During the conference SDAG representative Alexey Fadeev spoke about logistics strategy for implementation of Shtokman Gas-Condensate Field Development, Phase I. In his presentation Alexey stated that today the main objective is the selection of optimal scheme for delivery of cargo and transportation of personnel to the work site. Several routes are under consideration; moreover the particular attention during logistics operations will be given to labor and industrial safety. The logistics strategy for SGCF development also assumes maximum use of the Murmansk Region capabilities in transportation, thus imposing special requirements to regional infrastructure. In this respect the main priorities are to improve riding qualities and further reconstruct Murmansk-Teriberka Road, enhance cellular communication quality along that route, as well as elaborate optimal customs clearance scheme.

The Agreement provides for cooperation in training, employment, personnel career enhancement, including organization of personnel training to be engaged in phase 1 of the Shtokman Project. To this effect, the Parties to the Agreement intend to jointly develop training programs based on SDAG requirements, and with regard to the Project unique features.

“SDAG HR policy stipulates engagement of best and talented young professionals in the Project, which will promote to creation of highly effective team. We are confident that MGIMO and MIEP long experience in training of highly professional personnel will significantly contribute to the human resources content of the Project. It will considerably increase Russian content in the Project, while engagement of your graduates in the Shtokman Project will serve the basis for creating human resources potential for new large Russian and international projects in the Arctic shelf” — said Alexei Zagorovskiy at the signing ceremony.

Information

SDAG has been actively developing partners’ relations with most famous Russian Universities and colleges under training program of young Russian specialists for the Shtokman Project. The Cooperation Agreement with MGIMO and MIEP is the fifth document signed within the past year. Similar agreements were signed earlier with Gubkin Russian State University of Oil and Gas, Murmansk State Technical University, Northern (Arctic) Federal University (Arkhangelsk), and Admiral Makarov State Marine Academy (Saint-Petersburg).

At the video conference 2011 activities’ results of Joint Working Groups comprising representatives of the Administration of Murmansk Region and SDAG employees have been summarized.

Significant progress was noted in relation to engagement of the Murmansk Region enterprises in the Project of integrated Development of Shtokman Gas-Condensate Field and specialists’ training to support HR needs of the Project. The parties devoted special attention to discussing results of Joint Working Groups’ activities to use transportation and logistics infrastructure, as well as power supply system of the Region within the scope of the Shtokman Project. The joint work of the Company and the Region to assure environmental protection and ecological safety of the Shtokman Project was also positively evaluated. When discussing tax issues, the SDAG top management has expressed gratitude to the Government of the Murmansk Region for effective cooperation in establishing preferential tax regime for the Project on the regional level.

During the video conference the parties have underlined effectiveness of cooperation between SDAG and the Murmansk Region within Joint Working Groups, and agreed to continue joint activities in the noted areas in 2012.

Shtokman Development AG (SDAG) delegation participated in the event. Head of Corporate Relations Department, Secretary of SDAG Board of Directors Andrey Krivorotov delivered a speech dedicated to the current status of Integrated Shtokman field development, Phase 1. Representatives of SDAG shareholders — M.U.Basarygin (Gazprom) and J.H.Skogen (Statoil ASA) also spoke about the Shtokman project.

As part of the Conference the first forum of Norwegian-Russian educational and research consortium for international business promotion (NAREC) was arranged, as well as the workshop conference dedicated to creation and development of oil and gas cluster in the Murmansk region. SDAG representatives participated in expert discussions during both events.

Reference

Russian-Norwegian conferences are held annually by the Norwegian Association of Partners in Oil and Gas Industry “INTSOK”. The INTSOK Association was established in 1997 by the national oil and gas companies and the Government of Norway, and currently unites more than 200 enterprises. INTSOK interacts actively with suppliers of equipment and technologies, service companies in order to render them assistance in assessment of market opportunities, and strengthen their competitive advantages.

In 2012 the conference was organized jointly with Ministry of Oil Industry and Energy of Norway, Natural Resources and Environment Ministry of Russia, Norwegian Directorate of Oil, Mayor’s Office of Oslo, Union of Oil and Gas Manufacturers of Russia and Russian Gubkin Oil and Gas University.

The regional contest was aimed to bring the facts and current events related to the development of Shtokman gas-condensate field under the notice of journalistic community. Fourteen representatives of the regional media who took part in the contest have presented their materials published in press or broadcasted on TV and radio. In all, 37 works were reviewed by the members of the panel of judges.

The winners of “Shtokman — the vector of Murmansk Region development” nomination were Yuri Banko (newspaper Polyarnaya Pravda), Natalya Savinykh (newspaper Na Strazhe Zapolyarya) and Rodon Severyanov (TV-21). The first place winner in “Shtokman, the socially responsible project” nomination was a journalist of the local newspaper Murmanskiy Vestnik Yuniya Valamina and Olga Rybak, the correspondent of the newspaper Na Strazhe Zapolyarya, won the second place.

Also, the organizers have created a special award for “Active involvement in Shtokman Project media coverage” for the journalists who presented the largest number of materials at the contest.

Prospects for the development of cooperation in the areas of mutual interest while implementing the Shtokman project were discussed during the meeting. In particular, the parties exchanged opinions on opportunities to utilize Nenets Autonomous Region potential for logistics and transport support of operations at the Shtokman Gas Condensate Field during the post-FID stage. Interest in regular communication on the matters of further collaboration between the Company and the Region was also confirmed during the meeting.

The shareholders assessed the good progress made but consider that some additional time is required to achieve the necessary conditions to take the Final Investment Decision (FID).

Following discussion of the current situation the shareholders decided to postpone the Final investment decision until the end of March 2012. This timetable to take FID is necessary given the importance and size of the Shtokman project.

“Shtokman is a strategic Project for all of the partners, — Alexei Miller, President of the SDAG Board of Directors, Chairman of the Management Committee of Gazprom stressed. — In this context the FID must be well prepared taking into account scale and complexity of the Project. The shareholders and SDAG are determined to continue their good and close cooperation”.

A festive show was run for 75 kids in the Children’s Art Center after A. Bredov. The kids got involved in the New Year performance helping Father the Frost and The Snow Maiden to return Fairy Book so that they all can see New 2012 Year in, they danced, sang songs and walked around the sparkling New Year’s Tree.

At the end of the party SDAG representatives wished the children happiness, prosperity and good luck in the new year and presented every kid a sweet gift and a toy symbol of the Arctic — a big snow-white seal

Establishing of special language lab should enhance the quality of education in Lodeininskaya school, as well as improve language skills of school graduates in case of entering colleges and universities being a potential skill pool for the Shtokman Project. As a multinational company Shtokman Development AG assesses foreign language skills, including English language, as one of key requirements to specialists employed in international oil & gas projects.

Moreover in order to develop the social infrastructure of Teriberka settlement Shtokman Development AG performed a capital reconstruction and equipped Lodeininskaya school gym with sports and weight-lifting facilities. Installed facilities substantially expand power and cardio exercises, as well as sports games available to the visitors. The Lodeininskaya school gym is open to both school pupils, and all residents of Teriberka settlement.

Reference:

Lodeininskaya school is a secondary public school located in Teriberka settlement, Kola district of Murmansk region. Currently 88 students attend Lodeininskaya school.

The hearings got together local citizens, officials of regional authorities, local municipality, regional and federal governmental agencies, representatives of Fisheries Union of North, Kola Saami Association, Institutions of the Kola Scientific Center of the Russian Academy of Sciences as well as environmental public organizations, such as The Barents Sea branch of WWF, Kola Center of wildlife protection, etc.

Discussions led to the approval of the project solutions and results of environmental impact assessment.

It was noted in particular during hearings that the industrial facilities will be located outside of the specially protected natural sites and areas of environmental hypersensitivity. Implementation of environmental actions will allow mitigating environmental impact while countervailing measures will compensate for the lost biological resources. In addition, planned activities will make a positive impact on the social living conditions of the local population due to the development of the productions and social infrastructure, job creation and increased tax revenues at various budget levels.

According to the Russian environmental legislation, community liaison offices have been functioning in Moscow, Murmansk and Teriberka from November 7 to December 8, 2011 where everybody could familiarise with the documents and share comments. Besides, materials were published at SDAG Internet webpage www.shtokman.ru.

All comments and proposals received in the course of the public hearings and through the community liaison offices will be sent to the respective company units for further consideration.

NOTE

According to Russian environmental legislation, public hearings are among major tools of discussing environmental issues associated with large investment projects implementation. SDAG arranged public hearings in terms of offshore facilities in May 2010, and Gas treatment unit (GTU) in February 2011. Solutions on LNG plant and Onshore Infrastructure facilities presented during the latest hearings are the continuation of Procedure of Project Discussion “Integrated development of the Shtokman Gas Condensate Field. Phase 1”. The comments and proposals made will be duly taken care of in the post-FID construction and operation of SGCF facilities.

The main consultant for SDAG on environmental studiesis — FRECOM and the main consultant of SDAG on Hydrocarbon Spill studies- “Informatika riska” took part in the meeting along with representatives of many public environmental organizations such as Greenpeace Russia, Bellona-Murmansk, Russian Union of Birds Protection, Marine Mammal Council, Ecojuris Institute of Environmental Law, GreenLab, and Ecocenter. Representatives of Gazprom dobycha shelf, Gazprom VNIIGAZ, “Environmental and analytical center of gas industry” were also present at the meeting.

Marat Sharifullin, SDAG Deputy Technical Director for Environment gave a brief description of the Shtokman Development Project Phase 1 and presented a general overview on completed environmental surveys. Representatives of FRECOM presented current status of the results of the environmental, social, and health impact assessment (ESHIA) performed in compliance with international requirements, and “Informatika riska” presented an initial report for developing the SDAG Hydrocarbon Spill Response Plan.

Also the issues related to emergency response were discussed during the meeting. The parts exchanged views on the prospects of SDAG and NGOs joint efforts to ensure environmental safety during development of Shtokman gas-condensate field. The participants agreed to hold next meeting in the same constructive way in Murmansk in February next year.

Representatives of SDAG and NGOs, who took part in the meeting, confirmed their joint intent to continue a constructive dialogue in order to minimize environmental risks during development of the fields on the Russian Arctic shelf.

He said that SDAG currently is focused on creation of the necessary conditions for Shareholders to make the final investment decision in December 2011. This will allow supplying the first gas in 2016 and first LNG in 2017.

All main technical solutions have been made, the technical Project feasibility has been confirmed by the markets, and the major tenders are about to be closed. The Company is preparing for the construction stage. A significant progress has been reached to insure special tax breaks for Shtokman Project. It is now understood in Russia, that a big-scale complex project like Shtokman needs the state support at all levels.

Alexey Zagorovskiy emphasized that one of the most important goals of the Shtokman project is to attract as many Russian contractors as possible to build production and infrastructure facilities. Cooperation with the world leading oil and gas corporations will let Russian companies gain new experience in engineering and design, manufacturing equipment and tools for development of oil and gas fields in the Arctic shelf.

“Shtokman is one of the most ambitious gas projects in Russia. According to our preliminary estimates the overall socio-economic effect on Russia’s GDP during the construction and operation of Phase 1 facilities of the Shtokman project could reach up to 400 billion U.S. dollars ”, — stated Alexey Zagorovskiy.

Reference:

Russia Gas Forum is one of the most important events of the year for Russian and International gas business, where the parties can exchange the information related to innovation development and international cooperation in gas sector.

This Forum traditionally has been the place to bring together state officials and politicians, representatives of the Russian Ministries and Departments, representatives of the International Gas Union, European Union of the Natural Gas Industry, leaders of the biggest producers and operators, representatives of gas unions and associations, leading experts in gas sector.

The Forum was organized by the Russian gas society with the support of Gazprom.

The wide perspectives of dialog between Russia and Norway were pointed out during the meeting. The dialog is successfully developing by the example of SDAG as the first joint project on the Arctic shelf with participation of the leading energy corporations of two countries — Gazprom and Statoil ASA.

Reference

“INTSOK” — Norwegian Oil and Gas Partners — was established in 1997 by the Norwegian oil and gas industry and the Norwegian Government. “INTSOK” incorporates the majority of the Norwegian oil and gas companies, suppliers of equipment and services for the shelf projects.

The excursion program included a hike along ecological path Elnyun II. Its elevation above sea level is 580 meters. During the excursion, kids took part in an environmental quiz. School kids also visited a museum of the Nature Reserve founder G.K. Kreps and apartment museum of famous Russian geographer and researcher O.I. Semenov-Tyan-Shansky, where they were told about the history of the Lapland Nature Reserve, life and activity of its founders.

After the excursion, the kids were proposed to take part in a drawing contest arranged by Shtokman Development AG. The contest winners will be awarded prizes, and best pictures will be placed on SDAG’s Intranet Portal and in Saami Nature Fund office.

Victor Petrov, Kola Wildlife Preservation Center specialist, delivered a lecture to the school kids. He, in particular, noted the following: “The earlier kids become acquainted with local nature, with animal and vegetal life, the easier it will be to explain them that attitude of care towards nature plays a major role. Through such projects as ‘Environmental Lessons’ arranged by SDAG, kids from their early years develop environmental consciousness”.

In 2012, project “Environmental Lessons in the Lapland Nature Reserve” aimed at development of the rising generation environmental culture and environmental knowledge will be continued. Environmental care is one of SDAG’s top priorities. The Company is committed to the highest Russian and international environmental standards.

Information

The Lapland State Nature Biosphere Reserve is located in the Murmansk Region. It is one of the largest protected natural areas in Europe. The main value of the Nature Reserve is intact nature. The Nature Reserve is one of the oldest in Russia, it was founded in 1930 for the preservation of wild reindeer population and keeping overall geosystem intact. Several archeological sites related to Saami history are located in the territory of the Nature Reserve.

10 of the Natural Sciences Department students became winners. In 2012 the winners of this contest will have professional training and internship in the Company business units in Moscow, Murmansk and Teriberka. Successful trainees who will continue their education in MFTU will be offered contracts with the Company for future employment in SDAG provided that they have graduated with good results.

The students who failed to be in the top 10, but were proactive, will have an opportunity to be additionally tested from January 2012 onwards, and eventually become trainees in Shtokman Development AG.

Student training organization is part of a big program implemented by SDAG within the program of training personnel for Shtokman Project. Murmansk Federal Technical University is the first higher educational institution in the Russian North-West to make a cooperation frame agreement with the Company and to start the practical implementation of the actions aimed at providing future personnel for the Project.

Wi-Fi zone in the main building of MSTU allows students, trainees and teachers to use free wireless connection to the Internet. State-of-the-art digital equipment allows simultaneous connection for 50 users, speed of the Internet connection is 2 Mb/sec.

“Opening of Wi-Fi zone in MSTU is the first project of this kind implemented in a training institution in Murmansk. Access to the Internet is first of all access to the source of new knowledge and we are glad that MSTU teachers and students have received a possibility of immediate access to a large amount of information available on the Internet with the help of our Company. Wi-Fi zone creation is one more step in strengthening cooperation and stable partnership relations between Shtokman Development AG and Murmansk State Technical University”, Alexander Djakhonov, deputy director of Murmansk and Teriberka branch, said.

Sergey Dubrovin, MSTU provost for academic affairs, also said: “We express appreciation to Shtokman Development AG for assistance and funding of this project. I believe that very soon Wi-Fi zone will become very popular among our students and trainees who have received a possibility to use wireless access to the Internet on the territory of our University”.

Aleksandr Selin, Director of SDAG Murmansk Branch, has made a report at the Conference.

Aleksandr Selin has informed Conference participants on SDAG Tender Policy, on the standards and requirements set up for the Russian partners involved in the Shtokman Project. “Maximum involvement of Russian Content in the Shtokman Project is one of the key SDAG priorities. Shtokman is supposed to be an example for all future projects to be implemented in the Arctic Shelf, — commented Aleksandr Selin. — Taking into account the magnitude and complexity of the Shtokman Project, SDAG intends to attract Russian contractors and suppliers complying with the HSE highest international standards. SDAG continues to search the reliable and professional Russian partners, using the potential of Murmanskshelf Association as well. SDAG highly estimates the activity of this Association and plans to further develop effective cooperation”.

SDAG stand decorated by the corporate colors and the plants of Kola Subarctic became one of the main attractions of this Exhibition. Company personnel engaged in the stand told the visitors about the unique features and technical nature of Shtokman project.

SDAG has been presenting its stand in SevTEC exhibition for consecutive three years.

Mr.Dmitrienko, Murmansk Governor, Mr.Nikora, Regional Parliament Chairman, Mr.Stratiy, the Chairman of Murmanshelf Association, and some other people visited the opening ceremony.

According to Mr.Dmitrenko, the number of participants increased greatly since this exhibition had been inaugurated which proves progressive advance of Murmansk Region. The Governor specially emphasized the importance of Shtokman Project implementation.

This year the key subjects of SevTEC-2011 are Shtokman gas condensate field development as well as development of Murmansk transport system and the Northern Sea Route.

NOTE

SevTec exhibition is an efficient site for extending communication and improving the interfaces between the specialists engaged in various industries. Its main purposes are as follows: promote the development of fuel and energy sector, facilitate the efficient application of industrial potential, transport and infrastructure of the Russian Arctic.

This year over 100 Russian and Western companies, including Total, Statoil, Murmanshelf, Sevmach (Archangelsk Region), Start (Penza Region), Saturn-Gas Turbines (Yaroslavl Region), Severstal-Metiz (Vologda Region) and other companies and enterprises participated in this Exhibition. Canadian, Finnish, German, British, Norwegian companies were represented, including Canadian Embassy in Russia.

The document was signed by Alexei Zagorovskiy, Chief Executive Officer and Sergey Frank, Chairman of the Board of Sovcomflot.

The Agreement stipulates mutual consultations and exchange of information on support fleet services for the Shtokman Project, organization of environmentally safe marine transportation patterns, transportation of liquid hydrocarbons, and operation of onshore logistic bases.

“SDAG, as the operator of phase 1 of the largest Russian gas project on the Arctic shelf is interested in promoting and analysis of Sovcomflot experience, the first class operator, which provides service for offshore oil and gas fields. We consider mutual consultations with Sovcomflot to be of utmost significance, taking into account the fact that the company has been operating in the Russian, as well as in world markets, and for long has been a partner of Gazprom, our main Shareholder”, stated Alexei Zagorovskiy after signing the Agreement.

“Extension of the company role in providing services to energy projects on the Russian continental shelf is one of the directions of Sovcomflot development strategy. The Shtokman Project ranks high in our plans. I am confident that close cooperation with the Project Operator will contribute to development of optimal logistics patterns strongly sought-for during the Project realization”, pointed out Sergey Frank.

NOTE

SCF Group of Companies (Sovcomflot) is one of the world biggest shipping companies specializing in shipping of oil, oil products and LNG. The company owns the fleet of 156 vessels of about 12 mln dwt. The company is registered in St.-Petersburg, with offices in Moscow, Novorossiysk, Murmansk, Vladivostok, London, Madrid and Singapore.

Owing to its wide line of ships represented in segments mostly sought-for by Largest Russian oil and gas companies, its developed products and high-end technologies — unique for shipping company, Sovcomflot meets highest requirements of its clients, providing reliable and effective transportation services for oil and gas companies.

The parties have underlined the importance of state support of investment activities and modification of regional income tax and property tax laws. In compliance with adopted amendments, strategic projects the be realized in the region may be exempt from property tax, with regional income tax rate being 13.5%.

The decision of the Government of the Region to transfer land lots in Teriberka from reserve into industrial and other special purpose categories was also discussed during the teleconference. This decision will enable SDAG accelerating registration of its right to land lots to be allocated for construction of phase 1facilities and required infrastructure.

“Regional income tax reduction and transfer of land lots allocated for the Shtokman Project into industrial category will help SDAG further progress in assessing the Project economics and preparing onshore Design Engineering Documentation of the Shtokman Project. We highly appreciate support the Government of the Region has been rendering to SDAG, and we are confident that we will carry on such cooperation”, said Mr. Alexei Zagorovskiy, SDAG Chief Executive Officer.

“Establishment of favorable investment climate in the region is one of the principal aims of the activities of the Government of the Murmansk Region. Herewith, we give special attention to maintaining balance between economic attractiveness and social liabilities undertaken by the investor. We are encouraged that our negotiations with the Shtokman Development AG have contributed in developing unified position on the subject, which guarantees safeguarding interests of the Company, as well as of the residents of the Murmansk Region”, underlined Mr. Dmitry Dmitrienko.

The patients were examined by Murmansk- based doctors who used local medical facilities in Teriberka. For diagnostic examinations they brought medical equipment to identify heart diseases, respiratory and hearing malfunctions, ultrasonic scanner was available too. During that action a neurologist, oculist, dermatologist and other specialists provided about 400 consultations.

In autumn 2011 another phase of the “Healthy Days in Teriberka” is scheduled where pediatricians will see local children.

Particular focus was made on the package of draft laws received in the State Duma for consideration related to application of concessional taxation for the Shtokman Project, opportunities to establish, operate and use artificial islands and simplification of the border crossing rules in the area of shelf operations.

Mutually beneficial cooperation of SDAG and RS is primarily targeted at achieving the appropriate quality and safety of the Russian design bureaus and ship-building yards services. The Parties will strive to enhance the participation of the biggest Russian industrial companies, to promote the partnership relations between the Russian and foreign engineering companies, equipment manufacturers, service providers, to support adaptation of Russian companies to the new kind of offshore operations. SDAG and RS also agreed to develop and improve the Russian maritime standards framework based on the offshore specifics and international experience.

“The partnership between SDAG and RS will facilitate the involvement of the Russian companies in Shtokman gas and condensate field development project. It will also enable the Russian manufacturers to get the experience, knowledge and know-how from the international companies”, Alexey Zagorovsky emphasized.

“Oil and gas offshore fields development requires strict compliance with safety and environmental regulations. Research and development, and innovative activities of RS, high professionalism of personnel enable RS to participate in the process of safety standards improvement at major offshore oil and gas projects, such as the Shtokman Gas-Condensate Field Development Project. Bridging of all the gaps in Russian regulatory framework regarding offshore fields is the most important objective and our joint contribution in safety standards improvement. The agreement we signed sets new tasks which we are ready to carry out with the highest quality”, Nikolay Reshetov highlighted.

Reference information

Russian Maritime Register of Shipping is one of the leading classification societies. The Shipping Register is recognized by the European Community and is a member of International Association of Classification Societies. Activities of the Shipping Register are aimed at assurance of high navigational safety standards, minimization of negative impact of human activities on the environment by means of research-justified risk assessments and risk management procedures.

At the meeting, the group summarized the results of incorporation of WWF environmental expert review comments regarding Shtokman Phase1 offshore facilities. For another thing, SDAG specialists reiterated the Company commitment to participation of public and environmental organizations in environmental studies and environmental monitoring in the area of Shtokman facilities construction and operation.

The parties exchanged their views on potential cooperation in setting up of compensatory specially protected nature area (SPNA) in the vicinity of the Voronia River mouth and on the Barents Sea continental coast opposite to Gavrilov Islands. Summarizing the meeting results, Marat Sharifullin, SDAG Deputy Technical Director for Environment, highlighted importance of participation in the dialogue and further development of the group environmental cooperation with the Northern Coalition member organizations.

In 2010, SDAG set up a special group of experts with a view to ensure maximum effectiveness in consideration of public comments and proposals on OVOS materials (environmental impact assessment) made in the course of public hearings regarding Shtokman Project. Such meetings were held in 2010, and proved their effectiveness.

The Board of Directors has confirmed the necessity to continue the dialogue with the Russian Federation state authorities at all levels so as to obtain a favorable economic environment for the Project, including taxation issues, and expressed support to the efforts made by shareholders and SDAG in this field. State support of the Project is one of the prerequisites for its successful implementation.

“Today we can state that the Project preparation phase is at the final stage. The Shareholders appraised past year activity of SDAG, and are confident that the Company is capable of achieving its objectives remaining prior to the adoption of the final investment decision”, - underlined Alexei Miller, President of the SDAG Board of Directors, Chairman of the Management Committee of Gazprom.

According to the Agreement SDAG and USC acknowledge their intentions to cooperate to achieve maximum Russian content for phase 1 of the Integrated Development of the Shtokman Gas and Condensate Field. The Parties agreed to cooperate and exchange information to extend the list of the Project participants and scope of Russian content.

“Engagement of Russian enterprises in the Project and development of their engineering capabilities are among the SDAG priorities. The Shtokman Project realization will contribute to the development of industrial and service capacities of Russian industry, and we intend to join efforts with USC in this direction”, — underlined Mr. A. Zagorovskiy.

Mr. R. Trotsenko assessed that “execution of the Agreement confirms the intention of SDAG, as Contractor to assure maximum engagement of potential of Russian ship building companies in the Shtokman Project using their existing and newly build capacities. Their capacities could be called for to manufacture production vessels, subsea production complexes, support and service vessels for offshore fields”.

SDAG and USC agreed to organize within the Agreement the Working Team on engaging Russian enterprises in the Project. The Parties assume that extended Russian content in the Project would contribute to further upgrading of Russian industrial capacities.

Background:

Shtokman gas-condensate field is located in the central part of the Russian sector of the Barents Sea 550 km away from Kola Peninsula. By the explored reserves of natural gas Shtokman is now one of the largest fields in the world. Phase One of Shtokman field will be developed with annual production of 23.7 bn m3 of gas per year by Shtokman Development AG, a company created in February 2008, a joint project of three leading world companies Gazprom (51%), Total S.A. (25%) and Statoil ASA (24%).

Unified Shipbuilding Corporation (USC) is a 100% state equity corporation. United Shipbuilding Corporation is a open joint stock company in Russia which unite shipbuilding, repair and maintenance subsidiaries in western and northern Russia, and in the country’s Far East, to streamline civilian shipbuilding using military facilities. The corporation was established by a series of Presidential Decrees signed by President Vladimir Putin. According to the decree, the corporation has 3 subsidiaries: the Western Shipbuilding Center in St. Petersburg, the Northern Shipbuilding and Maintenance Center in Severodvinsk and the Far Eastern Shipbuilding and Maintenance Center in Vladivostok. The state owns 100% of the shares.

Currently, in the town of Bolshoy Kamen (a joint project between USC and South Korea’s Daewoo Shipbuilding and Marine Engineering) new shipyards are under construction planned to produce modern heavy-tonnage vessels, including LNG carriers, floating drilling rigs and production platform topsides for Gazprom and other companies.

Alexey Zagorovskiy, CEO Shtokman Development AG (SDAG) made his speech during the parliament hearings. He presented to the audience the main parameters of the Shtokman field, uniqueness of technologies applied for the field development, and introduced in detail the legislation improvement areas required for the Russian shelf development projects.

SDAG Shareholders made a decision for maximization of the Russian Content in the project. Therefore Shtokman will give an additional impulse to the development of Russian regions and industry. Shtokman implementation will facilitate economical growth of the Russian North-West, creation of jobs, increase of tax revenues to the budget of all levels, will open an opportunity to develop both local plants and whole sectors of the Russian industry.

Implementation of such big scale and trailblazing project requires massive long-term investments and need for support at all levels of the state power. Jointly with shareholders SDAG is considering four packages as possible state support: taxation, customs preferences, removal of general legislation uncertainties related to continental shelf and border control issues.

“Implementation of the Shtokman project will allow Russia to establish a new gas producing region in the Arctic shelf. Under constantly growing demand for energy sources that issue is of paramount importance for the country. That is why the state support is prerequisite for the successful project implementation”, underlined Alexey Zagorovskiy.

The delegation head, Kirill Molodtsov, Vice-President for TEO and Phases 2 & 3 Interface SGCF, met Evgeniy Nikora, Chairman of the Murmansk regional Duma. The work progress on the package of draft laws intended for improving of the investment climate and regulating the investment activities in the Murmansk region was discussed during the talks.

The issue of the development of the city infrastructure for the needs of Shtokman project was debated at the meeting with Andrey Sysoev, Head of the Murmansk city administration. The city-manager also presented to the members of the Shtokman Development AG delegation the Action plan for the preparation and holding of celebration of the 100th anniversary of Murmansk foundation developed according to the Decree of RF President “On the celebration of the 100th anniversary of Murmansk foundation”.

’Plans to start the delivery of pipeline gas from the Shtokman field in 2016 remain unchanged and this should become a perfect gift to the centennial anniversary of Murmansk — a base city for the integrated development of Shtokman field’, - Kirill Molodtsov noted.

The representatives of Shtokman Development AG and the leading Murmansk enterprises exchanged opinions on the development of cooperation during the meeting of the Russian Content Committee that also took place on the first date of the visit. The Company specialists congratulated the co-organizer of the committee — Oil & Gas Industry Suppliers Association Murmanshelf with the 5th anniversary of its foundation and highlighted that Murmansk industry potential is of great demand for Shtokman field development .

During the visit the meeting of the committee on the participation of Russian companies in the Shtokman Field Development Project also took place. It was decided to facilitate the cooperation with Oil & Gas Industry Suppliers Association Sozvezdye which since 2006 unites the enterprises of the Arkhangelsk region which are planning to participate in the implementation of oil and gas projects on the shelf of the Arctic seas.

During the talks with the minister of education, science and culture of the Arkhangelsk region Ilya Ivankin the SDAG representatives highlighted the interest of Company in use of potential of the Northern (Arctic) Federal State University (S(A)FU) in the training of highly qualified personnel for the Shtokman project.

The visit was finalised by the ceremony of signing of the Frame Agreement on cooperation of Shtokman Development AG with S(A)FU which took place during the meeting of the Company delegation with the students and teachers of the leading university of the region. The document was signed by the rector of University Elena Kudryashova and SDAG Vice President.

“Today we state that the graduates of our university will be needed for the implementation of the Project”, — Kirill Molodtsov noted in his speech. “We shall energetically continue the activities for involving of the young specialists from the Arkhangelsk region, and the signed Agreement shall be a good support in this endeavour”.

SDAG representatives put forward an initiative to have public and environmental organizations involved in operational monitoring at Shtokman Project implementation stage. In addition, the attendees supported an idea to set up compensatory specially protected natural area in the vicinity of Voronia Bay at Kola Peninsula. Concerned public environmental organizations were proposed to accede to Cooperation Agreement between SDAG and WWF signed in September 2009, and to develop information sharing procedure.

The attendees confirmed a need to continue the dialogue. Shtokman Development AG intends to hold consultations with key stakeholders throughout the process of development of design engineering documentation within the scope of Shtokman Phase 1 implementation. With a view to discuss and address additional issues raised by public, SDAG, jointly with WWF, will hold a series of workshops for clarification of the Project basic engineering solutions.

In 2010, SDAG set up a special group of experts with a view to ensure maximum effectiveness in consideration of public comments and proposals on OVOS materials (environmental impact assessment) made in the course of public hearings regarding Shtokman Project. Such meetings were held in 2010, and proved their effectiveness.

Background:

Shtokman gas-condensate field is located in the central part of the Russian sector of the Barents Sea 550 km away from Kola Peninsula. By the explored reserves of natural gas Shtokman is now one of the largest fields in the world. Phase One of Shtokman field will be developed with annual production of 23.7 bn m3 of gas per year by Shtokman Development AG, a company created in February 2008, a joint project of three leading world companies Gazprom (51%), Total S.A. (25%) and Statoil ASA (24%).

World Wildlife Fund (WWF) is one of the largest non-governmental, charitable organizations, which has been working for more than 40 years to conserve the nature all around the world. Each year WWF supports over 1200 environmental projects, thus attracting the attention of millions of people to the problems of environment protection and their solution. World Wildlife Fund (WWF) started first projects in Russia back in 1988, and in 1994 opened a WWF representative office in Russia. In 2004 the World Wildlife Fund became a Russian national organization.

On 20 September 2010 the design engineering documentation on Shtokman gas-condensate field development, updated with consideration of the comments and proposals made by the public, received a positive conclusion from the State environmental expertise (GEE).

The Parties have discussed the results of joined Work Groups activity in regard to the land use and environment protection, information policy, use of the regional resources in the sphere of power supply, logistics and personnel training required for Shtokman Project Phase 1.

The Governor of Murmansk Region has stated an importance of the cooperation between the Government and Shtokman Development AG and expressed his hope that this interaction will be developed for the purpose of Project implementation.

According to the opinion of Alexey Zagorovskiy, Chief Executive Officer of Shtokman Development AG, current efficient interaction with Murmansk Region contributes to timely solution of the arising issues and comprehensive respect of regional interests in the frameworks of Shtokman Project implementation, including involvement of the enterprises located in Murmansk Region.

Press-conference topic: “Shtokman: Principal Decisions and Further Implementation”.

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