2. October 7, 2004www.eegas.com2 Gas Pipeline System of Gazprom The total length of Gazprom pipelines is about 154,000 km, including:The total length of Gazprom pipelines is about 154,000 km, including: ~54,000 km of 56 ~25,000 of 48 ~16,000 of 40 pipelines The average age of pipelines is 22 yearsThe average age of pipelines is 22 years In 2003, the pipelines supplied 327 bcm to Russian consumers, 91 bcm to FSU and 140 bcm to EuropeIn 2003, the pipelines supplied 327 bcm to Russian consumers, 91 bcm to FSU and 140 bcm to Europe 18 x 56 lines Source: www.gazprom.ru Ave 2004 production cost - $0.24/mcf European border delivery cost - $2.16/mcf, incl transit and taxes

3. October 7, 2004www.eegas.com3 Pipeline Breaks in 2000-2002 Gazproms pipeline break rate is about 0.2 per 1000 km, or ~30 per yearGazproms pipeline break rate is about 0.2 per 1000 km, or ~30 per year Worst case repair time (tundra, no railroad, melting snow) is 72 hours; its under 30 hours in populated areasWorst case repair time (tundra, no railroad, melting snow) is 72 hours; its under 30 hours in populated areas Pipeline system has a lot of bypass capacity, which minimizes operational lossPipeline system has a lot of bypass capacity, which minimizes operational loss

4. October 7, 2004www.eegas.com4 Existing Pipeline Capacity Gazprom has spare capacity along the Central corridor from West Siberia through the Russian borderGazprom has spare capacity along the Central corridor from West Siberia through the Russian border Eastern Urengoy corridor and the North corridor are fully loadedEastern Urengoy corridor and the North corridor are fully loaded The size and timing of pipe demand of Gazprom and its FSU neighbors depend on location and timing of the future capacity bottlenecksThe size and timing of pipe demand of Gazprom and its FSU neighbors depend on location and timing of the future capacity bottlenecks

5. October 7, 2004www.eegas.com5 Daily Flow Projections Is the Key Pipeline capacity is defined by the maximum daily flowPipeline capacity is defined by the maximum daily flow Russian gas flows have a huge seasonal swingRussian gas flows have a huge seasonal swing –Winter peaks are partly shaved by storage withdrawal mmcm/day

6. October 7, 2004www.eegas.com6 EEGA has developed a model that calculates spare capacity and capacity deficit in the FSU gas pipeline system through 2020 (by year and by section)EEGA has developed a model that calculates spare capacity and capacity deficit in the FSU gas pipeline system through 2020 (by year and by section) The model uses reasonable gas market forecasts for Russia, FSU and EuropeThe model uses reasonable gas market forecasts for Russia, FSU and Europe –EEGA makes projections of gas consumption in the service area of Gazprom in Russia by region and in FSU Daily Flows of Gas The model calculates regional balances and maximum daily flows from West to East and compares the flows with the existing pipeline capacityThe model calculates regional balances and maximum daily flows from West to East and compares the flows with the existing pipeline capacity Finally, location and timing of new pipeline projects are identifiedFinally, location and timing of new pipeline projects are identified

7. October 7, 2004www.eegas.com7 New Pipeline Construction 1.Zapolyarnoe-Urengoy – 3x56x200km – completed 2.Ukhta-Torzhok – 56x 1324km – under construction 3.Torzhok-Smolensk – 56x 324km (Russian section of Yamal-Europe) – completed 4.Yamal-Yamburg – 6x56x 520km – in about 2006-2017 5.North European Pipeline – 42 x1200km – in about 2011-2014 6.Gryazovets-NEP – 56x610km – same timing as NEP 7.Turkmenistan-Russia – 56x 1070km – in about 2012-2016 8.Novopskov-Uzhgorod – 56x 1420km – in about 2010-2014 9.Bogorodchany-Uzhgorod – 56x240km – in 2006-2008 10.Tula-Torzhok – 56x540km – in about 2008- 2011 New Pipeline Projects Required under Moderate Market Scenario

8. October 7, 2004www.eegas.com8 Upstream West Siberia Nearly all independent producers are located along and east of the Urengoy-Surgut- Chelyabinsk pipelinesNearly all independent producers are located along and east of the Urengoy-Surgut- Chelyabinsk pipelines –This section is fully loaded but there are options, like flow reversal and Siberian Interconnector Production decline at Urengoy, Yamburg and other old fields will free up enough capacity for the Yamal gasProduction decline at Urengoy, Yamburg and other old fields will free up enough capacity for the Yamal gas All Gazprom projections anticipate high gas markets in Russia and EuropeAll Gazprom projections anticipate high gas markets in Russia and Europe loaded spare capacity of ~30 bcmy loaded

9. October 7, 2004www.eegas.com9 West Siberian Pipeline Input Gazprom has enough pipeline capacity to take all West Siberian gasGazprom has enough pipeline capacity to take all West Siberian gas Billion cubic meters

10. October 7, 2004www.eegas.com10 The Size of the Pipe Market, MMT Nearly all new gas pipeline projects require 56 pipe of grade X65 and higherNearly all new gas pipeline projects require 56 pipe of grade X65 and higher Standard operating pressure is 75 and 85 barsStandard operating pressure is 75 and 85 bars Gazprom considers use of X100 pipe in YamalGazprom considers use of X100 pipe in Yamal 40 and 48 pipe is mostly required for replacement works40 and 48 pipe is mostly required for replacement works Totally, 12.8 mmt, including 7.5 mmt of 56 pipe

11. October 7, 2004www.eegas.com11 Where Does Gazprom Shop for Pipe? In Russia, only Volzhsky Pipe Mill can make 56 pipe (spiral-weld)In Russia, only Volzhsky Pipe Mill can make 56 pipe (spiral-weld) Ukrainian 56 pipe of Kharzyzsk Mill is the most popular product for replacement works and projects of local importanceUkrainian 56 pipe of Kharzyzsk Mill is the most popular product for replacement works and projects of local importance All export projects use imported pipe (mostly Mannesmann)All export projects use imported pipe (mostly Mannesmann) Typically, Gazprom gets conditional loan through ExIm bank of Germany, or Japan, or Italy, etcTypically, Gazprom gets conditional loan through ExIm bank of Germany, or Japan, or Italy, etc –By the loan terms, Gazprom has to buy pipe and compressor equipment from the creditor-country European pipe became very expensive, as Gazprom gets paid in Dollars and buys pipe in EurosEuropean pipe became very expensive, as Gazprom gets paid in Dollars and buys pipe in Euros

12. October 7, 2004www.eegas.com12 You wont find a project location in Russia that looks anything like the site of Aruba refinery

13. October 7, 2004www.eegas.com13 Most of new pipeline projects are located in areas where summer looks like this