blue fuel #12 | october 2011 | vol. 4 | issue 3

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Ý Ê Ñ Ï Î Ð ÒBLUE FUEL

October 2011 | Vol. 4 | Issue 3

Gazprom Export Global Newsletter

The European Union energy market is once again at a crossroads.

In recent years, changes that occurred in this market were influenced by the activities of the European political and regulatory authorities. However, the realities of the European gas markets do not necessarily align with political will. Instead, it is moulded under the influence of specific economic and even geographical circumstances which have operated successfully for decades.

One clear example of this is the unfortunate tragedy of the March tsunami in the northeast coast of Japan that dealt a blow to the Fukushima nuclear power plant – serving as a catalyst for changes to the European energy sector. This disaster led to the review of nuclear power development’s prospects in different regions of the world, including in some of the leading EU countries.

The outcome of this review includes not only policy decisions (for example, to phase out nuclear power generation in Germany and to postpone its return in Italy), but also a manifestation of the many distortions that have matured in the structure of the EU energy markets.

These distortions are of different nature. One can point to the tremendous subsidization of renewable energy sources, which distorts competition in the market above reasonable levels – not only raising the costs of the entire system and the final cost of electricity, but also undermining investment incentives in traditional power generation. In addition, the ongoing European financial crisis

means it will be interesting to see how state budgets will continue to subsidize renewable power generation projects.

Unfortunately, under the current system of benefits and rates, it is more profitable to develop coal generation that causes enormous emissions of carbon and other harmful pollution than to generate environmentally friendlier gas.

Europe may face the forthcoming underinvestment in gas, electricity and transport infrastructure, which will be inevitable due to the removal of players interested in its stable development from this business.

Gazprom is one of the few energy players that is actually able and committed to investing in the European energy’s security of supply and pipeline infrastructure. Nord Stream’s opening in November 2011 is an example of this. The pipeline will supply as much energy as 50 coal power stations or 40 nuclear power stations in the medium-term.

Realities help dispel many illusions such as abundant cheap gas, brought about by the shale revolution. The fact remains that there still needs to be investment in new fields and new infrastructure to ensure security of supply.

In general, the current situation can be considered the outcome of the fact that too many people sincerely believed that the short-term shocks are a sufficient basis for long-term structural changes in the market, however, the reality is that this is not the case.

TO OUR READERS:

IN THIS ISSUE

© Gazprom Export

Continues on page 13

To Our Readers: Pg. 1

Alexander Medvedev: The Asian Market After Fukushima

Pg. 2The Truth About ‘Cheap’ Natural Gas and Arbitration

Pg. 3South Stream Will Bridge Gas Imports Gap

Pg. 5Nord Stream is a Long-term Solution for Europe’s Energy Needs

Pg. 6Katharina UGS Facility Named After Russian Empress Catherine the Great

Pg. 8Banatski Dvor UGS Comes On Stream

Pg. 8Let the Natural Gas Flow

Pg. 9A Real Milestone in Our Cooperation

Pg. 10VEMEX Enters New Markets

Pg. 10Gazprom Group to Continue LNG Supplies to India

Pg. 11Gazprom Group and Green Energy Projects in Malaysia

Pg. 12Alexander Medvedev Briefed Japanese Experts on Gazprom Activities in Asian Markets

Pg. 13Waving Goodbye to the "Gas Glut" Worldview

Pg. 14Widening New Arts Vistas

Pg. 16Sports Center for the Blind Sponsored

Pg. 16French King of Fashion Returns to Russia

Pg. 17

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BLUE FUELGazprom Export Global Newsletter

Ý Ê Ñ Ï Î Ð Ò

www.gazpromexport.com | [email protected] | +7 (499) 503-61-61 | [email protected] October 2011 | Vol. 4 | Issue 3

The Asian Market After FukushimaAlexander Medvedev, Deputy Chairman of the Gazprom Management Committee, Director General of Gazprom Export

The March earthquake and tsunami had a devastating effect on the Japanese nuclear power plant in Fukushima, resulting in major changes for the world’s energy markets. Time, of course, will heal the wounds but I again want to say that Russia took the misfortunes of the Japanese people very close to heart.

Immediately after the tragedy, I attended the meeting with the Japanese Ambassador in Moscow Masaharu Kono and Russian Deputy Prime Minister Igor Sechin to discuss how Russia could provide all possible assistance to Japan, both in the short and long term. To start, Gazprom Group sent five LNG carriers in addition to its contractual obligations to help Japan in the wake of this recent tragedy, and we continue to meet their short-term natural gas demands together with other suppliers.

The medium and long-term demand should be soon determined by the Japanese, both for gas and oil. It is likely that delay in deciding this is linked to the fact that the fate of some of the nuclear power plants in Japan is yet unknown. Regardless of the outcome, we hope that the new government of Japan and the new Prime Minister Yoshihiko Noda will continue the policy of cooperation with Russia.

Regarding the status of international cooperation, particularly Asian-Russian

cooperation, in September we met with the head of Shell, Peter Voser. Gazprom Group, the Anglo-Dutch Shell and the Japanese companies Mitsui and Mitsubishi are partners in Sakhalin-2 and have a binding agreement on the scope and character of their interaction. This document stipulates that if Gazprom is to bring on board foreign companies to develop the Sakhalin-3 project then Shell, Mitsui and Mitsubishi have pre-emptive rights to participate.

International cooperation in large projects such as this is a common practice. The position of the Russian government on direct involvement of foreign companies in projects in the sphere of production in our country is well-known. The approach is simple: Russia is open to the participation of foreign partners, in particular, as licensees for hydrocarbon production, but at the same time we expect to receive from our partners proposals for collaboration in their projects outside the Russian Federation.

Gazprom Group believes that at this stage of development, in principle, it is able to implement large-scale projects on its own. However, like other majors, in order to minimize risks, attract the most advanced technologies, and optimize financing we realize the helpful contributions our foreign partners can make. Therefore, continuing to prepare for exploration within Sakhalin-3 project we are engaged in consultations and negotiations with our partners on possible forms of cooperation.

The third phase of the Sakhalin-2 project may be the fastest way to maximize LNG uptake in the region. We are looking at the end of 2016 or the beginning of 2017 as the finishing line. Therefore we will continue negotiations and hope to be able to find mutually beneficial and mutually acceptable solutions.

The Russian Far East is developing rapidly. Recently the Sakhalin-Khabarovsk-Vladivostok gas pipeline was commissioned. Given our priority is the domestic market, we will determine what volumes are needed for Russian consumers and what volumes are demanded and can be delivered to foreign markets in the form of pipeline gas and LNG.

In accordance with the agreement signed by the Japanese Agency for Natural Resources and Energy, and with participation of the Japanese company Itochu, a draft LNG plant project in the Vladivostok area has been in the making. Pre-studies are already underway. The resource base for this project will primarily be the Chayandinskoye field.

The approved development plan for the Chayandinskoye field stipulates gas production to begin in 2016. Accordingly, the date of commissioning of the LNG plant is 2017. This is about the same time the third stage of Sakhalin-2 would be put onstream. We are waiting for the results of the feasibility study as along with this project there is potential for projects to develop chemical facilities.

Talking about the Asian market, one cannot fail to mention our relationship with China. We've been conducting commercial negotiations with CNPC for a rather long time. According to the roadmap agreed between the governments of Russia and China, contractual terms and conditions should have been concluded by the middle of this year. But to date, although we have progressed a long way we still have a number of outstanding issues, primarily the issue of price.

It is important to emphasize that we are applying market-based approach to the relationship with our Chinese partners.




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Blue Fuel: What is the current situation concerning the balance of natural gas supply and demand on the European market? Shall we expect any changes in the short- to medium-term?

Mikhail Malgin (MM): On the supply side we currently observe that producers are pursuing the so-called value-over-volumes strategy, which entails diversion of delivery to a future moment or to another location (i.e., Asian markets). In both cases, such diversion brings about additional value and eases tension of oversupply. Another factor contributing to supply uncertainty is the situation in North Africa and expected maintenance on liquefaction facilities in Qatar during the upcoming winter season. On the demand side we are experiencing general growth, particularly in the Asian markets due to positive economic development in the region as well as continued reverberations from the catastrophic events in Japan earlier this year. These changes in the supply/demand balance are reflected in the considerable growth of spot prices in the year 2011, as compared to last year (2010).

As far as our deliveries this year are concerned, we expect a slight increase in terms of volumes and a greater increase in terms of value, in comparison with the results of last year. The fourth quarter is associated with certain potential of growth.

Blue Fuel: How do you assess the current state of the German energy market and the prospects for natural gas therein?

MM: The German energy market is now facing a number of challenges – primarily brought about by its politicians – including security and ecologization of supply, and also liberalization. The puzzle is how to realize them all at once, because the problems are inherently related. For instance, wind and solar power generation is very ecological, but that market is very insecure. At the same time, liberalization policy is biased against major market players, but only

these major market players can provide the needed investments into security of supply and ecologization of supply. And so forth.

The German market is undergoing tumultuous changes. It is a challenging time for energy companies dealing both with gas and power generation. If the current policy continues, the country would have to switch to more expensive sources of power generation, which require large new investments. In contrast to the already amortized nuclear power plants, the introduction of new facilities, even for conventional generation, will demand significant injections of money.

The current German policy agenda also includes further expanding power generation based on renewable sources, which requires huge subsidies to attract investment.

Against the background of the difficulties in the euro zone, there are some open questions: How would these renewable incentives programs keep running? What sources could be raised to fund them? Will those major players hit by liberalization be capable of and willing to continue their investment programs and fill the state budget to subsidize new power generation projects?

As already mentioned, we must take into consideration how the German market is accommodating the consequences of liberalization in the energy sector pursued by the EU authorities. As the result of unbundling (“vertical disintegration” in power and gas business), big energy companies will lose their synergies – including possibilities to create additional value by optimizing capacity for generation and transportation in power/transportation and storage in gas. The outcome of all of this? Margins will be squeezed and companies, losing their competitive edge, are beginning to look for more favorable overseas investment possibilities.

What will happen with the “disintegrated” assets? Will the new “independent”

owners be eager to invest into infrastructure development in an environment where the rate of return is regulated with downward perspective? Recent examples from the market paint a not so optimistic picture.

Many German market observers come to the conclusion that, by now, the only true, absolutely liberalization champions are the local and municipal utilities, which are - by their nature -- in a more competitive position because they sell a number of products and services (gas, power, water, etc.) to the end customers from “one hand” and therefore can create synergies and inter-product optimization possibilities. In the last couple of years, these utilities have managed to structure their gas supply in a manner permitting partial direct access to the spot market. In fact, they took part of the margin of importers, but did not roll it over to end customers to the fullest extent possible.

Although the spot market is always characterized by a high degree of volatility, the temporary advantages of lower prices in 2010 ended with price increases in 2011. Currently we observe a general increase of prices/tariffs to the end customers in Germany

Blue Fuel: Why do the discussions with German partners on price terms continue; what are their demands?

MM: The companies, who require price discounts for imported natural gas, have several reasons to demand a price revision. First of all the buyer is, by definition, never satisfied with the price and is always looking for reasons to buy cheaper. This is normal behavior. On the other hand the liberalization policy has created a formal framework for changing suppliers (this includes access to trading hub and transport/storage infrastructure). The problem is that change of supplier does not necessarily mean changing the

The Truth About ‘Cheap’ Natural Gas and Arbitration Mikhail Malgin, Deputy Head of the Department of Natural Gas Exports North and South-West Europe gives answers to the questions of Blue Fuel

Continues on page 4




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source of supply. The particularity of the German market is that, contrary to the UK market with its abundant supply, supply to Germany is restricted to fewer sources. Even some of our counterparts in private talks confess that they cannot buy in the German market any substantial volume in replacement of Russian gas. That’s why the liquidity of the German market, much spoken about, is rather more virtual than physical. Nevertheless, some market players have initiated the “downwards” game. As a result, for certain periods of time, the spot price in the German market was below the German border price. Some of the smaller players are already out of the game. The bigger players are also not very happy. We proposed some temporary remedies to our customers and they were accepted. Now the question is about additional measures. What we reasonably do not exclude is that, due to the above mentioned global developments, the spot price will reach and even overrun the so-called “oil-linked” price in the observable future.

Blue Fuel: What is the difference between Gazprom and other producers?

MM: The European media, strangely enough, focuses only on the “expensive Russian natural gas” although all producers are in the same position. None of the producers are happy about the buyers’ “downwards” pricing game. The producers struggle at least to maintain the current level of production. To achieve this goal, they will have to develop new deposits, which are located in harder-

to-reach areas. They will not be able to finance these projects without an adequate level of return from gas sales. Organizing the project financing on the basis of volatile spot market exposure seems to be a challenging issue so it makes sense to preserve as much “oil” exposure with guaranteed returns as possible. To the best of our knowledge, some producers categorically do not accept spot market exposure. Others selling larger portions of their volumes under long-term contracts with “oil” exposure accept partial spot market exposure, but prefer exposure to that particular spot market which brings higher value.

Blue Fuel: A round of price revisions for European buyers was done in 2009-2010. What do they claim this time?

MM: What has changed? The latest rounds of price revision requests from some partners are no more attributed to the falling demand caused by consequences of the crisis, than to the development of liberalization and competition. This has been already mentioned earlier. As part of liberalization, local regulators in the EU actually created a new market framework, with trading hubs and free access to capacities. But this does not necessary mean that prices will go down. On the contrary, it can result in higher prices in the event of a "seller's market", where supply does not completely meet demand.

Blue Fuel: What is the difference between arbitration and court procedures? How does Gazprom Export see the arbitration proceedings initiated by your partners?

MM: We have a certain vision of the gas market. Based on it, we respond to the partners who have approached us with a request of a price review. If the customer is not satisfied, he has a contractual right to find a solution in arbitration. However, arbitration is a very expensive and time consuming endeavor, and comes with an unpredictable end. That’s why, in parallel with arbitration,

we generally continue seeking an amicable solution. As far as the court of common jurisdiction is concerned, we generally do not apply to any court, and arbitration is the final and exclusive way of a “non-amicable” dispute resolution. It’s up to the lawyers to explain the difference between arbitration and court of common jurisdiction, but I think application to the court with its system of appeals, etc. is a more complicated and lengthy roller-coaster.

Long-Term Contracts – Secure Yet FlexibleGazprom Export currently holds a portfolio of long-term supply contracts in Europe. Some of these contracts extend for periods of 25 years more, thereby creating a system that provides energy security for all players involved: upstream producers like Gazprom are assured of their returns on investment for gas infrastructure (production/trans-portation/storage facilities), while gas buyers - like utility companies and Euro-pean consumers - enjoy a guarantee of long-term energy supplies.

In order to mitigate the buyers’ risk of substantial changes in the market, the long-term contracts allow for reviews of the pricing conditions contained therein, which usually take place not more than once in every 3 years. As a general rule, a revision of the gas pricing formula can only be triggered by a significant, objective and proved change in the relevant energy market. The revision thus aims to ensure the continued competitiveness of natural gas as an energy source.

The pricing reviews follow an agreed-upon procedure for adjustments. It is standard practice for supply contracts to stipulate that in cases where the parties cannot conclude the review process in an amicable mutually acceptable

The Truth About ‘Cheap’ Natural Gas and ArbitrationContinued from page 3

Continues on page 5

Important Facts on Arbitration

• Paris International Chamber of Commerce : 793 cases in 2010

• London Court of International Arbitration : 246 cases in 2010

• Arbitration Institute of the Stockholm Chamber of Commerce: 197 cases in 2010




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The Truth About ‘Cheap’ Natural Gas and Arbitration: Long-Term Contracts – Secure Yet FlexibleContinued from page 4

Blue Fuel: Mr. Kramer, how competitive is natural gas versus other sources of energy currently promoted in the framework of the EU energy policy?

Marcel Kramer (MK): The role of gas in the energy mix is important for meeting the objectives of security, competitiveness and environmental sustainability. Gas should thus be considered not only as transitional but also as a destination fuel on the way to a more sustainable energy supply. Gas is not only the cleanest but also the most flexible fossil energy source – particularly

with respect to the transportation sector, where an efficient infrastructure already is in place and continues to be developed. Natural gas will provide a flexible part of a sustainable energy mix at a reasonable cost, while helping Europe achieve its carbon reduction targets. I therefore believe gas deserves a solid position among other sources of energy.

Blue Fuel:The recent economic crisis has lead to a sharp drop in gas demand in Europe. What makes you optimistic that there will be enough demand for South Stream?

MK: Energy demand is always dependent on economic growth. But EU gas consumption has largely recovered, and forecasts agree that long-term gas demand will continue to grow steadily. Meanwhile, domestic gas production will decline swiftly. This creates a gap in gas imports. South Stream will help to bridge this gap and to meet Europe’s growing gas demand. Therefore, I do not see any issues with marketing South Stream gas. To the contrary, South Stream will only be part of the solution, and others will have to step up

to the plate, too. I agree with those that say that the best times for natural gas still lie ahead of us.

Blue Fuel: What are South Stream’s competitive advantages compared to other projects?

MK: There are a number of gas supply projects under discussion, but this is not a beauty contest. Ultimately, it will be the market – that is the banks and investors and creditors – who decide which projects go ahead. South Stream has a lot to offer. On 16 September, three European energy majors joined forces with Gazprom to build the offshore segment across the Black Sea. With EDF, ENI, Gazprom and Wintershall on board, this is an impressive cast of players who have the technological and financial capabilities for a project of this magnitude. And Gazprom has successfully forged joint ventures with leading national companies to implement the onshore segment. The gas supply is available, the European markets need it, and we have

South Stream Will Bridge Gas Imports GapMarcel Kramer, CEO of South Stream project, speaking to Blue Fuel

Continues on page 6

way, the matter may be referred to an arbitration.

Arbitration: a common practice in international commerce

Arbitration procedures are a standard mechanism for dealing with commercial disagreements. There are a number of arbitration institutions in Europe that are widely used by companies, e.g. the International Chamber of Commerce in Paris or the London Court of International Arbitration. Arbitration is a form of alternative dispute resolution and as such is distinctively different from law suits. In commercial arbitration the case is referred to independent arbitrator(s), nominated by the parties who review the case as

"champions of objectivity" and then impose a decision that is legally binding for both sides.

Arbitration procedures do not prevent negotiations

However, the decision of an arbitrator only refers to a particular proceeding and does not set precedents for other proceedings - even if the same parties are involved. This is due to the uniqueness of every long term contract, the nature of each complaint, and the changing conditions of the gas market over time and across countries.

Every new arbitration request yields a new investigation and will produce a new ruling - unless the parties find an

agreement before the conclusion of the arbitration procedure.

Notably, arbitration procedures do not prevent the continuation of negotiations between the parties towards finding mutually acceptable solutions.

In most cases, arbitration procedures are terminated due to the settlement reached between the parties before arbitration takes place. Although pricing is a common reason to refer the matter to arbitration in the gas sector, arbitration is also used to settle disagreements in other matters, such as varying interpretations of contractual obligations, or the consequences of changes in national legislation.




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the means to implement South Stream. We are well on track.

Blue Fuel: The EU seems to be putting all of its political weight behind the Southern Corridor. Do you have the political support you need?

MK: South Stream will boost the economic and infrastructure development in many countries of central and southeast Europe. Many EU market leaders have signed up for the project. All of this makes South Stream an obvious priority in many EU capitals, as the existing bilateral support agreements with the Russian Federation show.

Blue Fuel: And the European Commission…?

MK: The Commission has made clear that it welcomes all new gas pipeline projects. The Southern Corridor intends to access new gas sources in difficult regions; this naturally requires additional political attention. South Stream diversifies supply routes from an established supplier. We do not need political handholding, but we believe there must be a level playing field. Private investment in EU-Russian energy relations should be encouraged. There is no reason why the EU should not recognize South Stream as a priority project.

Blue Fuel: Why should the EU support South Stream?

MK: Around a third of EU member states are actively involved in South Stream. The project is good for Europe, because it creates a new, direct link between the world’s largest gas reserves and EU markets. It will strengthen gas deliveries in those parts of Europe that have the weakest supply infrastructure and little redundancy and flexibility. On top of its contribution to energy security, South Stream will support the EU’s climate policy by facilitating a switch from coal and oil to gas in a region where the economy is still very carbon-intensive.

This is also why it cannot be in anyone’s interest if regulatory burdens hamper the development of new supply infrastructure. We need to kick-start investments in gas supply infrastructure today, in order to meet tomorrow’s demand, and we believe it is only fair to have a clear, predictable and supportive legal and regulatory framework for that to happen.

Blue Fuel: What do you make of the opinion that South Stream is pitted against Ukraine and will undermine Nabucco?

MK: This is not very plausible, to say the least. The fact is that Europe’s gas imports

are concentrated on very few supply pipelines and that any supply security strategy will have to do with diversification. This is why a certain share of South Stream’s pipeline capacities is reserved to relieve existing supply systems, while at least one third of the transported gas will serve new supply contracts. We have already talked about Europe’s growing gas demand, and that Europe needs many new energy projects. Recent trends underline this: Japan’s massive LNG imports, the nuclear decisions in Germany and Switzerland, the political turmoil in North Africa and the Middle East, and the questions around the low price strategy of U.S. shale producers.

Blue Fuel:Where does the project currently stand?

MK: The integrated feasibility study will be finalized shortly and provide the basis for the final routing of the pipeline. This will allow us to launch environmental impact assessments and permitting procedures. The companies participating in South Stream Transport AG aim to take the Final Investment Decision by the end of 2012, and commercial operations are to start by the end of 2015. The project is moving ahead as scheduled.

Blue Fuel: Mr. Kramer, thank you for this interview.

South Stream Will Bridge Gas Imports GapContinued from page 5

“Nord Stream has become a part of European gas infrastructure,” European Energy Commissioner Günther Oettinger said soon after Russian Prime Minister Vladimir Putin started the flow of technical gas into the newly-constructed Nord Stream pipeline. This technical gas has now flowed all along the new 1,224 kilometer pipeline on the bed of the Baltic Sea and cleared it of all the nitrogen buffer gas that had been fed in at German landfall.

In a few weeks the pipeline will have been filled to an adequate pressure for it to be able to come on-stream and start transporting Russian gas to customers in Europe. This will be a historic day for both Russia and Europe: Nord Stream will provide a fixed link between the Russian and European gas grids for at least the next 50 years. The value of this fixed link for Europe’s energy security is at the heart of the rationale for this Gazprom-led project. It will also

Nord Stream is a Long-term Solution for Europe’s Energy NeedsBy Ulrich Lissek, Communications Director, Nord Stream AG

Continues on page 7




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be the shortest route between Russia’s massive Siberian gas-fields and the growing markets of northern Europe.

Nord Stream is a long-term project: when fully operational this €7.4 billion pipeline will provide additional capacity for supplies of up to 55 billion cubic meters of natural gas per year to European consumers. Furthermore, it is a private investment, which will enable Gazprom and its European partners to meet part of the expected dramatic increase in demand for natural gas in the EU over the coming decades at no cost to European taxpayers. This key infrastructure is recognized as serving "common European interests" by the EU's Trans-European Networks (TEN) Directive.

Currently some 80 percent of Russia’s gas exports to Europe are delivered through the antiquated pipeline through Ukraine. In any industry, it is generally considered risky for both the supplier and the customer to be so dependent on one route to the market. When Nord Stream comes on-stream in the next few weeks, Gazprom will have three main gas supply routes to Europe:

• The "Brotherhood" (Urengoy-Pomary-Uzhgorod) pipeline via Ukraine (the oldest and largest, built in late 1970s);

• The 'Yamal-Europe' pipeline via Belarus to Poland;

• And now the first of Nord Stream’s twin pipelines (The second Nord Stream pipeline is on schedule to become operational at the end of 2012)

Gazprom Export has contracted 100 percent of Nord Stream’s capacities and will determine the most efficient use of these various options. Moreover, in the current spot market gas trade in the EU, Nord Stream will also provide new options for flexible and efficient management of gas flows from Russia

in line with short-term fluctuations in demand.

Nord Stream will provide a very competitive solution: it is a modern, state-of-the-art, high-quality pipeline. It is also highly efficient, as it will be able to operate at pressures up to 220 bar and therefore needs no interim-compressor stations. The pipeline is also subject to fewer taxes and transit fees, as most of its route is in the high seas beyond territorial waters.

Nord Stream provides one of the long-term solutions to Europe’s energy needs. In the medium- to long-term (2030), Europe will need to increase its gas imports by over 200 bcm a year (over 2008 figures), which is almost four times the total capacity of Nord Stream. All energy analysts agree that there will be a substantial gas import gap in the EU over the next few decades, due to growing demand and falling domestic production, which needs to be filled by new infrastructure. The EU is also still looking to secure other suppliers to justify investment in additional infrastructure.

So far Nord Stream has been delivered on schedule and on budget: by early 2010 detailed routing, construction and operational plans were agreed upon by the authorities of the five countries through whose waters the pipeline passes, and the first round of financing secured from international commercial

banks. In April 2010 construction of the first of the twin pipelines was started, and all 1,224 kilometers were completed, joined together and pre-commissioned in the summer of 2011.

Line One is about to come on-stream, and progress on Line Two is such that over 60 percent has already been completed. Furthermore, on-going monitoring along the whole route is showing that the environmental impact of construction is turning out to be even less than assessed in our extensive pre-construction studies. Despite concerns expressed in advance, this is a project that continues to gain support as each ambitious milestone is passed. The confidence is justified: by late 2012. it will be fully operational and playing an important role in securing Europe’s energy security for decades to come.

Nord Stream is a Long-term Solution for Europe’s Energy NeedsContinued from page 6

"Gazprom Export has contracted 100 percent of Nord Stream’s capacities

and will determine the most efficient use of these various options…

by late 2012 it will be fully operational and playing an important role in

securing Europe’s energy security for decades to come."

EU Commissioner Gunther Oettinger at NS opening ceremony in Portovaya Bay, Russia




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Erdgasspeicher Peissen GmbH, a JV be-tween Gazprom Export and Verbundnetz Gas AG, has begun construction of the Katharina underground gas storage facil-ity near Bernburg (Saxony-Anhalt, Ger-many). The Katharina project was named after Russian Empress Catherine II, who was born Princess of Anhalt-Zerbst.

The JV plans to use a salt cavern to create 12 600 mcm underground gas storage facilities by 2024. This capac-ity should annually supply natural gas to 300,000 households. The project also involves the construction of 37-km gas pipeline, connecting Katharina to the JAGAL gas trunkline and ultimately the trans-European gas transportation system. Total investments in the project, which will provide economic and job-creation benefits in Saxony-Anhalt, will be about 368 million euro.

Gazprom Head of Gas Transportation, Underground Storage and Utilization Oleg Aksyutin, Verbundnetz Gas AG Executive Board Chairman Dr. Karsten Heuchert and Gazprom Germania Senior Managing Director Vyacheslav Krupenkov attended the project’s launch ceremony.

“Enhancing and ensuring Europe supply security is a top priority for Gazprom

and projects like the Katharina UGS are an important part of this goal. It is not just an investment into the secure supply of ecologically-friendly natural gas but also the trust in the German market which we have provided natural gas supplies to for more than 40 years,” said Vyacheslav Krupenkov.

“Joint construction and operation of underground storage facilities reinforces

the longstanding cooperation between Gazprom and VNG. We will use our expe-rience in this regard to establish important terms for providing secure gas supplies to our customers. Construction of Katharina UGS is an important milestone in the continued development of European gas infrastructure,” Dr. Heuchert said.

Katharina UGS Facility Named After Russian Empress Catherine the Great

The Banatski Dvor underground gas stor-age (UGS) in the Republic of Serbia - a joint venture between Gazprom and the Serbian company Srbijagas - has been put into commercial operation. This took place on 1 October 2011. Buffer gas is currently being pumped and in the coming winter Banatski Dvor UGS will be able to contribute to the security of natural gas delivery.

The commissioned underground gas storage facility has an active volume of 450 million cubic meters; its maximum extraction productivity is 5 million cubic meters per day. The gas storage can also be further expanded.

The Banatski Dvor UGS is important both for ensuring energy security in Serbia, as well as for Russian natural gas deliveries, including taking into account the imple-mentation of the South Stream project.

Background on the Banatski Dvor UGSCooperation between Gazprom and Srbijagas on construction of the Banatski Dvor UGS is developing on the basis of an intergovernmental agreement on coopera-tion in the oil & gas industry, entered into between the Russian Federation and the

Republic of Serbia on 25 January 2008.

On 20 October 2009, an agreement to establish The “Banatski Dvor UGS” a joint venture between Gazprom Export, Gaz-prom Germania GmbH and Srbijagas was signed in Belgrade. According to this docu-ment, the share of Gazprom Germania in the joint venture is 51 percent; that of Srbijagas is 49 percent

The “Banatski Dvor UGS” joint venture was officially registered on 8 February 2010.

Banatski Dvor UGS Comes On Stream

UGS Katharina

• Aim of the project: Securing of gas supply to the customers in Germany,

France, Czech Republic; Securing of gas supply security through OPAL and

YAGAL pipelines.

• Structure: GazpromVNG

50%50%

• Technical parameters:

Active volumeWithdrawal rate

629 mcm13 mcm/day

Greifswald

Mallnow

Emden

Bunde

Medelsheim

Olbernhau

Waidhaus

Lampertheim

Brandov

Gaspool

NCG

GermanyBel

gium

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Let the Natural Gas FlowWith the new Baltic Sea Pipeline Link, OPAL, the largest natural gas pipeline in Western Europe is now ready

Work on Germany’s longest construction site, which connects the first line of Nord Stream to OPAL (Ostsee-Pipeline-Anbindungsleitung – Baltic Sea Pipeline Link), has been finished – which means one of Europe’s largest pipeline projects is on the verge of completion. This pipeline now provides a direct link between the major natural gas reserves in Siberia and the European end-market.

The final welding joint between the first line of Nord Stream and the OPAL pipeline was completed on the grounds of the natural gas transfer station in Lubmin near Greifswald, where the Baltic Sea pipeline reaches the German coast.

“The pipeline system is now ready for the next complex steps in the commissioning process, which means we will be able to commission the first line of Nord Stream in the fourth quarter of 2011 as planned,” said Dr. Georg Nowack, project manager for Germany at Nord Stream AG.

The last of around 50,000 welding joints, which hold together the individual pipes – each 18 meters long and weighing 15 tons – was completed on the grounds of the OPAL compressor station south of Berlin. Up to 2,500 workers have laid over 26,000 pipe segments this way since September 2009. The result is the largest natural gas pipeline in Western Europe, which stretches from Lubmin on the Baltic Sea coast to the German-Czech border near Olbernhau and covers 470 kilometers in total. The pipeline was completed in a record time of just 22 months.

“Thanks to everyone’s hard work we managed to finish OPAL on schedule,” Dr. Gerhard König, managing director of WINGAS GmbH & Co. KG, said at the completion of construction work in Baruth. “Now we are ready to transport the natural gas from the reserves in Siberia to the consumers in Germany and neighboring European countries.”

WINGAS GmbH & Co. KG – a joint venture of Wintershall, Germany’s largest crude oil and natural gas producer, and OAO Gazprom – has an 80 percent share in OPAL and E.ON Ruhrgas AG holds the other 20 percent. Overall WINGAS and E.ON Ruhrgas have invested over a billion euros in the energy infrastructure project.

The OPAL natural gas pipeline has the capacity to transport 36 billion cubic meters of natural gas a year. This is equivalent to approximately a third of Germany’s current annual gas requirements. “In the future natural gas will play a much greater role in Germany’s energy mix as an important partner of renewable energies,” Dr. König said regarding the future of this source of energy. “Together with the Nord Stream

Baltic Sea pipeline OPAL will make a key contribution to the future natural gas supply in Germany and Europe.”

The OPAL pipeline runs from the Baltic Sea coast through the German states of Mecklenburg Western-Pomerania, Brandenburg and Saxony to the Czech Republic. The Radeland compressor station located half-way between the starting point and the destination will dry, heat and compress the gas to allow its onward transport.

The OPAL natural gas pipeline has now been filled with gas as part of the test phase. Now everything is in place to take the natural gas arriving through Nord Stream through East Germany to the Czech Republic. In other words: Let the natural gas flow!




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Successful partnerships are shaped by special moments, and for me connecting the first line of the Nord Stream Baltic Sea Pipeline with the OPAL pipeline link is one of these moments. A bridge of historic proportions has been built, and for now there is a direct link between the natural gas in Siberia and the end-user market in Western Europe.

This is an important milestone in ensuring a secure, affordable and ecological energy supply for Europe long-term. After all, Nord Stream will supply as much energy as 50 coal power stations or 40 new nuclear power stations in the medium term – and it will do so via the most reliable transport lane in the world: the Baltic Sea. Together with the new OPAL pipeline, this pipeline network will

be a cornerstone of Europe’s energy infrastructure in the future.

However, for me the connection between Nord Stream and OPAL is also a milestone in what is in many ways an exceptional form of cooperation – between Russia and Europe in general, as well as between Gazprom and Wintershall specifically.

For more than 20 years, our two companies have been bound by a partnership of success and trust - a

partnership which extends along the entire value chain, from the joint production in the Achimgaz and Yuzhno-Russkoye natural gas fields and the transportation of that gas to end-customers, to our shared pipeline projects and pioneering E&P research. A partnership which, with the completion of Nord Stream and OPAL, once again proves that: “Together we can achieve more.”

A Real Milestone in Our Cooperation By Dr. Rainer Seele, Chairman of the Wintershall Board of Executive Directors

In early September, VEMEX s.r.o announced that it completed the ac-quisition of a 51 percent stake in RSP Energy a.s., which now appears under a new trade name VEMEX Energie a.s.

The acquisition of a majority stake in RSP Energy a.s. by VEMEX was a se-rious step which significantly expands the activities of our company in the market. In addition, it will be the first

company in the Gazprom Group which sells electricity and gas directly to end-users outside Russia. Now VEMEX Energie works with 16,039 end-users.

The importance of this deal is easily understood if you look at it in a broader context. With the acquisition of RSP Energy, we discover not only a new market for small customers and house-holds, but also a new segment of work

VEMEX Enters New Markets By Hugo Kysilka, Marketing and PR Director of VEMEX Group





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Gazprom Group to Continue LNG Supplies to India Gazprom Marketing & Trading (Singapore) announces a 4th Indian LNG agreement with the signing of an LNG supply MOU with Indian Oil Corporation Limited.

Gazprom Marketing and Trading Singapore (Pte.) Limited (Gazprom Singapore) has signed a Memorandum of Understanding (MOU) with Indian Oil Corporation Limited (IOCL) to supply with up to 2.5 million tonnes per annum of liquefied natural gas (LNG) for up to 25 years.

The long-term LNG supply agreement is a natural step for all parties after a number of successful LNG cargo deliveries by Gazprom Singapore to its counterparties in India since 2007. Gazprom Singapore sees India as one of its key markets for LNG supplies, along with Japan and other North Asian countries, as it continues to strengthen its presence and operations in Asia-Pacific. India is both a key market for LNG sales in its own right, and also provides significant gas, power and downstream opportunities.

Gazprom Singapore will provide LNG to its Indian partners from its current and projected Gazprom group production, such as Sakhalin, and will be supplemented by its wider Russian and international supply portfolio.

Nigel Kuzemko, Gazprom Singapore’s Global Director of LNG Development said of the deal; “We are delighted to have entered into this agreement with IOCL as it provides an excellent base to further develop Gazprom Singapore’s relationship with a premier Indian company. We recognize IOCL as major player in global energy markets with a strong presence in refineries, pipelines and marketing in India.

ProfilesGazprom Marketing & Trading Singapore (Pte.) LimitedGazprom Marketing & Trading Singapore (Gazprom Singapore) started operations as a platform for LNG trading, shipping and originating carbon reduction projects in the Asia Pacific markets.

The business has developed a wide range of emission reduction projects in the region under the Clean Development Mechanism of the Kyoto Protocol. Gazprom Singapore is helping to build a significant and sustainable carbon business with access to European, Japanese and other emerging markets.

The business has also extended the Gazprom Group’s commodity reach beyond its core portfolio offering by launching a trading desk specialising in crude, LPG and currency. Gazprom Singapore has been trading financial oil products on a number of exchanges since 2006 and can now offer 24-hour coverage of the market between Singapore, London and Houston.

Further Information visit: www.gazprom-mt.com

Follow: www.twitter.com/gazprommt and www.facebook.com/gazprommt

Indian Oil Corporation Limited Indian Oil Corporation Ltd. is India's largest company by sales with a turnover of Rs. 3,28,744 crore (USD 73.05 billion at exchange rate of 1 USD = Rs. 45) and profit of Rs. 7445.48 crore (USD 1.65 billion) for the year 2010-11.

Indian Oil is India's flagship national oil company with business interests

straddling the entire hydrocarbon value chain – from refining, pipeline transportation and marketing of petroleum products to exploration & production of crude oil & gas, marketing of natural gas and petrochemicals. It is the leading Indian corporate in the Fortune 'Global 500' listing, ranked at the 98th position in the year 2011.

With over 34,000-strong workforce, Indian Oil has been helping to meet India’s energy demands for over half a century. With a corporate vision to be the Energy of India, Indian Oil closed the year 2010-11 with a sales turnover of Rs. 3287 crore (USD 1.65 billion) at exchange rate of 1 USD = Rs. 45) and profits of Rs. 7445.48 crore (USD 1.65 billion).

At Indian Oil, operations are strategically structured along business verticals - Refineries, Pipelines, Marketing, R&D Centre and Business Development – E&P, Petrochemicals and Natural Gas. To achieve the next level of growth, Indian Oil is currently forging ahead on a well laid-out road map through vertical integration— upstream into oil exploration & production (E&P) and downstream into petrochemicals – and diversification into natural gas marketing and alternative energy, besides globalisation of its downstream operations. Having set up subsidiaries in Sri Lanka, Mauritius and the United Arab Emirates (UAE), Indian Oil is simultaneously scouting for new business opportunities in the energy markets of Asia and Africa.

Further Information visit: www.iocl.com




www.gazprom-mt.com

www.twitter.com/gazprommt

www.facebook.com/gazprommt

www.iocl.com

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Gazprom Group and Green Energy Projects in Malaysia

Gazprom Marketing and Trading Limited (GM&T) and SPPH ECO Biomass Resources Sdn. Bhd. (SPPH-ECO) have signed of a Memorandum of Understanding to develop a long-term agreement for the sale and purchase of torrefied palm residues on a commercial scale. The agreement was announced on 9 August 2011. Under the agreement, GM&T seeks to purchase torrefied palm residues and SPPH-ECO seeks to manufacture and supply the torrefied products to GM&T. The plant will deliver 150,000 metric tons per annum in 2013 rising to 500,000 metric tons per annum in 2015.

SPPH Eco Biomass and GM&T are also exploring the opportunity to create a biomass hub for the development of learning about clean energy, and reduced carbon emissions through efficient use of biomass as a fuel for power generation. As part of this program, special attention is being paid to small scale rural electrification so that more remote areas may enjoy power supply, and develop their own ownership of the fuel supply chain, through growing, harvesting and processing the biomass feedstock in an environmentally, sustainable way to provide rural employment and preserve the natural environment.

"Gazprom Marketing & Trading is proud to be an environmentally responsible company, and as part of our Clean Energy strategy we are excited to partner major developments such as

this. The Government of Malaysia is very supportive of this project and the initiatives that will develop from it, this governmental support is seen as a vital component of the project’s success,” said Adrian Boodt, Head of Biomass of Gazprom Marketing and Trading Limited.

“The collaboration between SPPH-ECO and GM&T is another milestone in the development of green energy projects in Malaysia. It is a step towards us becoming a regional leader in this industry. We believe a growing awareness in environmental issues will lead to a greater emphasis on green energy policy within this region. In turn providing more opportunity for the industry to expand its activities as demand rises,” said HRH Tg Puteri Seri Teja Pahang, Tg Hjh Muhaini bt Sultan Hj Ahmad Shah, Chairman of SPPH Eco Biomass Resources Sdn Bhd.

ProfilesGazprom Marketing and Trading Gazprom Marketing & Trading Limited (GM&T) is a UK-registered wholly-owned subsidiary of the Gazprom Group, the world’s largest gas company by asset base, accounting for 17% of the world’s total natural gas reserves and for about 70% of natural gas reserves in Russia. GM&T is headquartered in London and was established in 1999 to manage Gazprom's marketing and trading activities in the liberalised markets of Europe.

GM&T is responsible for the optimisation of Gazprom’s energy

commodity assets and downstream expansion through its marketing and trading network. With subsidiaries in Houston, Singapore, Paris, Berlin and Manchester (hub for gas, power, carbon in North Western Europe), GM&T trades energy commodities including gas, power, oil and oil products, carbon, LNG and FX.

For more information please visit: www.gazprom-mt.com

SPPH ECO Biomass Resources Sdn. Bhd. SPPH Eco Biomass Resources Sdn Bhd (Company No 937044 H) (SPPH ECO) is spearheaded by a group of industry experts in March 2011 to engage in Malaysia biomass’ sector to develop, construct and operate projects that contribute to a goal of sustainable future. By transforming waste to commodities, we target organizational success on triple bottom lines which spell the 3Ps – People, Planet and Profit.

SPPH ECO will undertake to convert Empty Fruit Bunches (EFB), an oil palm waste, into biocoal by adopting the torrefaction and pelletization process. Biocoal is a solid enhanced biomass fuel in terms of energy density and is equivalent to the energy density of coal used by utilities in coal fired power stations. Biocoal is a replacement fuel for traditional fossil coal. It is hydrophobic, which means it repels, resists or unable to dissolve in water and easy to store and handle and has similar characteristics as ordinary coal except that it is CO2 neutral.




www.gazprom-mt.com

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We believe that a country with the largest foreign currency reserves can and should buy gas on the same principal terms as China's neighbors in the region. I hope that it is on this basis that an agreement would be reached. There is no reason for any of the exporters to subsidize the Chinese economy.

Another promising direction is the Korean peninsula. How likely is the construction of a gas pipeline from Russia via North Korea to South Korea, the prospect of which is actively being discussed? This topic is not new. As soon as South Korea assessed its energy demands and an analysis of how best to supply gas was carried out, it became clear that a pipeline through the territory of North Korea is the most cost-effective option.

We understand that if this project is realized it would have a powerful impact on the settlement process of inter-Korean relations, as well as a factor serving stability and peace throughout the region, and it makes this project go far beyond sheer business. Nevertheless, for a long time this project was not getting off the ground. Apparently it was influenced

by numerous cases of flaring tensions between North and South Korea and also by North Korea’s stance on various international issues as a whole.

However, the recent visit by North Korean leader Kim Jong Il to Russia when he met Russian President Dmitry Medvedev has given hope that the project can be implemented. In addition to these developments, on 15 September, Gazprom held talks with North Korea's oil minister and the head of the South Korean company, Kogas on the practical aspects of the gas pipeline to the Korean peninsula.

The light at the end of the tunnel can be seen and there is a good chance that this project can be implemented from both economic and political points of view. First serious steps have been made: Gazprom and Kogas signed Roadmap on project for natural gas supply from the Russian Federation to the Republic of Korea via the Democratic People's Republic of Korea, and also on the same day a Memorandum of Understanding was signed between Gazprom and North Korea’s Ministry of Oil Industry.

Continued from page 1

To Our Readers:

Alexander Medvedev: The Asian Market after FukushimaContinued from page 2

Alexander Medvedev, the Deputy Chairman of Gazprom and Director General of Gazprom Export, hosted a delegation of prominent Japanese journalists and experts who specialize in Russian studies and discussed Gazprom’s activities in Asia. In particular, he covered Gazprom’s response to the earthquake in Japan and the catastrophe at the Fukushima nuclear plant. He also commented on the negotiations on gas

supplies to China and the Korean peninsula, the Sakhalin gas projects’ development and gasification of the Russian Far East.

“We are glad that we were able to help Japan. Additionally, from its energy portfolio, Gazprom supplied five tankers of LNG, exceeding contractual volumes,” Mr. Medvedev said.

Alexander Medvedev Briefed Japanese Experts on Gazprom Activities in Asian markets

Given the current situation in the EU energy market, we must look forward and search for solutions that will allow for a successful and progressive development of the European energy sector and its players.

Gazprom Group is interested in contributing to this process and balancing the interests of suppliers and consumers because we clearly understand the interdependence of Russia and the EU in the gas sector and categorically reject the allegations of one-sided dependence. A harmonious and growing energy and gas market in the EU is the keystone for the success of our company.




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When recession hit the global economy in late 2008, the natural gas market suffered a major split in worldviews. While some companies and analysts thought the world was facing a long-term structural glut others believed the glut was cyclical, not structural and that gas prices would increase soon after it disappeared. Ultimately and particularly after the Fukushima disaster, the “cyclical” view prevailed. For the purposes of this article, it is worth taking a closer look at the global LNG market, where price is the ultimate arbiter.

Natural Gas Glut Debate: Structural or Cyclical? Both sides had strong data points to support their positions. Those in the “structural” camp pointed to the rise U.S. shale gas development and to the possibility that other countries such as Australia, Argentina, China and Poland would soon experience similar shale production booms, arguing that this development would shrink LNG demand in those countries much like it had in North America. They pointed to massive developments in Australia that could potentially flood the market and demand uncertainty as factors threatening the long-term competitiveness of natural gas.

The cyclical glut camp had equally

strong arguments. They pointed to gas as the main fuel for power generation in the OECD where coal was too dirty, nuclear energy too risky, oil too expensive and hydropower too immature to be compelling alternatives to gas. This was chiefly a battle between gas and renewables and gas was holding up nicely. They also pointed to rising demand in non-OECD markets that sought to gasify their economies and turned, increasingly, to LNG to do so. Brazil, Chile, Argentina, Kuwait, the UAE, and Thailand had emerged as LNG buyers by 2011 while a few years ago, no one would have taken them seriously as LNG markets. Nor did the list stop there: throughout South and Southeast Asia and the Middle East and North Africa, countries were proposing re-gasification terminals. Finally, they pointed to LNG supply which was shrinking from established players who were struggling to keep plants running at full capacity and numerous new pro-jects failing to forward as planned due to underlying constraints.

The Global Recession and LNG PricesGas prices, while giving conflicting signals due to the fragmented nature of the market as a whole, primarily pointed to a cyclical glut. In Europe, the disparity between long-term oil-linked prices and spot prices prevented the conclusion of new long-term contracts, making investor sentiments difficult to determine.

In North America, gas prices collapsed as domestic supplies rose amidst weak demand. As time passed, the market turned increasingly bearish and futures market prices continued to fall. The “consensus” forecast fell from $7 to $6 to $5 to $4. This was clearly a market where buyers and sellers saw a long-

term, structural glut. But even there, cheap gas was laying the seeds for its own undoing: gas producers were keen to expand gas use in transportation; industrial users that had given up on North America due to its expensive energy, were coming back to invest and benefit from cheap supplies and several companies were looking to build infrastructure to export LNG from North America.

In Asia, prices pointed strongly to a structural glut. While in theory there was a glut, post 2015 long-term contract prices were high. The expectations voiced in late 2008 – that oil parity was a thing of the past and that sellers would beg buyers to take their gas – proved remarkably wrong. Coefficients weakened but only slightly. Moreover, cost inflation meant that high prices – above $7 and sometimes above $9 – were needed to justify final investment decisions for new projects. In Asia, the cyclical glut was only evident in occasional spot cargoes.

This triad of worlds sustained widely differing views about where the market was going, with discussions in Houston, London, Moscow, Doha and Tokyo sounding drastically different. By the end of 2010 and the Fukushima disaster the “structural glut” view of the world became increasingly difficult to sustain. While North American supplies continued to outpace demand, other regions experienced a rapid tightening of their natural gas markets. Global gas demand rose 7.4% in 2010, with growth coming from OECD and non-OECD countries alike. And while weather played a role, especially in OECD markets, there was clear evidence that gas was on the rebound.

Other signs pointed in the same direction. Unprecedented LNG supply growth was coming to an end, and if anything, the LNG market was headed

Waving Goodbye to the “Gas Glut” Worldview Nikos Tsafos, Senior Manager, PFC Energy





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VEMEX Enters New Markets

in full accordance with the continuing liberalization of the energy market in the country. We strive to optimize performance, participating in several stages of the value creation chain as it is done by European energy compa-nies. We also have the opportunity to optimize our portfolio by working with several energy products.

Our growth is not limited to the bound-aries of the Czech Republic. In June 2003, VEMEX founded its 100 percent owned subsidiary company, VEMEX Energo in Slovakia, and in Decem-ber of the same year the firm was licensed to trade in gas and electricity in the Slovak energy market. In 2010, the company contributed to the first electricity transaction in Slovakia and this year we expect to sign the first contracts to supply natural gas to end-users in Slovakia.

How does the RSP Energy Company work?The company was founded in May 2009 for energy trade. The first deliver-ies of electricity to end-users by the company were made in August 2009 and in January 2010 shipping of gas began, mainly focusing on the segment of small customers and households. All work on sale of gas and the electric power, down to signing the agreement with clients is done by the sales de-partment. With large and medium-sized customers the company works through its own sales managers, and with small customers and households it works through external partners.

Customer service includes the solution of formal problems associated with the change of supplier, invoicing and de-veloping payment schedules for clients, dealing with additional requirements and potential customer complaints, and servicing a hot line for communication.

At the same time, the company tries to build new sales channels through col-laboration with renowned partners from different industries.

In both the trade of gas and electric-ity, purchases are made from major suppliers. In gas VEMEX s.r.o, is a chief supplier. CEZ, the largest power company in the country, amongst oth-ers supplies electricity. The procure-ment department purchases energy products on the basis of the predicted future consumption of portfolio clients. It is also engaged in correcting devia-tions and the optimization of additional purchases. This is implemented with the help of its own commercial dispatch service which cooperates with all the famous players in the Czech energy market.

In addition, the firm became a member of the Prague Energy Exchange in 2010.

The Strategic Goals of the VEMEX GroupThe first task that we have set for ourselves is launching VEMEX in the electricity market. To do this, we will maximize the know-how and techni-cal background of a new member of our group and use their contacts. Our level of cooperation allows shipments to start start in the new format of work almost immediately and with minimal costs.

The objectives of VEMEX’s parent company will include working with cli-ents, transferring them the proposals, evaluation, contract signing and incor-poration of a client into the account-ing system. Simultaneously VEMEX Energie will work on evaluating and developing proposals itself, preparing contracts, client accounting and the preparation of a schedule of payments. The company will keep in touch with

the market operator, issue invoices and service bill payment. Of course, all this takes place within the overall sales strategy and takes all risks into account.

Our joint work makes it possible to combine efforts and synergize directly in the market. From the start of the season VEMEX is the sponsor of the Energie Karlovy Vary hockey club, so we have put our combined marketing and sales efforts into the Karlovy Vary Region itself. This region is tradition-ally very friendly to businesses with a Russian background, and I am convinced that in the case of VEMEX s.r.o and VEMEX Energie we can expect the same attitude. We want to use the newest hockey palace of the Czech Republic in the search for new consumers of electricity and gas for the entire VEMEX group.

What is VEMEX? The VEMEX group consists of VEMEX s.r.o., VEMEX Energie a.s. and VE-MEX Energo s.r.o - important members of the energy markets in the Czech Republic and Slovakia.

The VEMEX company has delivered gas to the Czech Republic market since 2006. Then it signed a long-term contract with Gazprom Export for the supply of gas. Since then it has been one of the largest alterna-tive natural gas suppliers in the Czech energy market. The main activities of the company are still the supply of natural gas to large and medium sized customers, primarily in the chemical, food, and construction industries, as well as district heating. In recent years, the company provided about 9% of the gas consumed in the Czech Republic, and according to existing contracts, will retain this stake in 2012.

Continued from page 10




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The Austrian town of Frankenfels hosted the third international meeting of the Open World 2011 Arts Camp, which is run with assistance from Gazprom Export and its local partners OMV and GWH and under the patronage Dr. Erwin Pröll, the governor of Lower Austria.

Children from six countries with many different social and economic backgrounds participated in this year’s camp, which is part of the international children's social and charitable Open World project. Children from all walks of life were united at the camp by their love of the arts under the leadership of camp director Kristel Demaere, the international award-winning Belgian choreographer and director.

The program included several concerts, including ones at the Waldschule specialized boarding school for disabled children, for the regional television station in Lower Austria, during the camp’s opening day and at the "Energy for Life Party" festival in the city of Baden where Open World 2011 culminated.

Under the direction of the project organizers, all camp participants worked together to develop the final program statement, which made them emotionally involved, increased their confidence and provided them with opportunities to meet new people, make friends and form like-minded connections. The end result was the emergence of a children's community

with space for dialogue and the self-fulfillment of each child.

This year Open World’s Children’s Media Group gathered video and audio material about the experience each day and posted them on the Internet-based platform. Reports and interviews from participants can be found here: http://www.openworld.eu.com.

The children's camp Open World 2011 has concluded, but will once again open its doors in the summer of 2012. In the meantime, in October 2011 we had another encounter with the talented children of Germany – in Berlin, Kassel and Leipzig.

On 1 September, Gazprom Export and its German partner, Wintershall Holding AG, participated in the dedication of a sports complex at a Chernish, Smolensk Region boarding school for blind and visually impaired children, which Gazprom and Wintershall helped finance.

The new complex has both sports and fitness areas that are specially equipped

for the blind and visually impaired, including a hall for aerobics, reflexology rooms and a spacious locker room. The complex is connected to the main building of the boarding school with a heated passage, beautified with a winter garden.

“The opening of the complex is a very special and pleasant occasion,” said Tatiana Khrapovitskaya, the director of

the boarding school. “Now, children with severe vision problems have a chance to engage in sports all year.”

The ceremony was also attended by the Head of Smolensk Region’s Department of Education, Mikhail Leonenkov.

Widening New Arts Vistas

Sports Center for the Blind Sponsored




http://www.openworld.eu.com

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On the 6 September, the Moscow Kremlin Museums opened the "Poiret - King of Fashion" exhibition, which was organized with the support of Gazprom Export.

The exhibition is housed in two halls, the Assumption Belfry and the One-Pillar Chamber of the Patriarch's Palace. This is the first time in Russia that the outstanding work of the Parisian couturier, Paul Poiret (1879-1944), the founder of twentieth century fashion who exerted considerable influence on the shaping of modern tastes, has been on display on such a scale.

Recognized in his lifetime as a great innovator, Poiret was able to both formulate and personify his revolutionary concept of women's clothing at the turn of the century. The exhibition features the most spectacular preserved samples of the great fashion designer’s work, reflecting the main stages in the origin and evolution of art deco style in dresses, accessories, prints, photographs and perfume.

The exhibition timing coincides with the 100th anniversary of Poiret’s triumphant visit to Moscow and St. Petersburg and includes podium demonstrations and lectures. The leading museums of

the world – the Paris City Museum of Fashion, the Victoria and Albert Museum in London, the International Perfume Museum in Grasse and the State Hermitage Museum in St. Petersburg – donated exhibits from their collections.

Gazprom Export and the Moscow Kremlin Museums have collaborated together for many years. The company supports the activities of the museum, sponsoring major international exhibitions.

French King of Fashion Returns to Russia

Waving Goodbye to the “Gas Glut” WorldviewContinued from page 14

for a period of extreme tightness before new projects hit the market in 2014 and 2015. 2011 contract activity has already surpassed historical levels in 2007 and 2009. New projects expected to come online by 2017 are almost all fully-contracted. So a company wishing to procure new long-term supplies for delivery before 2017 is out of luck in terms of new projects, its best hope being re-contracted gas.

LNG market tightness is causing

pipeline gas to step in and meet demand and other countries to start developing their own LNG supplies. Nord Stream, while seemingly launching at a terrible time, will instead benefit from the global redirection of LNG to Asia by enjoying increased European demand for pipeline gas.

This new supply – which is five to ten years out – will help supply catch up with demand while not overwhelming the market and creating a new glut.

Prolonged weakness in the global economy – or an unprecedented acceleration in new project approval – would push us to that world. But until then it seems that the market is getting a loud answer to the question of whether this glut is cyclical or structural and this tight world is one that we will live in for a while.




blue fuel #12 | october 2011 | vol. 4 | issue 3

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