1% respectively. They are 0,3-0,4% lower than the last ones and exceed the total level of the monopoly profitability by 0,6-0,7%. "The issue organizers have chosen the efficient strategy, having declared at the beginning the very attractive benchmark for profitability, and that provided them with the surplus of demand from the investors' part", Mikhail Galkin supposes.

The significant oversubscription allowed Gazprom to correct the benchmark for profitability down and, nevertheless, to attract the necessary volume, he adds.

   The profitability, with which the recent Gazprom placement has passed, still exceeds the current market level. "The market did not digest the new levels yet, which Gazprom decided to occupy", considers ING Wholesale banking analyst Andrey Andreyanov. According to him, in the future one should expect sales continuation of the corporate bonds belonging to other companies to buy more favorable securities of Gazprom.

As for the new issues which Rosneft and Evraz planned, they will have to place oneself with the considerable bonus looking at Gazprom, which bonds are considered the benchmark.

Actuality February 27, 2008

   Gazprom and Siberian Coal Energy Company (SUEK) agreed on the parameters of transaction for joint venture establishment after more than one year of negotiations.

SUEK will become the center for assets consolidation. It will hold additional emission that Gazprom will pay by the part of its energy assets. As a result the monopoly receives 50% plus one stock in the largest Russian energy company with the general installed capacity 30,5 thousands MW and the cost more than $16 bln. The strategic line of its development was already defined by the first vice-prime minister,

the head of board of directors of Gazprom Dmitry Medvedev: he sent SUEK to IPO.

   Gazprom and SUEK officially declared about signing of agreement for consolidation of energy and coal assets of companies on SUEK basis. The document stipulates that SUEK will hold the additional emission of stocks that will be fully placed in favor of Gazprom subsidiaries (they will become owners of 50% plus one stock of SUEK and will pay the additional emission by stocks of the energy company). The board of directors of joint venture will consist of 11 people – 5 are Gazprom representatives, 4 are representatives of SUEK stockholders and 2 are independent directors.

The present director general of SUEK Vladimir Rashevsky will head the company.

   In the report of the companies is said th at Gazprom and SUEK stockholders will conclude the agreement

at English law that will regulate their relationships, including principles of corporate management.

The parties plan to complete the transaction up to August 31, 2008. In the near future they will file an application to the Federal Antimonopoly Service.

   Gazprom will contribute electric assets to the capital of SUEK, falling at the stake of the monopoly in the capital of "RAO UES of Russia" after its reorganization, and also 15,61% stocks of OGC-2, 17,13% stocks of OGC-6, 5,27% stocks of OGC-5 and 5% stocks of TGC-5.

Taking into account the stocks that Gazprom exchanged with other minorities of RAO UES in summer, 2007, SUEK will get the controlling stock interest of OGC-2 and OGC-6.

   First about intention to establish joint venture Gazprom and SUEK declared in February, 2007. Negotiations passed very hard as parties could not coordinate the cost of assets of the monopoly and SUEK.

At transaction formation, in which Renaissance Capital, Citi and Gazprombank were engaged, SUEK turned out to be more expensive. But the monopoly declined to pay the margin by money. As a result SUEK stockholders yielded. As participants of transaction told, the assets of both companies are estimated at $8 bln. This figure was officially confirmed by Vladimir Rashevsky, the director general of SUEK, yesterday.

He specified, that "estimation of the diverse assets of SUEK and energy assets of Gazprom that can be underestimated on the first stage of energy restructure is an extraordinarily hard task".

   Igor Vasilev from Troika Dialog estimates the cost of Gazprom energy assets contributed to SUEK at more than $8 bln. The source in Gazprom supposes that the monopoly made concessions as the real SUEK value, as evaluated by independent experts, does not exceed $5,5 bln. But the senior analyst of Bank of Moscow Dmitry Skvorcov considers that taking into account high prices at energy coal SUEK capitalization can total $10 bln, therefore the estimation at $8 bln is "low". With him agrees investment

banker close to the transaction.

According to his forecasts, in 2008 EBITDA SUEK is expected at the level $1-1,2 bln. Director of UBS analytical department Alexey Morozov says that growth of contract prices at energy coal can total 80% to the level of the last year. But Rio Tinto already offers the Japanese consumers to conclude contracts at price $135 per ton with FOB supply. In this case the price growth at coal can total 140%.

   According to the official data of SUEK and Gazprom, the general installed capacity of the incorporated company (stations OGC-2, OGC-6, TGC-12, TGC-13) will total about 25 000 MW (about 30,5 thousand MW taking into account the corporate participation of SUEK in the electric power system of Far East). The current and future stockholders the of renewed SUEK estimate its stake on the Russian energy market at 12% (about 15% taking into account the electric power system of Far East), the proved and possible reserves of SUEK coal are about 5,8 bln tons.

   How SUEK will develop under Gazprom control determined Dmitry Medvedev, the first vice-prime minister, the head of board of directors of the monopoly. He marked that "in the long run we will get another large company with the subsequent entrance to IPO and public offering of sticks". Mr. Rashevsky says that IPO can take place already in 2008-2009, offering volume – up to 25%. The company needs IPO for "capital attraction", because it has the large investment program.

For the nearest three years, as reported in SUEK, investment program totals $1 bln.

   According to Dmitry Skvorcov, it is impossible

to estimate the joint venture capitalization by the simple investment. The analyst supposes that the value of the renewed SUEK will total about $20 bln, i.e. during IPO it can attract $5 bln. "IPO should be interesting to the stockholders of SUEK that give Gazprom control over the company, not receiving a penny", considers Mr. Skvorcov. However, in Gazprom mark that it will be real to conduct IPO no sooner than in 2009 and it is expedient to place about 20% comp any stocks on

a stock exchange.

For close of South Stream route Aleksey Miller, Gazprom head, should drum up support of Hungary yet.

   The agreement of Russia and Serbia has provided Gazprom with extremely favorable terms of work in this country.

It acquired the state NIS cheap and got advantages in admission to the Serbian area of future South Stream gas pipeline. Gazprom drummed up support of Austria also, and within the agreement frames got a half in one of the largest European gas trad ing floors.

Hungary should become the last element of South Stream. In analysts' opinion, in such situation it "can propose any price". Especially in the conditions of strong criticism of European countries' loyalty to Gazprom from the USA part.

   During a visit to Russia of Boris Tadich, Serbia President, and Prime Minister Voislav Koshtunitsa was signed an intergovernmental agreement about collaboration in oil and gas industry, approved by Serbia government on January, 22. As Vladimir Putin, Russia President, reported according to signing results, except for the intergovernmental agreement, was signed an additional protocol about a sale of 51% of Serbian public corporation Naftna Industrija Srbije (NIS) to Gazprom Neft.

Sale-Purchase Agreement of NIS stocks, as Dow Jones reports, should be signed no later than December 31, 2008.

In it, in particular, will be specified grant of Gazprom Neft rights for NIS operative management.

   The intergovernmental agreement is signed for 30 years with an automatic extension for five years, if parties will not want to break it. In the document is specified the collaboration in construction of trans-Serbian gas pipeline (power no less than 10 bcm a year) and Banatski Dvor UGSF (Underground Gas Storage Facilities), which will become the area of South Stream gas pipeline (Gazprom will carry out this project in partnership with Italian Eni), and also in NIS reconstruction (produces 1 mln tons and processes more than 7 mln tons of oil a year). Gazprom Export and Gazprom Neft are responsible for projects.

   Additional protocol about NIS sale to Gazprom Neft is dated January, 23.

In it Serbia authorities are obligated to sell to Gazprom Neft 4 158 040 NIS stocks (51% of the authorized capital) for €400 mln. Gazprom Neft is obligated to invest in NIS €500 mln in 2008-2012.

Serbia is obligated to save technical requirements to quality of produced oil products without changes before modernization completion, and also to provide defense of oil products' market, produced by NIS, within at least two years.

   In own analytic review UBS marks that, although as a result of NIS acquisition own powers of Gazprom Neft on processing will increase, one should remember that processing abroad is far less profitable than Russian one that uses tax allowances.

But still Gazprom Neft will gain control over 78% of oil products retail market in Serbia, and Russian business on the whole – more than 90%. Lukoil occupies the second place on the market (15%) after subsidiary company NIS Yugpetrol.

In 2003 the company has acquired 79,5% of Beopetrol for €117 mln plus €90 mln investment obligations, and gained control over 178 gas stations in Serbia and 28 gas

stations in Kosovo.

   Besides NIS low cost (the cost of its assets at the year-end was estimated at $1,9 bln) there are Gazprom projects will get additional support from Serbia part. According to the intergovernmental agreement, the country government has obligated to afford projects with preferential tax and custom treatment, to provide energy supply and land acquisition for gas pipeline construction. The document foresees an exemption of VAT services also, works and materials for the term, necessary for achievement of projects' payback.

   For carrying out of project gas part the parties will set up a joint venture (JV), in which 51% will belong to Gazprom, 49% – to Serbian public corporation Srbijagas.

JV will be gas pipeline and UGSF operator, setting tariffs for gas transportation

and its storage. An absolute right for the use of gas pipeline whole power and UGSF will belong to the Russian part. This point of agreement has fundamental value for Gazprom, as new rules of the European gas market foresee the equal admission to the pipeline for all suppliers.

Until now among all new transport projects in Europe Gazprom had the prerogative right for admission only to Yamal-Europe gas pipeline.

   Gazprom positions on the market of gas distribution in Europe strengthened additionally another agreement about collaboration – with Austrian OMV. The document foresees the monopoly transfer of 50% in Central Europe Gas Hub (CEGH), to OMV subsidiary Gas International.

CEGH – one of the largest floors on gas trading in Europe located in Austrian Baumgarten.