OJSC Severneftegazprom Annual Report 2011 (English) by OJSC Severneftegazprom

TABLE OF CONTENTS 2

INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . 3 Message from the Chairman of the Board of Directors. . . . . . . . . . . . . . 4 Message from the General Director. . . . . 6 KEY EVENTS OF 2011 . . . . . . . . . . . . . . . . . . . . . 8 MAIN RESULTS OF THE COMPANY’S FIRST DECADE. . . . . . . . . . . . . . . . . . . . . . . . . . 10 GENERAL INFORMATION. . . . . . . . . . . . . . . . . . 11 Registration Details . . . . . . . . . . . . . . . . . . . . 12 Authorized Capital . . . . . . . . . . . . . . . . . . . . . 13 COMPANY DEVELOPMENT. . . . . . . . . . . . . . . . . 16 Mission and Strategy. . . . . . . . . . . . . . . . . . . 17 Company History. . . . . . . . . . . . . . . . . . . . . . 17 Geography of Operations. . . . . . . . . . . . . . . . 19 Situation in the industry. . . . . . . . . . . . . . . . . 19 High Priority Lines of Business and Development Prospects . . . . . . . . . . . . . 20 MANAGEMENT BODIES AND BODIES FOR CONTROL OF FINANCIAL AND BUSINESS OPERATIONS . . . . . . . . . . . . . . 21 Structure of Management Bodies. . . . . . . . . . 22 The General Meeting of Shareholders . . . . . . 22 The Board of Directors. . . . . . . . . . . . . . . . . . 23 Technical Committee . . . . . . . . . . . . . . . . . . . 24 Report of the Company’s Board . of Directors on the Work . in Priority Directions of the Business. . . . . . . 25 Information on the Company’s Auditor. . . . . . 27 Internal Audit Commission. . . . . . . . . . . . . . . 27 KEY PERFORMANCE INDICATORS . . . . . . . . . . 28 The Stats of the Raw Material Base. . . . . . . . 29 Geological Exploration. . . . . . . . . . . . . . . . . . 31 Production Drilling. . . . . . . . . . . . . . . . . . . . . 31 Gas Production. . . . . . . . . . . . . . . . . . . . . . . . 33 Gas Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 FINANCIAL RESULTS. . . . . . . . . . . . . . . . . . . . . 34 Key Indicators over 2009–2011 . . . . . . . . . . . 35 Implementation of the Annual . Programme of Works and Budget . of the Company in 2011 . . . . . . . . . . . . . . . . 35 Analysis of Changes . in the Asset Structure of the Company . . . . . 36 Analysis of Change in the Liabilities . Structure of the Company . . . . . . . . . . . . . . . 38

Analysis of Change . in Indicators of the Profit . and Loss Statement for 2011. . . . . . . . . . . . . 40 Analysis of Cash Flow . . . . . . . . . . . . . . . . . . 41 Analysis of Debt Liabilities. . . . . . . . . . . . . . . 42 Analysis of Key Financial Ratios . . . . . . . . . . 43 INVESTMENT OPERATIONS. . . . . . . . . . . . . . . . 44 KEY RISK FACTORS ASSOCIATED WITH THE COMPANY’S BUSINESS . . . . . . . . . . 45 Industry risks. . . . . . . . . . . . . . . . . . . . . . . . . 46 Financial risks. . . . . . . . . . . . . . . . . . . . . . . . 47 Legal risks. . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Energy Consumption. . . . . . . . . . . . . . . . . . 49 SUSTAINABLE DEVELOPMENT. . . . . . . . . . . . . . 50 Role of sustainable development . in the Company’s activity. . . . . . . . . . . . . . . . 51 Social policy. . . . . . . . . . . . . . . . . . . . . . . . . . 51 Labour protection and industrial safety. . . . . 54 Environmental protection . and ecological safety. . . . . . . . . . . . . . . . . . . 55 Main indicators of environmental . protection activities . . . . . . . . . . . . . . . . . . . . 58 Main directions of regional policy . and interaction with interested parties. . . . . . 59 REPORT ON COMPLIANCE WITH THE CODE OF CORPORATE CONDUCT. . . 62 Report Parameters. . . . . . . . . . . . . . . . . . . 63 Disclosure of Information. . . . . . . . . . . . . 64 Appendix 1. Index of Standards . of the General Reporting Initiative . . . . . . . . . 65 Appendix 2. List of the Company’s . transactions in the year of 2011, . considered as interested party . transactions in conformance . with the Federal law . ‘On joint stock companies’. . . . . . . . . . . . . . . 69 Appendix 3. List of the Company’s . transactions in 2011 considered as major transactions in conformance with the Federal law ‘On joint stock companies’ as well . as other transactions subject . to the procedure of approval . of major transactions pursuant . to the Company’s Charter. . . . . . . . . . . . . . . . 76

ANNUAL REPORT 2011

performance indicators of operations of Severneftegazprom Open Joint-Stock Company (hereinafter referred to as OJSC Severneftegazprom, the Company) for 2011 and development prospects oriented towards shaping and reaching strategic goals and ensuring the Company’s long-term business stability. With the data presented in the Report, stakeholders can examine results of Company’s operations and assess its impact on economics, the environment and society. When compiling the Report, we have taken into account all information for

INTRODUCTION

This Annual Report (hereinafter referred to as the Report) shall detail the key

suggested Report users concerning the Company’s business operations for the reporting period, industrial safety, environment, social and economic development activities that have taken place during this period. Taking into account the responsibility and public interest in its operations, for the first time the Company extends the Report with indicators of the Global Reporting Initiative (GRI) v. 3.1 that will characterize the degree of applying sustainable development approaches on an annual basis. The Report contains evaluations and forecasts of the Company’s authorized management bodies regarding its operating results and future events and/or actions, including Company plans, and the probability of certain events and actions. Forward-looking statements, by virtue of their nature, are associated with inherent risk and uncertainty of both general and specific character. The Company emphasizes that actual results may differ considerably from those provided, whether directly or indirectly, in the forward-looking statements in question. In particular, economic, political, social, technology-related and other conditions can affect Company operations both in Russia and abroad. Report users must not completely rely upon assessments and forecasts of Company’s management bodies, as future actual results of Company’s operations may differ from forecasted results for many reasons.

Message from the Chairman of the Board of Directors

We have recorded stable results

Dear Shareholders! 2011 has completed the first decade of OJSC Severneftegazprom operations, which have been marked by a number of notable achievements. The Company has successfully passed through an important stage of development and stabilization of its operations and has entered into the range of most promising and progressively developing enterprises of Gazprom Group. Events of the previous decade and achieved results have established a solid foundation for further Company development, growth of its strategic potential, and long-term increase of its value and shareholdersâ&#x20AC;&#x2122; income. Today, OJSC Severneftegazprom demonstrates sustainable production and financial indicators. In 2011, the Company started experimental gas production in the Turonian Gas Deposit of the Yuzhno-Russkoye Gas Field. This is a milestone project both for Gazprom and the entire gas industry of our country. Actually, this project has initiated a new stage of its development that suggests production from hard to recover gas reserves. Last year, an important event for OAO Gazprom was the implementation of the Nord Stream project intended to ensure

ANNUAL REPORT 2011

Message from the Chairman of the Board of Directors

maximum reliable gas supply to European consumers in the long term. Nord Stream has directly connected the European gas market and large Russian fields, including the Yuzhno-Russkoye Gas Field, which is one of its main resource bases. By enabling new volumes of gas supply in future, development of the Turonian Gas Deposit started by OJSC Severneftegazprom at the same time helps to resolve one of the most important goals of Gazprom Group as a gas supplier in a new gas transport project – ensuring a stable supply of large volume of natural gas to Europe. In the new decade, the Board of Directors and management of the Company have been set new challenges. First of all, these are retaining positive development dynamics, ensuring stable operations with simultaneous growth in efficiency and improvement of key indicators. On behalf of the Board of Directors I would like to express our appreciation to employees and managers of OJSC Severneftegazprom for their sense of purpose, responsibility and professionalism, and for their fair work and priceless contribution in ensuring stable and efficient operations of the Company. I would also like to say thank you to the Company’s shareholders for supporting management initiatives aimed at ensuring growth and development of OJSC Severneftegazprom. I hope we will continue our fruitful cooperation with shareholders. I wish you all further success and reaching new goals! Sincerely,

Alexander Medvedev Deputy Chairman of the Management Committee, OAO Gazprom Chairman of the Board of Directors, OJSC Severneftegazprom

Message from the General Director

We will go further…

Dear Shareholders, Partners and Colleagues! Summarizing the results of the Company’s operations for 2011, I would like to note that this was a special year for OJSC Severneftegazprom. In June 2011, the Company celebrated its 10th anniversary since it was established. These years have become a true epoch – the period of company formation and growth and achievement of impressive results that have allowed it to join the leading producers of Gazprom Group. In the shortest terms possible, one year ahead of plan, we have put the Yuzhno-Russkoye Oil Gas Condensate Field into operation, started producing gas and have reached the planned production level of as much as 25 billion m3 gas per year. To ensure continuous gas production, one of the most state-of-the-art gas fields in Russia has been built. All production-related achievements have secured the stable financial standing of the Company. One can say that the Company has successfully completed its first decade which turned out to be a period of progressive development resulting in establishing a flourishing and stable operating enterprise with powerful production and workforce potential. Today, OJSC Severneftegazprom is a modern and innovative company achieving fifth place in terms of production level among Gazprom Group companies, and one of is an example of successful international cooperation in gas production. 2011 was no exception for the Company and was marked by a number of achievements. The milestone of the operations was starting the pilot production of the Turonian Gas Deposit and supply of Turonian gas in the Unified Gas Supply System (UGSS) of Russia in December last year. OJSC Severneftegazprom became the first company that started pilot gas

ANNUAL REPORT 2011

Message from the General Director

production from the Turonian Deposit in Russia. An outstanding event in the area of corporate finance was the deal struck in May 2011, which consisted of attracting project financing totalling 1.1 billion EUR. It’s worth noting that this deal was recognized by the international financial community and was twice nominated as “Transaction of the Year 2011” in gas production project financing. Commissioning the Nord Stream gas pipeline supplying gas to Europe from multiple points, including our Yuzhno-Russkoye Field, became another milestone event for our Company, which took place in November. In addition to the above, it’s worth noting that 2011 continued overall positive dynamics of Company development in terms of key indicators, including financial ones, build-up of resource base, and development and implementation of new technologies with prospects. Summarizing results of the first decade and 2011, one can state that the Company has successfully completed its first stage of formation and entered a new responsible stage of quality improvement and efficiency enhancement. The Company has unique technical, management, intellectual and financial potential capable of ensuring deployment of the most complicated unprecedented projects. I would like to express my gratitude, first of all, to my colleagues – employees of OJSC Severneftegazprom, and also to Company shareholders and partners that have supported it throughout the years and have helped reach today’s landmark. We are planning to go further: we are already making new plans and setting new strategic goals. I assure you that employees and management of OJSC Severneftegazprom will make their best efforts to enable further stable and sustainable Company development. Sincerely,

Stanislav Tsygankov General Director, OJSC Severneftegazprom

KEY EVENTS OF 2011

January OJSC Severneftegazprom was awarded the second and third prizes at the IX All Russian Conference of Young Scientists, Specialists and Students Studying Gas Industry Issues.

February Stanislav Evgenyevich Tsygankov was appointed in the post of the Company’s Director General. The Federal Service for Intellectual Property (Rospatent) registered OJSC Severneftegazprom’s trade mark. The Company has successfully passed the first compliance audit of the integrated management system in Quality and HSES for compliance of requirements of international standards ISO 9001:2008, ISO 14001:2004, and OHSAS 18001:2007 (compliance certification took place in February 2010).

March As a result of many years of cooperation of OJSC Severneftegazprom and its shareholders – OAO Gazprom, Wintershall Holding GmbH and E.ON Ruhrgas E & P GmbH a project financing agreement totalling 1.1 billion EUR was signed. Drilling of the first dual-bore cluster of the Turonian Gas Deposit was completed and completion jobs were started in the Western Siberia Turonian Gas Deposit development project, which is unique for Russia.

The corporate website of OJSC Severneftegazprom (http://www.severneftegazprom.сom/) was launched. . The website allowed the Company to publish information about its operations, history, sector profile, management bodies, and fulfill its information disclosure obligations as provided by legislation of the Russian Federation without any intermediaries.

May Gas influx from unique dual-bore cluster No 174 of the Turonian Gas Deposit was obtained. Financial closure of the deal attracting project financing totalling 1.1 billion EUR was realized. The credit was provided by an international consortium of foreign banks and Russian bank Gazprombank (OJSC).

ANNUAL REPORT 2011

Key events of 2011

June

August

June 15, the Company celebrated its 10th anniversary since the day it was established.

The first professional skills contest for the “Best Professional” was held. According to the decision of the shareholders, the Company’s authorized capital was increased 60 times by increasing the nominal value of all shares.

November On 8 November, the Company’s General Director took part in the solemn ceremony of commissioning the Nord Stream subsea gas pipeline, with the Yuzhno-Russkoye Field being the foundation of the resource base of the first pipeline run.

December June 30, the Annual General Meeting of Company Shareholders was held, where shareholders considered results of operations for 2010, unanimously approved the Annual Report and the Annual Financial Statements, and the Company’s auditor for 2011; elected members of the Board of Directors and the Audit Commission; approved a number of interested party transactions for the following corporate year; and decided on profit distribution.

Test production of the first Turonian well was started. For the first time, Turonian gas was supplied in the Unified Gas Supply System of the Russian Federation. Owners of Company’s ordinary and preferred shares were paid dividends totalling 13.2 billion rubles according to results of the first 9 months of 2011. The Board of Directors approved the Annual Work Programme and Budget of the Company for 2012.

2012 January

February

Drawing project financing to develop the Yuzhno-Russkoye Oil Gas Condensate Field was announced the transaction of the year by Thomson Reuters Project Finance International Magazine in the “Gas Industry Transaction” category, and by Euromoney Institutional Investor plc. Project Finance Magazine in the “Transaction of the Year 2011” category.

Stanislav Tsygankov, the Company’s General Director, and Ivan Kostogriz, Head of the Administration of Novy Urengoy, signed the General Agreement for Cooperation between OJSC Severneftegazprom and Novy Urengoy City Administration.

The second compliance audit of the integrated management system for compliance of requirements of international standards ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007 was held.

OJSC Severneftegazprom was awarded the Deal of 2011 prize from Project Finance Magazine (PFM)

March Stanislav Tsygankov, OJSC Severneftegazprom General Director, and Vasily Parshakov, Head of Administration of Krasnoselkup District, signed the Agreement for Cooperation between the Company and District Administration for 2012.

MAIN RESULTS OF THE COMPANYâ&#x20AC;&#x2122;S FIRST DECADE

Energy. Cooperation. Trust.

OJSC Severneftegazprom is currently the fifth largest producer in the Gazprom group of companies with an annual gas production of over 25 billion cubic meters. During the first decade of its activities, Severneftegazprom approached the landmark of 100 billion cubic meters of accumulated gas. The activity of OJSC Severneftegazprom is of strategic importance for the gas industry: the Yuzhno-Russkoye Gas field developed by the company is a major component of the resource base of the first leg of the Nord Stream pipeline, transporting gas to Germany, France, the UK, Denmark, the Netherlands, Belgium, Poland, the Czech Republic and other European countries. Moreover, the Company is the only Gazprom gas producing enterprise, whose activities are carried out via project financing. OJSC Severneftegazprom is the first company in Russia to implement a project for commercial development of gas deposits in the Turonian deposit. In December 2011, the first Turonian gas was supplied to the gas transport system of Russia, which was the beginning of a new stage of development for the gas industry involving the development of gas reserves. If the project is successful in developing the Turonian deposits, the Company will be able to produce an additional 5-8 billion cubic meters of gas annually. The company uses the latest equipment and innovative technology to allow it to reach the maximum efficiency level for production and business processes. OJSC Severneftegazprom continuously monitors and active searches for new technologies and production solutions that will not only bring economic but also environmental benefits. The latest projects in this area are the development of specialized cleaning systems for industrial wastewater, heat recovery and power generation based on a flue gas of the booster compressor station. OJSC Severneftegazprom is an example of effective cooperation between Russia and Germany. In recent years, the Company has succeeded in building an efficient model of interaction and corporate management taking into account the rights and needs of all the three Company shareholders. It manages to successfully consolidate and use accumulated potential and experience of shareholders in its business operations. OJSC Severneftegazprom now plays a prominent role in the gas market in Russia and is recognized as one of the most successful examples of international cooperation in gas production.

ANNUAL REPORT 2011

GENERAL INFORMATION Registration Details. . . . . . . . . . . . . . . . . . . . . . . 12 Authorized Capital . . . . . . . . . . . . . . . . . . . . . . . . 13

General information

Registration Details Full company name: Severneftegazprom Open Joint Stock Company Short business name of the Company in Russian: ОАО «Севернефтегазпром». Full business name of the Company in English: Open Joint Stock Company “Severneftegazprom”. Short business name of the Company in English: OJSC “Severneftegazprom”.

Legal and postal address:

Interdistrict Inspectorate of the Ministry of Taxation No 3 for Yamalo-Nenets Autonomous District.

Information of the Company’s Registrar ZAO “Specialized Registrar – Gas Industry Shareholders’ Registrar” (ZAO SR-DRAGa). Location and postal address: 117420, Moscow, Novocheremuskinskaya street, house 71/32, . tel.: +7 (495) 719-40-44, Fax: +7 (495)719-45-85.

Legal address: 629380, Yamalo-Nenets Autonomous Region, Krasnoselkup District, Krasnoselkup Village, Lenina street, 22. Postal address: 629300, Yamalo-Nenets Autonomous Region, Novy Urengoy, p/b 1130. E-mail – sngp@sngp.org.

Register maintenance operations licence dated 26 December, 2003 No. 10-000-1-00291, issued by the Federal Securities Market Commission of Russia for an indefinite term.

Information sources, in which the Company discloses information in compliance with requirements of securities laws.

Yuzhno-Russkoye Oil Gas Condensate Field development and facilities construction; recovery, collection, disposition and sales of natural gas; prospecting and exploration work; construction customer operations.

OJSC Severneftegazprom website at . http://www.severneftegazprom.com/. News feed, which is the content resource updated in real time and provided to the Company by Interfax Information Agency . (ZAO Interfax is a news agency for the securities market) at . http://www.e-disclosure.ru/index.aspx.

State Registration Date and Registration Number Certificate No R-16625.16 of registration and entry in the state register of commercial entities was issued to OJSC Severneftegazprom in connection with reorganization of Severneftegazprom LLC based on Minutes No. 5 of the extraordinary General Meeting of Company Members dated 1 June, 2001 (previous register No.: R-16447.15 dated 31 May, 2001). Issued 15 June, 2001 by the State registration Chamber at the Ministry of Justice of the Russian Federation. Certificate of the entry made in the Unified State Register of Legal Entities of the legal entity registered before 1 July, 2002, under Main State Registration Number 1028900699035 dated 19 December, 2002 was issued by

Core Operations

The Company holds the following main licences: licence for exploration and raw hydrocarbons production within the Yuzhno-Russkoye mining site situated in Krasnoselkup District of Yamalo-Nenets Autonomous District of Tyumen Region. Series SLKh No. 11049 NE. Issued 22 June, 2001. Valid until 31 December, 2043; licence for operating explosion-hazardous production facilities, No. EV-00-007716 (DK). Coming into force 7 August, 2007. Valid until 7 August, 2012. Moreover, the Company holds over 10 permits (licences) for other kinds of operations and is a member of Association of Gas and Oil Industry Constructors Non-Commercial Partnership.

Company Representative Offices OJSC Severneftegazprom has representative offices in Novy Urengoy, Urengoy Village, Tyumen and Moscow. The Company has no subsidiaries and affiliates.

ANNUAL REPORT 2011

General information

Authorized Capital Information about Authorized Capital as of 31 December, 2011. The authorized capital is presented in the amount of nominal value of ordinary and preferred shares placed by the Company. The Com-

pany’s authorized capital is divided into 533 330 shares and amounts to 40 000 thousand rubles as of the end of the reporting period. Placed Shares:

Including:

Types of Security Shares (pcs.)

Amount at Par per Share (rub.)

Paid in Full (pcs.)

Paid in Part at Par (rub.)

The Company’s authorized capital totals to:

533 330

–

533 330

Ordinary shares

533 324

60.00

533 324

including those accounted in the balance sheet

Preferred shares, including:

preferred shares of type A

2 461 620.00

666 692.40

1 076 992.20

2.1. 3. 3.1. 3.1.1.

including those accounted in the balance sheet

3.2.

preferred shares of type B

3.2.1. 3.3. 3.3.1.

including those accounted in the balance sheet preferred shares of type C including those accounted in the balance sheet

The Company’s authorized capital has been paid in full.

Information on Changes of the Company’s Authorized Capital for the Reporting Year Company shareholders (Minutes of the extraordinary General Meeting of Shareholders No. 17/2011 dated 11 May, 2011) took the decision on increasing the authorized capital by increasing As of 01.01.2011

the nominal value of all placed shares of the Company (placement method: conversion of shares in shares of the same category (type) with higher nominal value). As of 31.12.2011

Changes for 2011

Share Category Number of Shares

Par Value (rub.)

Number of Shares

Par Value

Number of Shares

Changes per 1 Share 1, (rub.)

533 324

1.00

533 324

60.00

–

+ 59.00

Type A

41 027.00

2 461 620.00

–

+ 2 420 593.00

Type B

11 111.54

666 692.40

–

+ 655 580.86

Type C

17 949.87

1 076 992.20

–

+ 1 059 042.33

Ordinary Preferred

General information

Information of the Company’s Issuance Securities Nominal Value of Each Security of the Issue, rub.

Total Number of Placed Securities of the Issue, pcs

State Registration Number of the Issue

Date of the State Registration of the Issue

Ordinary registered shares

533 324

1-02-31375-D

05.07.2011

Preferred shares of type A

2 461 620

2-10-31375-D

03.10.2011

Preferred shares of type B

666 692.4

2-08-31375-D

03.10.2011

Preferred shares of type C

1 076 992.2

2-09-31375-D

03.10.2011

Kind and Category (Type) of Securities

State registration of all issues of Company shares was performed by the Regional Branch of the Federal Financial Market Service in the Ural Federal District. In the reporting year, the Company did not attract cash or other funds as a result of securities issuance.

40%

The Company’s securities are not listed with any trade organizer on the securities market and have no market quotations.

25%

35%

Company Shareholders Holding over 5 % of Company’s Voting Shares for the End of the Reporting Period Number of Shares, pcs.

Nominal Value, rub.

Share in the Authorized Capital, %

Part of Ordinary Shares, %

OAO Gazprom

266 668

16 000 080.00

40.0004506028

50.00112502

Ordniary shares

266 668

16 000 080.00

40.0004506028

50.00112502

Preferred shares, A

–

Preferred shares, B

–

Preferred shares, C

–

Wintershall Holding GmbH

133 331

13 999 912.20

34.9999997750

24.99943749

Ordniary shares

133 328

7 999 680.00

19.9993252958

24.9994

Preferred shares, A

4 923 240.00

12.3081771107

–

Preferred shares, B

–

Preferred shares, C

1 076 992.20

2.6924973685

–

E.ON Ruhrgas E & P GmbH

133 331

9 999 757.20

24.9995496222

24.99943749

Ordniary shares

133 328

7 999 680.00

19.9993252958

24.99943749

Preferred shares, A

–

Preferred shares, B

2 000 077.20

5.0002243264

–

Preferred shares, C

–

533 330

39 999 749.4

100.00%

Shareholder

Total:

ANNUAL REPORT 2011

General information

Income from Ordinary and Preferred Shares in the Reporting Year (Declared Dividends) Per Share №

Amount of Income from Securities in the Reporting Period, in Rubles per Share

Category (Type) of Security

Ordinary share

19 800.35

Preferred share, type A

812 328 000.00

Preferred share, type B

220 000 000.00

Preferred share, type C

355 344 000.00

Report of Payment of Declared (Accrued) Dividends for Company Shares (Draw) for Company Shares (Shares in the Authorized Capital) According to results of the first 9 months of 2011, in compliance with the decision of the extraordinary General Meeting of Shareholders held on 21 December, 2011 (Minutes No. 22/2011 as of 21 December, 2011) 13,200 million rubles were allocated to pay dividends. Category (Type) of Security

Amount of Dividends Paid, TOTAL (thous. rubles)

Paid

Ordinary shares

10 560 000

Dec-11

Preferred shares, type A

1 624 656

Dec-11

Preferred shares, type B

660 000

Dec-11

Preferred shares, type C

355 344

Dec-11

13 200 000

Dec-11

TOTAL:

Information on Changes of the Company’s Capital Surplus Amounts of premium on capital stock received from placement of the Company’s shares at the price exceeding their nominal value are accounted as part of the Company’s capital surplus. In 2011 the capital surplus was reduced by the amount of 39 333 000 rubles as its funds were used to increase the charter capital by increasing the nominal value of shares. As of December 31, 2011 the capital surplus totaled 25 099 046 000 rubles.

As of 31 December, 2011, dividends were paid in full, and there is no debt for dividend payment.

Information on Changes of the Company’s Reserve Fund In compliance with the Articles of Association, the Company established a reserve fund totalling 5 percent of the authorized capital. Due to the increase of nominal value of shares and the authorized capital, in 2011 the reserve fund was increased by 1 967 000 rubles and amounted to 2,000,000 rubles as of 31 December, 2011. Financial Indicator for the Reporting Period

Amount of the Indicator for the Reporting Period, Rub.

Reserve Fund as of the End of the Period

2 000 000

Allocations provided in the Reserve Fund

1 967 000

Amount Used from the Reserve Fund in the Reporting Period

COMPANY DEVELOPMENT Mission and Strategy. . . . . . . . . . . . . . . . . . . . . . 17 Company History . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Geography of Operations . . . . . . . . . . . . . . . . . . 19 Situation in the industry. . . . . . . . . . . . . . . . . . . 19 High Priority Lines of Business . andÂ Development Prospects . . . . . . . . . . . . . . . 20

ANNUAL REPORT 2011

Company development

Mission and Strategy OJSC Severneftegazprom views its mission in ensuring long-term and balanced growth due to efficient and stable production and sales of natural hydrocarbons through use of state-of-the-art, innovative and environmentally friendly technologies, facilitating social and economic development of its regions of presence and taking care of its employees. Our strategic goal is to become a technology leader in producing hard to recover gas reserves in the framework of successful Russian and German cooperation that unites European technologies with Russian experience to achieve maximum efficiency of operations, with reasonable use and development of the resource base.

Main Strategic Principles of Operations: enhancing efficiency of core operations and improving performance indicators; improving corporate management and following all shareholders’ interests; enhancing transparency of business operations and cost control; personal liability of managers for management decision making;

minimizing specific negative man-induced impact on the environment.

Principles of gas production operations: building a reliable foundation for future stable operations through preserving and developing the raw material base due to required scope of exploration work at the YuzhnoRusskoye licence areas and possible purchase of new areas with prospects; creating long-term growth potential – improving exploration work efficiency due to thorough selection of projects and use of state-of-the-art technologies; efficient production cost control due to use of state-of-the-art technologies, optimizing operations of well stock and used field development systems and technologies; applying innovative solutions and state-of-the-art techniques and technologies of field development and exploitation, improving exploration work and gas production efficiency; maximum efficiency in producing remaining reserves using state-of-the-art, innovative and safe technologies to reduce negative environmental impact.

Company History 1969

1993–1994

The Yuzhno-Russkoye Field was discovered as a result of drilling exploration well No. 6, which, when tested on 17 November, gave a gas spouter from Cenomanian deposits. Drilling was performed by the Urengoy oil/gas exploratory expedition.

Deposit prospects were confirmed, and an operating evaluation of oil and gas reserves was performed. On 23 December, 1993, the state subsoil licence for the Yuzhno-Russkoye mining site came into force.

1979

2001

For the first time, the State Commission for Reserves of Commercial Minerals under the aegis of the Council of Ministers of the USSR (GKZ USSR) calculated and approved reserves of the Cenomanian and Senonian deposits of the Yuzhno-Russkoye Field. Detailed seismic exploration operations were conducted in Lower Cretaceous and Jurassic sediments of the Yuzhno-Russkoye Field. Based on the data of well testing, it was concluded that Lower Cretaceous and Jurassic sediments had prospects.

15 June, OJSC Severneftegazprom was registered. 22 June, OJSC Severneftegazprom was issued a licence for exploration and raw hydrocarbons production within the YuzhnoRusskoye mining site.

2004

1990

The reservoir management plan for Cenomanian (PK1) and Senonian (T1, T2) deposits of Yuzhno-Russkoye Field was performed (by OOO TyumenNIIgiprogas).

The second stage of prospecting and exploratory drilling of Yuzhno-Russkoye Field deposits began.

The Yuzhno-Russkoye Field facilities construction project design was performed based on the reservoir management plan for

Company development

Cenomanian and Senonian deposits (by OAO UzhNIIgiprogaz), on which positive expert opinions were later provided in-house and by the Main State Expert Review Board. It was determined that the Yuzhno-Russkoye Field development was to be performed using project financing methods (Resolution of the Management Board of OAO Gazprom No 51 “On primary measures for setting into operation the Yuzhno-Russkoye field subsurface area Site”).

2006 Yuzhno-Russkoye Field facilities construction operations began.

2007 Inclusion into the Unified Gas Supply System of OAO Gazprom was performed to enable gas supply from the Yuzhno-Russkoye Field. On 25 October, at 3.20am, the Yuzhno-Russkoye Field was put into commercial operation with a daily gas production rate of . 16.8 million m3. The solemn ceremony of commissioning the Yuzhno-Russkoye Field was held 18 December, at the central office of OAO Gazprom in the presence of Dmitry Medvedev, First Deputy Chairman of the Government of the Russian Federation, Chairman of the Board of Directors of OAO Gazprom and Frank-Walter Steinmeier, Vice Chancellor, Minister of Foreign Affairs of the Federal Republic of Germany.

2009 Russian and German investors signed the Shareholders’ Agreement on the order of interaction in the Yuzhno-Russkoye Oil and Gas Field development. One year ahead of plan, the Yuzhno-Russkoye Field design capacity of gas production volume of 25 billion m3 per year was reached. As a result of asset swap transaction between OAO Gazprom and E.ON Ruhrgas AG, E.ON Ruhrgas AG’s subsidiary, E.ON Ruhrgas E & P GmbH, was included in the number of Company’s shareholders. The Federal Subsoil Resources Management Agency took the decision to extend the licence for exploration and raw hydrocarbons production within the Yuzhno-Russkoye mining site until 31 December, 2043.

2010 In June, overall gas output at the Yuzhno-Russkoye Field totalled 50 billion m3.

2011 The first gas was obtained from development of the Turonian Gas Deposit. Financial closure of the deal attracting project financing totalling 1.1 billion EUR was implemented. Commissioning of Nord Stream gas pipeline, with the YuzhnoRusskoye Field being one of the components of its resource base. As a result of asset swap transaction between OAO Gazprom and BASF AG, BASF AG’s subsidiary, Wintershall Holding AG, was included into the Company’s shareholders.

OJSC Severneftegazprom, the first of Gazprom Group producers, started pilot gas production from the Turonian Gas Deposit.

ANNUAL REPORT 2011

Company development

Geography of Operations The Company operates in the territory of the Yamalo-Nenets Autonomous District, where the Yuzhno-Russkoye Oil Gas Condensate Field is situated.

Yamalo-Nenets Autonomous District

Yuzhno-Russkoye Oil Gas Condensate Field

The Yuzhno-Russkoye Field is situated in the north-eastern part of Western Siberia in Krasnoselkup District of Yamalo-Nenets Autonomous District of Tyumen Region, in the eastern part of Taz petroliferous area of Pur Taz Oil and Gas Province, and is over . 85 km long and over 14 km wide. Human settlements that are nearest to the field are Krasnoselkup village, which is situated 135 km to the east of the field, and Urengoy village, which is situated 90 km to the west. Three runs of Zapolyarnoye-Urengoy connecting gas pipeline, with a diameter of 1 420 mm, are situated 60 km away from the northern border of the licence area. The nearest railway station, Korotchaevo, is situated 110 km away to the west of the border of the field. The nearest river port and airport with a rough airstrip are situated in Urengoy village.

The Company is fifth in Gazprom Group in terms of production volume. As gas application is extended and its consumption grows, gas production demand is also increasing.

Situation in the industry

Company development

The fuel and energy complex (FEC) plays an exceptional role in the country’s economy and its development. The fuel and energy complex provides the main part of generating added value to the country’s GDP, receipts of tax and customs payments to the state treasury, as well as foreign currency receipts from export. The gas industry is the most stable and efficient segment of the country’s fuel and power sector that enables over 50% of domestic power consumption. Gas was and is the most environmentally friendly and socially attractive energy source. World reserves of natural gas in main producing regions total approximately 174.14 trillion m3. The largest producing regions in the world are Russia, the USA, Canada, Iran, Norway, Algeria and Qatar.

Meanwhile, in connection with the expansion of the use of gas and the rise in its consumption, the need for gas production is increasing. In this context, OJSC Severneftegazprom is implementing a project to develop Turonian natural gas deposits, the implementation of which will allow an annual production volume increment by 5-8 billion cubic meters of gas. The gas production level planned by OAO Gazprom is reached due to existing fields and new fields brought into development, among which an important place is given to the Yuzhno-Russkoye Field.

Russia’s share amounts to approximately 47.65 trillion m3 of world reserves of gas, which is about one third of overall gas reserves. About 70% of Russian reserves belong to OAO Gazprom.

Alexey Miller, Chairman of the Management Board of . OAO Gazprom, on congratulating OJSC Severneftegazprom staff on the 10th anniversary underlined the serious role the company is playing in the development of the industry: “Being an example of effective German-Russian cooperation, OJSC Severneftegazprom is making a notable contribution to the provision of energy security in Russia and Europe.

According to results of 2011, the Company is fifth in Gazprom Group in terms of production volume. OJSC Severneftegazprom is a successfully developing producing company. The share of natural gas produced by the Company during 2011 exceeds 4% of the total production of the group of companies of OAO Gazprom.

In the shortest terms, a modern gas field was created at the Yuzhno-Russkoye field, which is one of the best in Russia in terms of automation and technical equipment. Exemplary implementation of all environmental requirements and the high level of social responsibility have become a hallmark of OJSC Severneftegazprom.”

High Priority Lines of Business and Development Prospects The use of gas is expanding, and its consumption is constantly growing. According to forecasts, in the foreseeable future gas demand will grow faster compared to that of any other kind of energy source, in particular, due to its competitive advantages as the most environmentally clean fuel.

The following are high priority lines of business in OJSC Severneftegazprom’s operations: performing the licence agreement stating terms and conditions of using the Yuzhno-Russkoye mining site; ensuring planned gas production level of 25 billion m3 per year; implementing design solutions and measures to control the Yuzhno-Russkoye Field development; fulfilling the plan of exploration work and reserves increment; fulfilling the plan of reconstruction, retrofitting and re-equipment of facilities of the Yuzhno-Russkoye Oil and Gas Field in 2011-2012; developing a pilot multi-branch well, with a set of investigative work aimed at efficiently developing the Turonian (T1) Gas Deposit of the Yuzhno-Russkoye Field in compliance with the Project of Experimental Development of Turonian Gas Deposits of the Yuzhno-Russkoye Field;

further appraisal of producing characteristics of the Turonian (T1) Gas Deposit of the Yuzhno-Russkoye Field; fulfilling the project financing agreement provided by the international consortium of foreign banks and Russian bank Gazprombank (OAO); successful operation of the integrated management system in Quality and HSES in compliance with requirements of international standards ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007; participating in social and economic development of local municipal communities – Krasnoselkup and Purov Districts, as well as in implementing programmes supporting native minorities of the northern part of the country. A strategic plan of OJSC Severneftegazprom’s development, according to which current operations of the Company are planned, is the Long-Term Development Plan and the Budget of the YuzhnoRusskoye Oil and Gas Field based on the reservoir management plan for Cenomanian (PK1) and Senonian (T1, T2) deposits of Yuzhno-Russkoye Oil and Gas Field. On 22 October, 2010 the existing Long-Term Development Plan was amended and approved by the Company’s Board of Directors (Minutes of the meeting of the Board of Directors as of 22 October, 2010 No. 34/2010).

ANNUAL REPORT 2011

The General Meeting of Shareholders . . . . . . 22 The Board of Directors . . . . . . . . . . . . . . . . . . . . 23 Technical Committee . . . . . . . . . . . . . . . . . . . . . . 24 Report of the Company’s Board . of Directors on the Work . in Priority Directions of the Business. . . . . . . 25 Information on the Company’s Auditor. . . . . . 27 Internal Audit Commission. . . . . . . . . . . . . . . . . 27

MANAGEMENT BODIES AND BODIES FOR CONTROL OF FINANCIAL AND BUSINESS OPERATIONS

Structure of Management Bodies. . . . . . . . . . . 22

Management bodies and bodies for control of financial and business operations

Structure of Management Bodies The General Meeting of Shareholders — the senior management body whose competence includes the most important matters of the Company’s business. The Board of Directors — the management body undertaking general management of the Company and responsible for strategic management aimed at achievement of objectives and aims with prospects as well as control of efficiency of the Company’s business. The General Director — the sole executive body managing current activities of the Company. For the purpose of control of financial and business operations, the general meeting of shareholders elects the Internal Audit Commission responsible for audit and analysis of financial . standing of the Company, operation of the internal control system and verification of legality of business operations.

in accordance with International Financial Reporting Standards (IFRS), the Company engages an external auditor. The candidature of the independent audit is annually approved by the general meeting of shareholders upon suggestion by the Board of Directors. Matters associated with formation, competence and organization of activities of the management and control bodies are determined in the Company’s Charter and relevant internal documents of the Company. The Charter is accessible for familiarization to all interested persons on the official web site of the Company at: http://www. severneftegazprom.com/.

For the purpose of annual audit of financial statements prepared in accordance with Russian Accounting Standards (RAS) and

The General Meeting of Shareholders Nine general meetings of shareholders of the Company were held in 2011 including an annual meeting where the shareholders approved the Annual Report and the annual accounting statements of OJSC Severneftegazprom for 2010, approved the auditor of the Company for 2011, elected the Board of Directors and the Internal Audit Commission, and considered matters associated with distribution of profits and payment of considerations to members of the Board of Directors. The extraordinary general meeting of shareholders dated 15 March, 2011 approved the project facility agreement for the project “Yuzhno-Russkoye Oil and Gas Deposit” and transactions to be concluded to ensure raising of the project facility.

In addition, shareholders took the following decisions at extraordinary general meetings in 2011: on increase of the authorized capital stock of the Company; on amendment of the current version of the Company’s Charter to the extent of change of rights of holders of preferred shares in the Company; on re-election of the Board of Directors; on payment of dividends following the results of 9 months of 2011; on approval of amendment of gas supply contracts to the extent of price and volumes of gas supply.

ANNUAL REPORT 2011

Management bodies and bodies for control of financial and business operations

The Board of Directors Pursuant to the Charter, the Board of Directors of the Company is elected with 8 members. The Board of Directors is headed by the

Deputy Chairman of the Management Board of OAO Gazprom and General Director of OOO Gazprom Export – A.I. Medvedev.

The membership of the Board of Directors of the Company as of the end of the accounting period No.

Full name

Alexander I. Medvedev – Chairman of the Board of Directors

Olga P. Pavlova

Background

Born on 14 August, 1955 in Shakhtersk, Sakhalin Region. Graduated from the Moscow Physical and Technical Institute. Academic degree: candidate of economic sciences. 2002–2008 – member of the Management Board of OAO Gazprom, General Director of LLC Gazexport. Since 2008 – Deputy Chairman of the Management Board of OAO Gazprom, General Director of LLC Gazprom Export. Born on 17 August, 1953 in Vladivostok. Graduated from the Far-Eastern State University. Academic degree: candidate of legal sciences. Since 2003 – head of the Department for Property Management and Corporate Relations at OAO Gazprom Since 2004 – member of the Management Board of OAO Gazprom.

Vsevolod V. Cherepanov

Born on 25 November, 1966 in Frunze. Graduated from Lomonosov Moscow State University. Candidate of geological and mineralogical sciences. 2008–2010 – Deputy General Director – chief geologist at OOO Gazprom Dobycha Nadym. Since 2010 – member of the Management Board of OAO Gazprom, head of the Department for mining of gas, gas condensate, oil at OAO Gazprom.

Alexander P. Dushko

Born on 22 June, 1964 in Novodruzhesk. Graduated from Saint-Petersburg State Engineering Economic Academy. Since 2005 – Deputy Head of the Financial Economic Department of OAO Gazprom.

Dr. Rainer Seele

Born on 2 September, 1960 in Bremerhaven (Germany). Graduated from Gottingen University (Germany). Has the PhD degree in chemistry. 2000–2009 – Executive Officer of WINGAZ GmbH und Co.KG 2002–2009 – member of the Management Board of Wintershall Holding GmbH. 2005–2009 – Executive Officer of Wintershall Handelshaus GmbH and Co. KG, executive officer of WINGAZ Holding GmbH. Since 2009 – Chairman of the Management Board of Wintershall Holding GmbH, Executive Officer of Wintershall Erdgas Beteiligungs GmbH.

Mario Mehren

Born on 24 November, 1970 in Koblenz (Germany). Graduated from Saarland University (Germany), specialization “Business Administration”. 2006–2011 Head of the Finance and Information Management Department at Wintershall Holding GmbH, Managing Director of Haidkopf GmbH, Managing Director of Nordkaspische Explorations- und Produktions GmbH, Managing Director of Wintershall Libien Oil and Gas, Managing Director of Gewerkschaften Rehling GmbH, Managing Director of Wintershall Russland GmbH. 2007–2011 – member of the Management Board of Wintershall AG. 2009–2011 – Managing Director of Wintershall Norwegen Explorations-und-Produktions GmbH. 2008–2011 – Managing Director of Wintershall Middle East GmbH. since 2011 – member of the Management Board of Wintershall Holding GmbH.

Born on 21 August 21, 1957 in Time (Norway). Graduated from the Norwegian School of Economics and Business Administration. Master of Business Administration (MBA). Frank Allan Sivertsen 2005–2007 – Managing Director of E.ON Ruhrgas UK North Sea (Great Britain). Since 2008 – Managing Director at E.ON Ruhrgas E & P GmbH (Germany).

Alan James Weatherill

Born on 17 December, 1955 in Singapore. Graduated from Southampton University. Bachelor of science specializing in “Engineering Mechanics”. 2005–2010 – chief engineer at Shell Global Solutions B.V. (Holland). Since 2010 – General Director of E.ON Ruhrgas Exploration and Production Russia LLC

Management bodies and bodies for control of financial and business operations Information on changes in the membership of the Company’s Board of Directors in the accounting year Board of Directors in 1 January – 20 December, 2011

Board of Directors in 20 December – 31 December, 2011

Alexander I. Medvedev

Olga P. Pavlova

Vsevolod V. Cherepanov

Alexander P. Dushko

Dr. Rainer Seele

Tiessen Ties

Mario Mehren

Deters Henning Rolf

Alan James Weatherill

Frank Allan Sivertsen

The chairman and members of the Board of Directors did not hold any shares in the Company in the accounting year. No transactions for acquisition or alienation of shares in the Company were executed in the accounting year by members of the Board of Directors.

Technical Committee For the purpose of preliminary consideration of the most important matters covered by the competence of the Board of Directors and obtainment of recommendations for decisionmaking, the Company created the Technical Committee. The procedure for formation and operations of the Technical Committee are governed by the Shareholders’ Agreement of OJSC Severneftegazprom and the Regulations on the Technical Committee, approved by the Board of Directors. The Technical Committee consists of 8 members (since November 2009) who are appointed by the Board of Directors. Candidates are proposed by the shareholders of the Company as follows: from OAO Gazprom – 4 candidates, and from Wintershall Holding GmbH and E.ON E and P GmbH – . 2 candidates each. The function of the Technical Committee consists in the provision of recommendations for the Board of Directors on all material technical aspects of the Company’s business within its competence, including approval by the Board of the LongTerm Development Plan and Budget, the Draft Additional Field Development Plan, the Additional Field Development Plan and Annual Work Programme and Budget as well as any amendments and/or supplements thereto. Creation of a committee consisting of members possessing significant experience and knowledge in special areas increases efficiency and quality of work of the Board of Directors and consequently provides efficient mechanisms of control over activities of the executive body of the Company.

ANNUAL REPORT 2011

Management bodies and bodies for control of financial and business operations The membership of the Technical Committee as of 31 December, 2011: No.

Full name

Place of work

Occupied position

Stanislav E. Tsygankov

OJSC Severneftegazprom

General Director

Yulia V. Sukhanova

OJSC Severneftegazprom

Deputy General Director for Economy and Finance

Egor A. Efimochkin

OAO Gazprom

Deputy Head of the Directorate – head of the unit for mergers and acquisition at the Department of Foreign Economic Activities

Nazhib A. Bilalov

OAO Gazprom

Chief Technologist at the Directorate of Reconstruction and Development of New Capacities at the Department of Mining of Gas, Gas Condensate and Oil

Dr. Rolf Udo Norbert Pilling

Wintershall Russland GmbH

Deputy Managing Director for Matters of Technical Development and Support of Joint Ventures

Hermann Ubbenjans

OJSC Severneftegazprom

Deputy General Director for Development and Strategic Planning

Dr. Peter Reichetseder

E.ON Ruhrgas E&P GMBH

Managing Director for Production and Technology

Alan James Weatherill

E.ON Ruhrgas Exploration and Production Russia LLC

General Director

No members of the Technical Committee hold shares in the Company. No transactions for acquisition or alienation of shares in the Company were executed in the accounting year by members of the Technical Committee.

The following persons were also members of the Technical Committee in the accounting year: Full Name

Occupied position

Evgeny M. Zeigman until 04.02.2011

Deputy General Director – chief engineer of OJSC Severneftegazprom

Alexander P. Popov, until 22.04.2011

General Director of OJSC Severneftegazprom

Alexander A. Muzichenko, until 05.07.2011

Deputy General Director for Economy and Finance at OJSC Severneftegazprom

Robert Frimpong, until 10.10.2011

Vice President for Technology at Wintershall Holding GmbH

Report of the Company’s Board of Directors on the Work in Priority Directions of the Business The Board of Directors plays the most important role in ensuring shareholders’ rights, formation of the development strategy of the Company and ensuring its successful financial and economic operations.

17 meetings of the Board of Directors took place in 2011 which considered 95 matters in various directions of the Company’s business.

The Board of Directors assesses the performance of the Company in priority directions of business in the accounting year as successful in general.

The determinant decisions in the accounting year were decisions taken by the Board of Directors to arrange for long-term project facilities for development of the Yuzhno-Russkoye

Management bodies and bodies for control of financial and business operations

Deposit. The following matters were addressed by the Board of Directors within the framework of preparation for raising financing: on approval of transactions under the competence of the Board of Directors to be concluded to ensure effectiveness of the project facility agreement in relation to the project of the Yuzhno-Russkoye Oil and Gas Deposit; on convocation of an extraordinary general meeting of shareholders; on recommendation that the general meeting of shareholders should approve the project facility agreement in relation to the project of the Yuzhno-Russkoye Oil and Gas Deposit and transactions to be concluded to ensure effectiveness of the project facility agreement. The Board of Directors of OJSC Severneftegazprom addressed important matters associated with current operations of the Company: on re-election of the General Director due to early termination of powers upon agreement of the parties; on consideration of proposals of shareholders as to candidates to the Company’s Board of Directors for voting at the general meeting of shareholders; on approval of the annual programme of works and budget of the Company for 2012; on approval of related-party transactions; on appointment of members of the Committee for Technical Matters; on determination of the amount of consideration for auditors; on approval of decisions on issue of shares and Reports on results of share issues; on convocation of extraordinary general meetings of shareholders. The Board of Directors considered the following matters within the framework of preparation for extraordinary general meetings of shareholders: on determination of the gas sale price for the second half of 2011 and the first half of 2012;

on recommendations to the general meeting of shareholders as regard to increase of the authorized capital stock and amendment of the Charter to the extent of rights granted by preferred shares; on the recommendation for the general meeting of shareholders to raise loans for repayment of indebtedness associated with a multi-currency loan raised by the Company in 2010 from a group of banks; on recommendations as to amount of dividends on the Company’s shares and the procedure for payment thereof following the results of the first 9 months of the financial year of 2011.

Consideration of Members of the Board of Directors The total considerations paid in 2011 to members of the Board of Directors following the results of work in 2010 amounted to 3,936,250 rubles.

Executive Body According to the Company’s Charter, there is no collegial executive body of the Company (Management Board). The sole executive body of the Company is the General Director.

Biographical Information of the General Director Stanislav Tsygankov Term of office: from 25.02.2011 to the present Born on 27 July, 1966 in Moscow. Graduated from the Plekhanov Russian Economic Academy, specialization “Finance and Credit”.

Positions occupied in the 5 recent years: 2002–2011 – Head of the International Business Department at OAO Gazprom. Since 25 February, 2011 – the General Director of OJSC Severneftegazprom. The labour remuneration of the Company’s General Director is stipulated in the Agreement on Labour Remuneration being an appendix to the employment agreement which also provides the list of social guarantees and compensations. The General Director does not hold any shares in OJSC Severneftegazprom. No transactions for acquisition or alienation of shares in the Company were executed in the accounting year by the General Director.

ANNUAL REPORT 2011

Management bodies and bodies for control of financial and business operations The following persons fulfilled the functions of the sole executive body in the accounting year: Alexander P. Popov Term of office: until 18.01.2011 Alexander A. Dorofeev Term of office: from 28.01.2011 to 24.02.2011 . (temporary fulfilment of duties).

Information on the Company’s Auditor The auditor of the Company is JSC PricewaterhouseCoopers Audit (JSC PwC Audit) Address: 10 Butyrsky Val, Moscow 125047, Russian Federation; Certificate of state registration of the joint stock company . No. 008.890 issued by the Moscow Registration Chamber on 28.02.1992. Certificate of entry of a record into the Unified State Register of Legal Entities registered before 01.07.2002 under No. 1027700148431 dated 22.08.2002, issued by the Interdistrict Inspectorate of the Ministry of Taxation of Russia No. 39 for Moscow.

tors – registered number 870 in the register of members of NP APR.

Member of the Non-Commercial Partnership “Audit Chamber of Russia” (NP APR), a self-regulating organization of audi-

The audit was approved by the general meeting of shareholders of the Company on 30.06.2011.

Internal Audit Commission The Internal Audit Commission is a permanent internal control body, independent of officials, management bodies and management of the Company.

Membership of the Internal Audit Commission of the Company as of the end of the Accounting Period Full name

In its work, the Internal Audit Commission is guided by the Federal Law “On Joint Stock Companies”, the Charter of the Company and Regulations on the Internal Audit Commission. Pursuant to the Company’s Charter, the Internal Audit Commission consists of 3 members.

Place of work

Occupied position

Yulia N. Antonovskaya

OAO Gazprom

Chief Economist of the Organizational Directorate at the Department of Internal Audit of the Management Apparatus

Judith Buss

E.ON Ruhrgas E and P GmbH

Chief Financial Officer

Larissa Janz

Wintershall Russland GmbH

Head of the unit for finance and information technologies

No members of the Internal Audit Commission hold shares in the Company. No transactions for acquisition or alienation of shares in the Company were executed in the accounting year by members of the Internal Audit Commission.

KEY PERFORMANCE INDICATORS The Status of the Raw Material Base. . . . . . . . 29 Geological Exploration. . . . . . . . . . . . . . . . . . . . 31 Production Drilling . . . . . . . . . . . . . . . . . . . . . . . 31 Gas Production. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Gas Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

ANNUAL REPORT 2011

Key performance indicators

The Status of the Raw Material Base The Company possesses licence SLKh No. 11049 NE for geological exploration and mining of hydrocarbon raw materials within the Yuzhno-Russkoye subsoil area. The area includes three

deposits: Yuzhno-Russkoye, introduced into development in 2007, and Yarovoye and Zapadno-Cheselskoye, accounted for in the governmental balance sheet as under exploration.

Description of the raw material base as of the end of the accounting period: Reserves of hydrocarbon raw materials as of 31.12.2011 Deposit

Gas, bln. m3

Condensate, mln. tons

ABC1

937 903

162 017

Yarovoye Deposit

2 78

10 148

0 212

Zapadno-Cheselskoye Deposit

6 705

1 131

0 043

947 388

173 296

0 255

Yuzhno-Russkoye Deposit

Total:

ABC1

Oil, mln. tons

ABC1

3 823

9 288

30 894

0 993

0 057

1 203

4 816

9 345

32 097

All licence liabilities of the Company regarding geological study of subsoil were fulfilled in full.

Flow of reserves of the categories ABC1 and C2 in the accounting period

Hydrocarbons

Oil (thousand tons) Gas (bln. m3) Condensate (thousand tons)

Reserves as of 01.01.2011 АВС1

С2

9 617

26 405

831 900

208 880

261

2482

Changes in reserves in 2011 Mining + loss

25 667

Exploration АВС1

С2

Re-evaluation АВС1

С2

–272

Reserves as of 31.12.2011

Transfer АВС1

С2

АВС1

С2

+5692

9 345

32 097

+141155

–35 584

947 388

173 296

–6

+2334

255

4816

Key performance indicators The Development of the Cenomanian gas reservoir. The comparative characteristics of design and actual indicators: Indicators

2011 Design

Actual

25.060

25.655

90.990

90.265

Gas extraction from the beginning of balance-sheet reserves, %

13.68

13.57

Gas extraction in 2011 from the beginning of balance-sheet reserves, %

3.77

3.86

–

1 (well 2n)

–

162

161

142

– supervisory

– absorbing

4*16MW

0.95

0.98

Gas extraction, bln. m /year 3

Aggregate gas extraction, bln. m

Introduction of wells, units: – mining – supervisory The fund of wells as of the end of the year, units: – mining, including active ones

Power of the Booster Compressor Station (Booster Pump Station) Well utilization rate Utilization rate of well stock

ANNUAL REPORT 2011

Key performance indicators

Geological Exploration Geological exploration in the territory of the Yuzhno-Russkoye licence area was carried out in 2011 according to the specified geological terms of reference for execution of geological exploration, as approved by the deputy Chairman of the Management Board of OAO Gazprom A.G. Ananenkov on 24.01.2011 with amendments as of 26.12.2011.

The works were carried out in the following three main directions: topical and scientific-research works; seismic research of the territory; environmental activities and liquidation of unfavourable conditions of construction. No geological exploration wells were built in 2011, and there were no tests of facilities in the column. The comprehensive processing and interpretation of results of seismic exploration works on the basis of common depth point method 3D in the Yuzhno-Russkoye licence area were completed in 2011 to a volume of 1,462.12 km2 and the field stage and office processing of detailed seismic research with high density . to a volume of 15.2 km2 full-fold survey were completed. The works for environmental protection and liquidation of unfavourable conditions of construction were completed, and 6 wells from the aged geological exploration fund were liquidated: Nos. 3, 15, 20, 23, 24, 25.

The works for re-calculation of reserves of free gas in layers PK1, T1-2 and the works for calculation of hydrocarbon reserves in Lower Cretaceous and Jurassic sediments in the Yuzhno-Russkoye licence area were completed (work transferred from 2009), and the reports underwent expertise and were approved by the FGU State Commission for Mineral Reserves (minutes of State Committee for Reserves Rosnedra No. 2500-dsp dated 19.08.2011). Experimental two-face well No. 174 drilled into the Turonian gas deposit was commissioned in December 2011. The geological terms of reference did not plan any increase in reserves for 2011, however, following the results of calculation of hydrocarbon reserves at the Yuzhno-Russkoye and Yarovoye deposits and recalculation of reserves of free gas in the layer PK1 and Turonian sediments of the Yuzhno-Russkoye deposit, the following changes in reserves were observed: No. of the minutes of the State Committee for Condensate, mln. Reserves, date of approval tons

Increase in reserves, category С1 Deposit

Yuzhno-Russkoye Yarovoye Total

Gas, bln. m3

Oil, mln., tons

139.842

0.572

1.313

–0.844

–0.006

141.155

–0.272

–0.006

No. 2500-dsp dated 19.08.2011

Production Drilling It was planned to drill 1,460 meters of rock and complete construction of 2 wells in the accounting period.

As of the end of the accounting period: supervisory single well No. 2n was completed. The length of heading over the accounting period is 1,020 meters; production two-face well No. 174 was completed and commissioned. The length of the heading is 1,647 meters; the total heading length is 2 667 meters.

Key performance indicators

Scope of works in physical terms: heading –meters, wells – units Indicators

2011 2010 plan

report

Deviation from 2010, +,–

Heading, meters

5307

1460

2667

–2640

including gas

5307

1460

2667

–2640

–3

number of wells restored by the horizontal hole

–

number of wells withdrawn from production in progress

–

Number of wells accounted for in the balance sheet from among completed wells, units

–4

number of wells restored by the horizontal hole

–

number of wells withdrawn from production in progress

–

number of wells restored by the horizontal hole Number of completed wells, units including gas wells

including gas

Production two-face well No. 174 Built within the framework of experimental production development of the Turonian gas deposit. The well consists of two holes, the main – horizon T2 and side – lateral T1. The main hole was drilled to the depth of 1,806 meters, the depth of running of an extraction column with the diameter of 245 mm – 1,776 meters, includes a filter with the diameter of 245 mm. The lateral hole is drilled to the depth of 1,491 m, the depth of running of the tail filter with the diameter 168 mm is 1,468 m. The main hole of the multi-face well (MGW) contains a well completion system produced by Halliburton designed for separate operation of facilities by separate columns of the production tubing with the diameter of 73 mm. A double string of the production tubing was inserted into the well; this was done for the first time in the area of the Far North.

A double spider, double escalator and other auxiliary equipment designed and produced by CJSC NPP SibBurMash were used for execution of that operation. The string of the production tubing of the main hole was equipped with a packer above the interval of the production facility. This system of parallel tubing-string completion produced by Halliburton enables to carry out development and exploration operations in each hole of the multi-face well separately and provides separate access through the production tubing to the main and lateral holes of the well in the course of development and further production. In order to hang casing pipes, insulate the ring space between them and control pressure therein, insulate the well mouth, hang the double string of the production tubing, control and regulate the working regime of the wells, override and direct extracted products to a gas flowline and execution of various technological operations, a dual production treble was designed, produced by AK Korvet and successfully applied for the first time in Russia. In addition, a top drive drill rig was used within the framework of this project for the purpose to comply with special requirements.

ANNUAL REPORT 2011

Key performance indicators

Gas Production The plan of gas mining for 2011 is 25,060 bln. m3. The actual gross output in 2011 was 25,651 bln. m3 of gas. The plan was fulfilled by 102.4% (+ 591 mln. m3). 2011 Indicator

Measure

Gross gas production

plan

report

+,–

25 358.98

25 060.00

25 651.28

1.2

30 532

120 223

68 239

123.50

thousand tons

–

mln. m3

including gas for technical needs Mines volume of gas condensate

Deviation 2011 /2010

2010 report

Mined volume of oil

Gas Sales All volumes of gas mined by the Company are sold pursuant to long-term gas supply contracts to the following consumers: 40% – OJSC Gazprom; 35% – CJSC Gazprom YRGM Trading; 25% – CJSC Gazprom YRGM Development

I thank OJSC Severneftegazprom for very careful observance of the terms of gas supply contracts. Quality of gas treatment at facilities of OJSC Severneftegazprom in the Yuzhno-Russkoye Oil and Gas Deposit is very important for us, CJSC Gazprom YRGM Trading.

Gas Sales CJSC Gazprom YRGM Development

25%

40% OAO Gazprom

35%

CJSC Gazprom YRGM Trading

Gas sales in the accounting period:: Purchaser

Sale volume, million m3

Gas purchasers mark irreproachable fulfilment of contractual conditions both in terms and quality of supplied products.

Changes in the accounting period

Quality of gas supplied to the unified gas transport system of Russia and received by our European consumers depends to a large extent on the work and professionalism of specialists of OJSC Severneftegazprom. I wish that the team of OJSC Severneftegazprom would maintain further on its high standard of work and quality of produced goods!

2011

2010

mln. m3

in %

OAO Gazprom

10 232.5

10 130.9

+ 101.6

+ 1%

CJSC Gazprom YRGM Trading

8 953.4

8 864.5

+ 88.9

+ 1%

CJSC Gazprom YRGM Development

6 395.3

6 331.8

+ 63.5

+1%

E.A. Efimochkin

TOTAL

25 581.3

25 327.3

+ 254.0

+ 1%

General Director CJSC Gazprom YRGM Trading

Best Regards,

FINANCIAL RESULTS

Key Indicators over 2009–2011 . . . . . . . . . . . . . . 35 Implementation of the Annual . Programme of Works and Budget . of the Company in 2011 . . . . . . . . . . . . . . . . . . . . . 35 Analysis of Changes . in the Asset Structure of the Company . . . . . 36 Analysis of Change in the Liabilities . Structure of the Company . . . . . . . . . . . . . . . . . 38 Analysis of Change . in Indicators of the Profit . and Loss Statement for 2011 . . . . . . . . . . . . . . . 40 Analysis of Cash Flow . . . . . . . . . . . . . . . . . . . . . 41 Analysis of Debt Liabilities . . . . . . . . . . . . . . . . . 42 Analysis of Key Financial Ratios . . . . . . . . . . . . 43

ANNUAL REPORT 2011

Financial results

Key Indicators over 2009–2011 Change in % Indicator, million rubles

2011

2010

2009 2011 /2010

2010/2009

Sale revenues

26 038

36 902

16 891

29%

+ 118%

Sale profit

9 365

24 578

6 741

– 62%

+ 265%

Net profit

5 786

19 304

1 424

– 70%

+ 1256%

Net cash from operations . (current operations)

13 796

23 322

11 745

– 41%

+ 100%

Net assets

34 834

42 248

22 944

– 18%

+ 84%

Implementation of the Annual Programme of Works and Budget of the Company in 2011 отклонения факт / план 2011

2011 г. Наименование план

факт

млн. руб.

25 060 000

25 651 278

591 278

2.4%

24 937 855

25 581 326

643 471

2.6%

24 937 855

25 581 326

643 471

2.6%

OAO Gazprom

9 975 142

10 232 530

257 388

2.6%

CJSC Gazprom YRGM Trading

8 728 249

8 953 464

225 215

2.6%

CJSC Gazprom YRGM Development

6 234 464

6 395 331

160 867

2.6%

Total income, million rubles

25 374

26 038

664

2.6%

Total revenues from gas sales

25 374

26 038

664

2.6%

OAO Gazprom

10 149

10 415

266

2.6%

CJSC Gazprom YRGM Trading

8 881

9 113

232

2.6%

CJSC Gazprom YRGM Development

6 343

6 510

167

2.6%

19 584

18 787

–797

–4.1%

275

323

17.5%

Gas for internal needs

–

Purchased energy

0.0%

1 509

1 448

–61

–4.0%

129

154

19.4%

ANNUAL PROGRAMME OF WORKS Gross gas production, thousand m3 Volume of marketable gas, thousand m3 Total marketable gas shipped, thousand m

Total expenditure, mln. rubles Materials

Expenses for salaries, social benefits and payments Insurance contributions

Financial results

отклонения факт / план 2011

2011 г. Наименование план

факт

млн. руб.

5 705

5 888

183

3.2%

107

118

10.3%

7 017

7 139

122

1.7%

Mineral extraction tax

5 939

6 079

140

2.4%

Other taxes covered by the cost of products (works, services)

1 078

1 060

–18

–1.7%

Geological exploration (contracting)

211

165

–46

–21.8%

Costs under insurance contracts

290

276

–14

–4.8%

Overhaul (contracting without MTR)

–13

–100%

4 324

3 273

–1 051

–24.3%

Legal and advisory services

186

143

–43

–23.1%

Audit

–1

–9.1%

Services for technical maintenance and current repair

143

125

–18

–12.6%

Geophysical services

102

–57

–55.9%

Other services of external organizations

582

474

–108

–18.6%

2 637

2 340

–297

–11.3%

664

136

–528

–79.5%

Profit (loss) before tax

5 674

7 429

1 755

30.9%

Current profit tax (not covered by Cts)

1 432

566

–866

–60.5%

443

294

–149

–33.6%

2 007

1 063

–944

–47.0%

Depreciation (according to the Russian Accounting Standards) Lease of fixed assets Leasing Taxes and other compulsory charges

Miscellaneous expenses

Interest and lump-sum payments on credits and loans Other

Expenses not subject to taxation (accounted for in 2.5.4, 2.5.6 and 2.5.13.7 for inclusion in Cts) Capital investments

Analysis of Changes in the Asset Structure of the Company Changes in natural terms

Line of form No. 1

Line number

Change of specific weight in assets

Change over the period As of the As of the end beginning of of the period the period

in thousand rubles

Specific weight (Y) As of the As of the end beginning of of the period the period

Change of specific weight Y

I. NON-CURRENT ASSETS Intangible assets

1110

1 567

317

+1 250

394%

Results of research and development

1120

11 094

–

+11 094

100%

Fixed assets including

1130

55 415 570

60 286 972

–4 871 402

–8%

68.4%

67.2%

+1.2%

1131

54 332 838

59 698 128

–5 365 290

–9%

67.1%

66.5%

+0.6%

Fixed assets

ANNUAL REPORT 2011

Financial results

Changes in natural terms

Line of form No. 1

Capital investments in progress

Line number

Change of specific weight in assets

Change over the period As of the As of the end beginning of of the period the period

in thousand rubles

Specific weight (Y) As of the As of the end beginning of of the period the period

Change of specific weight Y

1134

1 082 732

588 844

+493 888

+83%

1.3%

0.7%

+0.6%

Deferred tax assets

1160

129 300

1 204 177

–1 074 877

–89%

1.3%

–1.3%

Other non-current assets, including

1170

1 915 797

1 972 781

–56 984

–3%

2.4%

2.2%

+0.2%

1171

968 635

966 029

+2 606

+0.3

1.2%

1.1%

+0.1%

1100

57 473 328

63 464 247

–5 990 919

–9%

71%

70.7%

+0.3%

1210

673 532

1 084 216

–410 684

–39%

0.8%

1.2%

–0.4%

Raw, other materials and other similar valuables

1211

667 359

1 079 128

–411 769

–38%

0.8%

1.2%

–0.4%

Finished products for resale

1214

6 173

5 088

+373

+7%

VAT on acquired valuables

1220

5 926

–5 873

–99%

Receivables including

1230

5 052 553

7 522 116

–2 469 563

–33%

6.2%

8.4%

–2.2%

Receivables due after 12 months

1231

430 643

570 114

–139 471

–25%

0.5%

0.6%

–0.1%

Receivables due within 12 months including

1235

4 621 910

6 952 002

–2 330 092

–34%

5.7%

7.8%

–2.1%

Purchasers and customers

1236

2 748 962

5 634 799

–2 885 837

–51%

3.4%

6.3%

–2.9%

Advances issued

1238

247 036

247 339

–303

–0.1%

0.3%

Other receivables

1239

1 625 912

1 069 864

+556 048

+52%

1.2%

+0.8%

Financial investments

1240

–

10 750 000

–10 750 000

–100%

12%

–12%

Cash, including

1250

17 575 679

6 577 805

+10 997 874

167%

22%

7.3%

+14.7%

Settlement accounts

1252

12 767 517

8 050

+12 759 467

–

16%

+16%

Currency accounts

1253

516

182 472

–181 958

100%

0.2%

–0.2%

Other cash

1259

4 807 646

6 387 283

–1 579 637

–25%

7.1%

–1.1%

1260

168 110

363 320

–195 210

–54%

0.2%

0.4%

–0.2%

1261

96 972

279 741

–182 769

–65%

0.1%

0.3%

–02%

Total section II

1200

23 469 927

26 303 383

–2 833 456

–11%

29%

29.3%

–0.3%

BALANCE (lines 1100 + 1200)

1600

80 943 255

89 767 630

–8 824 375

–10%

100%

–

Expenses for development of natural resources Total section I II. CURRENT ASSETS Stocks, including

Other current assets, including Expenses for development of natural resources

Assets of the balance sheet have the following structure as of the end of the accounting period: non-current assets: 71,0% of the balance sheet grand total current assets: 29,0% of the balance sheet grand total

The structure of non-current assets as of 31.12.2011. fixed assets: 94,5% . (or 67,1% of the balance sheet grand total) capital investments in progress: 1,9% . (or 1,3% of the balance sheet grand total) other non-current assets: 3,6% (or 2,5% of the balance sheet grand total)

Financial results

The structure of current assets as of 31.12.2011:

cash: 74,9% (or 21,7% of the balance sheet grand total) receivables: 21,5% (or 6,3% of the balance sheet grand total) reserves: 2,9% (or 0,8% of the balance sheet grand total) others: 0,7% (or 0,3% of the balance sheet grand total)

Over the accounting period assets of the Company reduced by 8 824 375 thousand rubles (by 10%) and amounted to 80 943 255 thousand rubles. The amount of assets reduced due to the following items of the balance sheet (without limitation): Fixed assets – by 5 365 290 thousand rubles or by 9%, mainly due to assessed depreciation over the accounting period; Receivables – by 2 469 563 thousand rubles or 33%.. Reduction of receivables due after 12 months after the accounting date (long-term receivables) by 139 471 thousand rubles (or 25%) is conditioned by repayment by OJSC Gazprom of a part of the debt (penalty) for failure to take

gas in 2009. According to signed undertakings within the framework of the gas supply contract, the total amount of the penalty is payable within 5 years from 01.01.2011 to 31.12.2015.. Reduction of receivables due within 12 months after the accounting date (short-term receivables) by 2 330 092 thousand rubles (or 34%) is mainly due to reduction of the gas sale price in 2011 and accordingly reduction of sale revenues and monthly receivables of purchasers for supplied products; Reserves – by 410 684 thousand rubles or 39%.. Reduction of this item is mainly due to assessment of a provision at the amount of 380.067 million rubles for depreciation of inventories, accrued following the results of the inventory held in 2011 and the report on independent appraisal of the market value of inventories, not intended for use in production operations of the Company. Such inventories are mainly presented by construction materials purchased in 2006-2009 which were not used for construction of facilities at the Yuzhno-Russkoye Oil and Gas Deposit due to amendments to design and technical solutions.

Analysis of Change in the Liabilities Structure of the Company Changes in natural terms

Line of form No. 1

Line number

Change of specific weight in assets

Change over the period As of the As of the end beginning of of the period the period

in thousand rubles

Specific weight (Y) As of the As of the end beginning of of the period the period

Change of specific weight Y

III. EQUITY AND PROVISIONS Authorized capital stock

40 000

667

+39 333

+5 897%

–

Re-evaluation of non-current assets

1340

47 142

–

0.1

–

Additional capital

1350

25 099 046

25 138 379

+39 333

–0.2%

31%

28%

+3%

Reserve capital

1360

2000

+1 967

+5 961%

–

Undistributed profit

1370

9 645 859

17 062 086

–7 416 227

–43%

12%

19%

–7%

Total section III

1300

34 834 047

42 248 307

–7 414 260

–17.6%

43%

47%

–4%

1410

33 004 231

–

+33 004 231

+100

41%

+41%

Bank loans repayable after 12 months

1411

33 044 231

–

+33 004 231

+100

41%

+41%

Deferred tax liabilities

1420

3 741 398

3 738 715

+2 683

+0.1%

4.4%

4.2%

+0.2%

IV. LONG-TERM LIABILITIES Borrowed funds including

ANNUAL REPORT 2011

Financial results

Changes in natural terms

Line of form No. 1

Total section IV

Line number

Change of specific weight in assets

Change over the period As of the As of the end beginning of of the period the period

in thousand rubles

Specific weight (Y) As of the As of the end beginning of of the period the period

Change of specific weight Y

1400

36 745 629

3 738 715

+33 006 914

+883%

45.4%

4.2%

+41.2%

1510

6 902 967

40 849 518

–33 946 551

–83%

8.5%

45.5%

–37%

Bank loans repayable within 12 months

1511

–

40 849 518

–40 849 518

–100%

45.5%

–45.5%

Current part of long-term loans and credits

1513

6 902 967

–

+6 902 967

+100%

8.5%

+8.5%

1520

2 157 728

2 653 456

–495 728

–18.7%

2.7%

–0.3%

Suppliers and contractors

1521

231 606

362 203

–130 597

–36%

0.3%

0.4%

–0.1%

Payables to personnel

1522

–

1 041

–1 041

–100%

–

Payable taxes and duties

1524

1 918 818

2 277 179

–358 361

–16%

2.4%

2.6%

–0.2%

Other payables

1525

7 304

13 033

–5729

–44%

–

Estimated liabilities

1540

302 884

277 634

+25 250

+9%

0.4%

0.3%

0.1%

Total section V

1500

9 363 579

43 780 608

–34 417 029

–78.6%

11.6%

48.8%

–37.2%

BALANCE (lines 1300 + 1400+1500)

1700

80 943 255

89 767 630

–8 824 375

–10%

100%

–

V. SHORT-TERM LIABILITIES Borrowed funds including

Payables including

Liabilities of the balance sheet have the following structure as of the end of the accounting period: Equity and provisions: 43% of the balance sheet grand total Long-term liabilities: 45% of the balance sheet grand total Short-term liabilities: 12% of the balance sheet grand total

The structure of liabilities of the balance sheet has significantly changed over the accounting period, namely: reduction of the share of short-term liabilities in the structure of the balance sheet 37%; increase of the share of long-term liabilities in the structure of the balance sheet 41%. The structure of liabilities changed mainly due to closure in May 2011 of the transaction for the project facility at the total amount equivalent to EUR 1.1 bln. provided by the international consortium of banks and Russian bank Gazprombank (OJSC).

The structure of long-term liabilities as of 31.12.2011: Bank loans repayable after 12 months: 90% . (or 41% of the balance sheet grand total) Deferred tax liabilities: 10% . (or 4 % of the balance sheet grand total)

The structure of short-term liabilities as of 31.12.2011: Borrowed funds: 74% . (or 8.5% of the balance sheet grand total) Payables: 23% (or 2.7% of the balance sheet grand total) Estimated liabilities: 3% . (or 0.4% of the balance sheet grand total) Over the accounting period liabilities of the Company decreased by 8 824.375 million rubles (by 10%) and totalled 80 943.255 million rubles:

The amount of liabilities reduced due to the following items of the balance sheet (without limitation): Undistributed profit – by 7 416.227 million rubles or 43 %, due to payment in 2011 of dividends to shareholders following the results of the first 9 months according to Minutes of the extraordinary meeting of shareholders No. 22/2011 dated 21.12.2011 at the total amount of 13 200 million rubles; Short-term borrowed funds – as a result of change in the structure of long-term and short-term borrowed funds, the total amount of borrowed liabilities in the accounting period decreased by 902 320 million rubles or 2.2%; Payables – by 495.728 million rubles or 19%, mainly due to reduction of tax liabilities as of the end of the accounting period by 358.361 million rubles.

Financial results

Analysis of Change in Indicators of the Profit and Loss Statement for 2011 line

2011

2010

Deviation 2011/2010

Change in % 2011/2010 (+/–)

Net revenues

2110

26 038 396

36 901 899

–10 863 503

–29%

Cost of sold goods, products, works, services

2120

–15 410 801

–11 292 670

–4 118 131

+36%

Gross profit

2100

10 627 595

25 609 229

–14 981 634

–59%

Commercial expenditure

2210

–

Management expenditure

2220

–1 262 402

–1 031 332

–231 070

+22%

Sale profit (loss)

2200

9 365 193

24 577 897

–15 212 704

–62%

Interest receivables

2320

625 677

651 297

–25 620

–4%

Interest payable

2330

–1 499 582

–1 626 896

127 314

–8%

Miscellaneous income

2340

95 348 926

19 375 067

75 973 859

+392%

Miscellaneous expenditure

2350

–96 411 240

–18 709 600

–77 701 640

+415%

Profit (loss) before tax

2300

7 428 974

24 267 765

–16 838 791

–69%

Current profit tax

2410

–945 966

–2 051 544

1 105 578

–54%

Profit tax in past years

2411

380 351

–

380 351

–

Change in deferred tax liabilities

2430

–989 510

–1 798 763

809 253

–45%

Change in deferred tax assets

2450

–75 442

–1 014 635

939 193

–93%

Other

2460

–12 667

–98 687

86 020

–87%

Net profit (loss) of the accounting period

2400

5 785 740

19 304 136

–13 518 396

–70%

Indicator, thousand rubles Income and expenditure from ordinary operations

Miscellaneous income and expenditure

The following factors influenced the indicators in the profit and loss statement over 2011 and accordingly the amount of net profits over the accounting period: revenues from sale of gas in 2011 reduced by 10 863.503 million rubles or by 29% compared to the preceding period and amount to 26 038.396 million rubles. Reduction of revenues from sale of gas was conditioned by a reduction of the calculated gas sale price by 30% due to a change of the formulae of the gas sale price fixed in the Shareholder Agreement. This formulae includes the mechanism of the compensatory component which significantly influenced an increase in the gas sale price in 2010; the cost of sold gas increased by 36% or by 4 118.131 . million rubles and totalled 15 410.801 million rubles versus 11 292.670 million rubles over the previous accounting period. The increase of expenditure is mainly due

ANNUAL REPORT 2011

Financial results

to an increase in tax deductions for the mineral extraction tax for gas due to an increase of the rate by a factor of 1.6 times (237 rubles in 2011, 147 rubles in 2010) and an increase in depreciation deductions in 2011 due to commissioning of new production facilities; management expenses increased by 22% or 231.070 million rubles and totalled 1 262.402 million rubles versus the preceding period. The increase in costs was due to an increase in expenses for the lease of property, services of external organizations, expenses for labour remuneration in connection with assessment of estimated liabilities for payment of vacation pay and yearly bonuses as of 31.12.2011 as well as retirement pay to personnel in the current year according to the terms of the Collective Agreement of the Company; interest payable over 2011 totalled 1 499.582 million rubles and decreased compared to the previous period by 8% due to a reduction of the average effective interest rates on credits and loans raised by the Company in 2011; increase in miscellaneous expenditure in 2011 versus 2010 was due to a reduction of the positive exchange difference from re-evaluation of the Company’s liabilities in foreign currency by 1 701.172 million rubles due to lesser weakening of the RUB/EUR and RUB/USD exchange rates as of 31.12.2011 compared to 31.12.2010, than as of 31.12.2010 compared to 31.12.2009 (i.e. accounting dates); increase of other income over the accounting period versus 2010 was due to the following: –– the financial result from sale and purchase of shares was significant due to repayment of loans and credits within the framework of the project facility; –– pursuant to the Accounting Policy of the Company, for accounting purposes, the effect from sale and purchase of currency is presented broken down in the profit and loss statement.

reduction of the current profit tax is due to reduction of the taxable base for the tax over 2011; the tax on profit of previous years amounted to 380.351 million rubles due to application in the accounting year of accelerated depreciation norms for hazardous production facilities over 2010; reduction of the change in deferred tax liabilities and assets in 2011 compared to the preceding year was due to the application in tax accounting of 10% and 30% depreciation premiums for fixed assets of the Company according to the depreciation group in 2010.

Analysis of Cash Flow 2011

2010

Deviation 2011/2010

Change in % 2011/2010 (+/–)

Net cash from operations

13 796

23 322

–9 526

– 41%

Net cash from (used in) investment operations

9 878

–5 543

15 421

+ 278%

–14 050

–16 189

2 139

+ 13%

Indicator, million rubles

Net cash from (used in) financial operations

The change in cash from operations was due to a reduction in the gas sale price and reduction of the amount of revenue from purchasers of products.

placed deposits for the term over 3 months of 2010 and a reduction of cash applied for financing of investment operations.

The change in cash from investment operations was due to adjustment of the accounting statements as regard to

The change in cash from financial operations was due to the change in the structure of debt liabilities.

Financial results

Analysis of Debt Liabilities As of 31.12.2011

As of 31.12.2010

Deviation 2011 / 2010

Change in % 2011/2010 (+/–)

Short-term credits and loans

6 902

40 850

–33 948

–83%

Long-term credits and loans

33 004

–

+33 004

+100%

Cash and cash equivalents including cash deposited for terms over 3 months and accounted for as financial investments

–17 576

–17 328

–248

–1.4%

Net debt

22 330

23 522

– 1 192

– 5%

Indicator, million rubles

In March 2011, the Company repaid short-term multi-currency loans raised from the bank consortium with the surety of BASF, E.ON and OAO Gazprom at the amount of USD 1 084 142 000 and EUR 193 183 000. The total amount of interest paid in 2011 under such loans was USD 3 974 000 and EUR 1 035 000. Fees paid for sureties for the loans amounted to EUR 1 083 000 and EUR 774 000, respectively. The main source of repayment of the indebtedness under the above multi-currency loans were loans from shareholders at the total amount of RUB 32 500 million at the interest rate 5.2% per annum, provided with the following proportions: OAO Gazprom – 13 000 million rubles Wintershall Holding GmbH – 11 375 million rubles E.ON Ruhrgas E and P GmbH – 8 125 million rubles

In May 2011, the Company repaid loans from shareholders. The total amount paid was 32 773 million rubles. On 25 May 2011, financial closure of the transaction was effected pursuant to the project facility agreement signed in March 2011 at the total amount equivalent to EUR 1.1 bln., provided by the international consortium of banks and Gazprombank (OJSC), with three tranches – USD 657 465 000, EUR 474 088 000, RUB 5 992 523 000 under the following conditions: the loan repayment date – 31 December, 2018 with the possibility of prepayment (cash sweep); for tranches in foreign currency, the interest rate including Libor/Euribor + the margin (2.35% from 2011 to 31 March, 2014, 2.50% from 1 April, 2014 to 31 March, 2017, 2.75% from 1 April, 2017 to 31 December, 2018); for tranches in rubles – the fixed interest rate 11.4%.

OJSC Severneftegazprom won the “Deal of the Year 2011” award of Project Finance Magazine (PFM). The award is the recognition of success in fundraising of EUR 1.1 billion.

ANNUAL REPORT 2011

Financial results

Analysis of Key Financial Ratios Key Financial Stability Ratios As of the beginning of the accounting period

As of the end of the accounting period

Change over the period

Economic value of ratios

Recommended value

Equity Ratio

0.47

0.43

–0.04

Equity to Total Capital

>= 0.65

Financial Leverage Ratio

1.12

1.32

+0.02

Borrowed Capital to Equity

<= 0.82

Working capital financed by equity to total assets ratio

–0.81

–0.96*

–0.15

Own current assets to total current assets

>= 0.1

Investment coverage Ratio

0.51

0.88

+0.37

Equity and long–term liabilities to total capital

>= 0.85

Current Assets to Equity Ratio

–0.5

–0.65*

–0.15

Own current assets to equity sources

>= 0.05

Current Assets Mobility Ratio

0.66

0.75

+0.09

The most mobile part of current assets to total value of current assets

–

–19.57

–33.61*

–14.04

Own current assets to stock value

>= 0.5

Ratio

Reserves to Production Ratio

* For calculation of the above ratios, long-term liabilities under project financing are taken into account by determining own current assets. In the case of calculation of own current assets without taking into account long-term liabilities under project financing, the ratios have the following values: - the working capital financed by equity to total assets ratio= 0.44; - the Current Assets to Equity Ratio = 0.30; - the Reserves to Production Ratio = 15.39.

Key Liquidity Ratios As of the beginning of the accounting period

As of the end of the accounting period

Change over the period

Economic value of ratios

Recommended value

Current Liquidity Ratio . (Asset Coverage Ratio)

0.6

2.51

+1.91

Current assets to short-term liabilities. Shows coverage of short-term liabilities by all current assets

>= 2

Quick (Intermediate) Liquidity Ratio

0.57

2.42

+1.85

Liquid assets to short-term liabilities. Shows security of short-term liabilities with monetary funds and shortterm financial assets and short-term receivables

>= 1.0

Absolute Liquidity Ratio

0.4

1.88

+1.48

High-liquid assets to short-term liabilities. Shows the part of short-term liabilities which may be repaid immediately

>= 0.2

Financial ratio

Profitability Analysis 2011

2010

Change over the period

Recommended value

66.6

–30.6

–

Return on sales by EBIT, in %

34.3

70.2

–35.9

–

Return on sales by net profit (in kopecks per ruble of revenues)

22.2

52.3

–30.1

–

15.9

–9.9

>= 1.5

Rates of Return Sales gross profit margin (in kopecks per ruble of revenues)

Interest Payable Coverage Ratio (ICR)

INVESTMENT OPERATIONS

In 2011, capital construction operations were carried out on account of own funds of the Company.

The key objectives of capital construction are: achievement of key indicators of the long-term plan development of Cenomanian and Senonian deposits of the Yuzhno-Russkoye Field; implementation of approved design solutions for commissioning, reconstruction and modernization of the main production capacities at the main and auxiliary production; fulfilment of the plan of geological exploration works according to existing licence obligations; risk minimization.

The key directions of the investment programme are: completion in 2011 of construction and commissioning of a two-hole operational gas well in the Turonian sediments and some systems and facilities at the Yuzhno-Russkoye Oil and Gas Field; continuation in 2011 of design and construction of facilities to be commissioned in 2012 and the following years; commissioning of the second stage of the booster compressor station (BCS) in 2015 according to the long-term plan of development of the Company; reconstruction and modernization of facilities, equipment and systems of the Yuzhno-Russkoye Field to ensure safe operation of facilities according to production safety, labour protection and environmental protection requirements.

Capital Investments 2010

2011

Change in 2011 / 2010

Indicator Capital investments

Actual

Plan

Actual

+, -

4 329.8

2 006.7

1 062.6

-3267.1

-75.5%

The main investment project which is currently being implemented is completion of construction of facilities at the YROGF (Cenomanian gas deposit). In 2012, the Company will proceed design and exploration at the Booster Compressor Station-1 (the second stage), construction will be started in 2014 and commissioning is planned for 2015. In 2017, it is planned to carry out design and exploration for construction of the Booster Compressor Station-2 to be constructed in 2018 and commissioned in 2019. The main investment project for the future is development and arrangement of the Turonian gas deposit.

The following production facilities were commissioned in 2011: the two-hole production gas well at the Turonian deposit; the automated system of control of technical maintenance and report of equipment (ASC TM&R); open storage sites within the “Customer’s base of the Yuzhno-Russkoye Oil and Gas Field” with the total area of 14.8 thous. m2; re-equipment of equipment at the emergency diesel power plant – 4 units. The amount of commissioned fixed assets is 535.3 million rubles.

ANNUAL REPORT 2011

KEY RISK FACTORS ASSOCIATED WITH THE COMPANY’S BUSINESS

Industry risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Financial risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Legal risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Key risk factors associated with the companyâ&#x20AC;&#x2122;s business

INDUSTRY RISKS The Company in its business is exposed to industry risks, the most important being prices for raw hydrocarbons and technological risks associated with the particulars of the production process. Moreover, general industry risks include transport restrictions of a technological nature which may become a serious obstacle in achieving long-term objectives of the Energy Strategy of Russia. Search and development of deposits, transportation and processing of gas and liquid hydrocarbons represents a complicated and capital-intensive process bearing technological and ecological risks. The company, strictly observing industry requirements and standards, implementing new technologies and technique at all stages of the production process, minimizes these risks.

The risk of reduction of sales The risk of reduction of sales is associated with the possibility of decline of demand for hydrocarbons in the long-term which may adversely affect project indicators. However, according to longterm gas supply contracts valid until 2018, the purchaser pays for the entire volume of contracted gas notwithstanding the actual intake which excludes the considered risk for the Company until expiration of such contracts.

The risk of material change in the market price for gas A material change in the market price for gas downwards may affect cash flows required for stable production and business operations of the Company. The risk is considered as low since, according to gas supply contracts, the price of gas is determined according to the formulae taking into account the Companyâ&#x20AC;&#x2122;s expenses and the required rate of return.

Risks associated with validity of licences The Company undertakes activities in relation to the YuzhnoRusskoye deposit pursuant to the licences for use of subsoil and other licensed activities. Applicable laws of the Russian Federation and/or licenses provide for possible limitation, suspension or early termination of the right for use of subsoil/exercise of a licensed activity in case of non-observance of conditions of licence agreements or violation of requirements of applicable Russian laws in the area of licensing.

ANNUAL REPORT 2011

Key risk factors associated with the company’s business

The Company has completely fulfilled requirements of licence agreements and has taken all necessary steps to observe applicable laws governing licensing, in order to minimize this risk.

Environmental Risks Activities of the Company associated with development of the Yuzhno-Russkoye are potential exposed to the risk of environmental impact. Therefore, one of the priority directions of the Company’s efforts is environmental protection. Key project solutions applied in the course of construction of infrastructural and operational facilities at the deposit comply with environmental standards.

Technological Risks Production activities of the Company associated with operation of the Yuzhno-Russkoye Deposit may be exposed to the impact of negative factors associated with failure of equipment. Meanwhile, technologies used for mining, treatment and transportation of gas comply with up-to-date requirements for reliability and safety in operation of the equipment which enables minimization of such risks. In addition, the Company pays special attention to observance of labour protection, industrial, fire and well-kill safety, including: training and certification of the Company’s personnel in the area of labour protection, industrial and fire safety as well as well-kill safety on the basis of the course “Well Control.

Control of Well at Oil, Gas and Water Show” which also reduces the above risks. For resolution of primary objectives associated with planning of efforts for prevention and liquidation of extraordinary situations for hazardous production facilities at the Yuzhno-Russkoye Deposit, the following documents were prepared: the Plan of Liquidation of Possible Accidents, the Plan for Prevention and Liquidation of Spreading of Oil Products in the Site of Technological Capacities of Reagents and Oils at the gas treatment unit of the Yuzhno-Russkoye Oil and Gas Field of OJSC Severneftegazprom, the Plan for Prevention and Liquidation of Spreading of Oil Products in Fuelling Stations (stations for fuelling of motor transport) of OJSC Severneftegazprom, and the Technological regulations on Operation of the gas treatment unit of the Yuzhno-Russkoye Oil and Gas Deposit 05.125-TP” with Amendment No.1. Pursuant to the above mentioned plans, trainings are carried out to train the personnel to acts to be taken in case of emergency. In addition, in order to minimize and avoid emergency situations, a contract was concluded with GUP YaNAO “Yamal Militarized Well-Kill Part”, administrative and production control of the status of labour protection, industrial, and fire and well-kiss safety has been organized and undertaken which also reduces possible risks. Certified equipment and technical devices meeting up-to-date safety and reliability requirements are applied at hazardous production facilities of the Yuzhno-Russkoye Deposit. The equipment and technical devices are maintained in a timely manner by the Company’s personnel or specialized organizations, which also reduces the above mentioned risks.

FINANCIAL RISKS Inflation Risks The inflation rate in 2011 was 6.1% which is the record lowest indicator over last twenty years in the Russian economy. The lowest consumer price indices were observed in 2009 and 2010 – 8.8% per year. According to observations, inflation rates are relatively stable and the Russian Ministry of Finance forecasts that inflation in 2012 will correspond to forecasts – about 6.1%. On the basis of this, the conclusion may be made that inflation will not cause any material impact on financial and economic indicators of the Company in the foreseeable future.

Interest Risk Being a large borrower, the Company is exposed to risks associated with changes in interest rates. The debt portfolio of the Company within the framework of the raised project facility is mainly presented by loans denominated in USD and EUR.

The interest rate for service of such loans is based on internal credit rates (LIBOR/ Euribor). An increase in such interest rates may render service of the Company’s debt more expensive. An increase in the cost of loans for the Company may affect solvency and liquidity indicators. However, LIBOR is currently at a relatively low historical level and has a medium-term tendency towards stabilization. However, taking into consideration that according to gas supply contracts the gas price is determined according to the formulae taking into account the compensatory component, the risk is deemed low.

Currency Risk Since the debt portfolio of the Company includes liabilities, assessable, accruable and repayable in foreign currencies, fluctuations of exchange rates to the ruble materially affect the result of financial and business operations of the Company. Due to the absence of any revenues in foreign currency, the

Key risk factors associated with the company’s business

balanced currency structure of claims and liabilities, used as a hedging mechanism, is not applicable to the Company, taking into consideration that according to gas supply contracts the

gas price is determined according to the formulae taking into account the compensatory component, the risk is deemed moderate.

LEGAL RISKS Risks associated with application and possible changes in tax laws of the Russian Federation Some laws have been adopted during recent years which introduced significant amendments to tax laws.

In order to avoid tax risks, the Company regularly monitors any amendments made to the Russian Tax Code and law enforcement practice with further application of the same in its activities. Pursuant to Russian accounting rules, any change of tax liabilities over preceding periods is accounted for in statements over that period when such changes were actually effected.

Amendments introduced into the Russian tax system are aimed at elimination of its deficiencies and therefore some provisions of the Russian Tax Code may be amended which may result in a future increase or reduction of the tax burden versus the accounting year.

Risks of Legal Proceedings and Restrictions of the Company’s Business

Amendments of tax laws of the Russian Federation making the position of a taxpayer less favourable do not as a rule apply retrospectively (unlike various interpretations of some provisions of tax laws).

No change in legal practice as regard to matters associated with the Company’s activities as well as rules of legal proceedings will have material impact on the Company’s business since the Company tries to settle any disputes extra judicially. At present, the Company is not involved in any material legal proceedings and does not bear any liability for debts of third parties.

Since interpretations of some norms of tax laws by tax authorities (the Ministry of Finance of the Russian Federation, judicial authorities) may not match interpretations of the Company’s management, the amount of tax liabilities following the results of tax audits at the Company, both in the accounting year and preceding periods, may change and cause tax risks (in particular, additional taxes, penalties and fines may be imposed on the Company).

Legal Risks Associated with Application and Possible Change of Currency Laws The Company concludes foreign economic transactions and executes currency operations with non-residents, and therefore changes in currency regulation may affect fulfilment of the Company’s liabilities to foreign counteragents. In particular, changes in currency regulation which may concern enforcement of control over execution of currency transactions and introduction of restrictions, may lead to losses under foreign trade contracts and/or delays in fulfilment thereof. Due to the existence of foreign economic transactions, the Company is exposed to risks of bringing to administrative liability for violations of currency laws of the Russian Federation and acts of currency regulators, including without limitation, violation of the established unified rules of execution (re-execution) of transaction passports and non-observance of the established procedure or terms of submission of accounting forms and reports on currency transactions. For the purpose of observance of currency laws of the Russian Federation, within the framework of relations with non-resident companies, structural subdivisions of the Company take measures of control over timely and quality submission of documentation required for execution of currency transactions.

ANNUAL REPORT 2011

Key objectives for improvement of energy efficiency are the following: use of advanced methods and approaches in management of energy efficiency; optimization of existing technological processes and improvement of energy efficiency in terms of energy costs at maintenance of key parameters of technological processes; improvement of energy efficiency in power and heat transmission and distribution systems; use of the criterion of energy efficiency for analysis and improvement of existing business processes and in design and implementation of new production facilities; implementation of up-to-date systems for technological accounting energy and technical accounting of key technological parameters of production processes. For the purpose of improving efficiency of its operations the Company has been progressively implementing a policy of energy saving and improvement of energy efficiency of production processes. This work is done on the system basis using mechanisms of medium-term and long-term planning. A plan of efforts for improvement of energy efficiency at the Company for 2011-2013 was prepared in December 2010.

The main objectives of the Company in that area are the following: maximum realization of the potential of energy saving in all types of activity on the basis of governmental support of the energy saving policy of the Company and improvement of energy saving management; improvement of energy efficiency of the Company by means of innovative technologies and equipment; ensuring reduction of the technical load on the environment.

Energy Consumption

The Company takes efforts to ensure efficient use of energy, and develops and implements measures for reduction of power consumption, programmes for efficient use of energy resources.

Consumption of energy resources in the accounting period in physical and monetary terms: 2010

2011 Deviation from 2010

Type the energy resources

report UoM

plan

report

total

Including own production

total

Total

Including own production

+,-

mln. m3

30.532

120.223

68.239

37.707

123.5%

mln. rubles

–

43.73

thousand kW*h

28 356

27 485

32 233

26 635

25 573

–1721

–6%

mln. rubles

224.08

222.15

195.5

216.34

213.7

–7.74

–3%

Gcal

36 196

35 283

41 086

32 956

31 817

–3240

–9%

mln. rubles

55.30

54.99

64.86

75.56

73.46

20.26

37%

thousand tons

0.73

–

0.75

–

0.02

mln. rubles

16.81

–

20.17

–

3.36

20%

thousand tons

0.17

–

0.19

–

0.02

12%

mln. rubles

4.56

–

5.38

–

0.82

18%

thousand tons

0.30

–

0.27

–

–0.03

–10%

mln. rubles

7.47

–

6.98

–

–0.49

–7%

Natural gas

Power

Heat energy

Diesel fuel

Car petrol AI-95

Car petrol AI-92

SUSTAINABLE DEVELOPMENT

Role of sustainable development . in the Companyâ&#x20AC;&#x2122;s activity. . . . . . . . . . . . . . . . . . . 51 Social policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Labour protection and industrial safety. . . 54 Environmental protection . and ecological safety. . . . . . . . . . . . . . . . . . . . . 55 Main indicators of environmental . protection activities . . . . . . . . . . . . . . . . . . . . . . 58 Main directions of regional policy . and interaction with interested parties . . . . 59

ANNUAL REPORT 2011

Sustainable development

Role of sustainable development in the Company’s activity The Company’s sustainable development policy is an integral part of the OJSC Severneftegazprom’s management model. At present, the Company is at the initial stage of introducing the sustainable development principles of the Global Reporting Initiative – C level – and expresses its intention to develop each project under implementation in accordance with the sustainable development principles applying them for specific short-term and medium-term plans of activity. The Company realizes that within the framework of sustainable development the Company’s activity shall ensure the balance in the long term when the current generation’s needs are satisfied without any damage for the possibilities of future generations to satisfy their own needs. Being one of the leading Russian enterprises operating in the oil and gas sector, the OJSC Severneftegazprom understands

that ensuring a stable power supply is not possible without strict observance of the population’s interests: economic growth and fair redistribution of national wealth, environmental protection and economic use of resources, social development and provision of opportunities for all the Company’s members to participate in decision-making. OJSC Severneftegazprom has always remained a responsible enterprise which observed environmental and social standards of the law, which is why we are confident that application of the sustainable development principles in the long term will become an important source of the Company’s competitive advantage. Continuous endeavour to increase its operational and financial indicators taking into account the application of the sustainable development approaches demonstrates the Company’s wish to carry out its activity based on innovations, transparency and interaction with the interested parties on a long-term basis for general welfare that was announced as the Company’s business values.

Social policy OJSC Severneftegazprom is aware of the significance of human resources development and implements the activities on formation of competitive, highly professional, responsible and team-oriented staff that provides labour productivity growth and efficiently solves the problem faced by the Company.

Movement and composition

People, %

Number of employees hired during the year

149

Number of employees who left employment during the year

121

By gender:

The Company is interested in creating favourable working conditions for its employees, providing them with various allowances and benefits, medical insurance, non-state pension programmes, as well as a decent salary. Human resource management is implemented on the basis of principles of observance of law, occupational and industrial safety, corporate and professional ethics, social responsibility, and joint consideration of the Company’s strategic priorities and personal interests of each employee. As at 31.12.2011, 991 employees worked at OJSC Severneftegazprom, compared to 963 employees at the end of the previous reporting period. The Company pays most attention to regions of the Far North (Krasnoselkup and Purovskiy Districts, the city of Novy Urengoy) were 914 employees (166 women and 748 men) worked there as at 31.12.2011.

Men, %

Women, %

By age: Younger than 30 years

From 30 to 50 years

Older than 50 years

Labour turnover, %

4.48

Retired employees

Number of employees, in total

991

Number of employees, by gender: Men, %

Women, %

Sustainable development

In 2011, the Company developed and successfully introduced the Comprehensive programme on HR management for the period of 2011-2015, stipulating the improvement of labour management, staff motivation, programme of training and development of employees, and introduction of corporate communications. OJSC Severneftegazprom employs young specialists every year. More than half of the staff consists of employees who have not reached the age of 40. Moreover, according to the International Labour Organization’s Convention No.138 on the Minimum Age for Admission to Employment adopted in 1973, and the Russian Labour Law, the Company does not hire persons under the age of 18 for work at industrial facilities1. Staff composition, by age

Manufacturing processes of OJSC Severneftegazprom are classified as a project with potentially significant negative social and environmental impacts which are of multilateral, irreversible or unprecedented nature (in accordance with the Equator Principles and standards of activity of the International Finance Corporation, based on the opinion of the independent ecological consultant – Environmental Resources Management (Eurasia) Limited). The Company’s management team takes a hard line against the use of child labour for commercial purposes. Article 3 Paragraph 1: The minimum age for admission to any type of employment or work which by its nature or the circumstances in which it is carried out is likely to jeopardize the health, safety or morals of young persons shall not be less than 18 years.

Managers

Specialists

Industrial and office workers

From 30 to 40 years

101

115

165

From 40 to 50 years

180

Older than 50 years

In total

223

286

482

Younger than 30 years

ANNUAL REPORT 2011

Sustainable development

The Company constantly examines the main needs and problems of its staff and tries to provide them with comfortable and safe working conditions and a decent salary. The Collective Agreement is in force in the Company, specifying, within the framework of financial and economic capabilities of the Company, a higher level of preferences, guarantees and compensations as compared to the effective Russian Labour Law for all its workers and retired persons. The Company provides for the opportunity to encourage its employees by carrying out housing programmes, providing sanatorium-and-resort treatment, rendering financial aid and giving corporate benefits for purchase of membership pass to sports and fitness centres and material aid is given to some categories. The Regulation concerning the Committee is in force in the Company, controlling social and labour relations, within the framework of the Committee the Company’s workers are able to have through their representatives influence on decisions made by the management in the sphere of social and labour relations as well as socio-economic relations. The Committee is formed on an equal basis from the employer’s representatives and workers vested with the necessary authority. The main tasks of the Committee are to organize and carry on collective negotiations, establish and maintain the current Collective

Agreement, settle disputes both while implementing the Collective Agreement’s provisions and individual labour disputes. The Company has concluded the Voluntary Medical Insurance Agreement according to which the employees are provided with free medical services. The Company has also signed the Accident Insurance Agreement. One of the main tasks of the OJSC Severneftegazprom is to make the process of substitution of its retired experienced and professional employees more gradual and smooth, and to hire employees who should not only correspond to professional requirements but also have high moral standards. The Company executes a non-state staff retirement programme through “Gazfond” nonstate pension fund in order to ensure a decent quality of life and social protection for retired workers. The Company is interested in the personal and professional growth of its employees. For this purpose, the professional development programme has been elaborated and operated. Training sessions are mainly carried out in corporate training centres of OAO Gazprom. In 2011, various categories of employees attended 31 660 hours of professional development classes. This is certainly a high indicator which characterizes the intention of OJSC Severneftegazprom’s management to maintain theoretical knowledge and practical skills of the employees.

Sustainable development

Employee category

Number of employees

Number of training hours

Average number of training hours per person

Managers

4632

65.2

Specialists

3840

Workers

174

23188

133.2

Total

305

31660

262.4

Moreover, the data base of candidates (applicants) for the Company’s vacancies is formed on a regular basis, as well as the candidate pool is annually renewed (among the employees) to promote the employees to executive positions. In 2011, six employees from the candidate pool were promoted. In addition, 30 employees of the Company from the candidate pool took professional development training sessions in training facilities of OAO Gazprom and leading higher educational institutions of the Russian Federation. The Company’s employees actively participate in international conferences and seminars and publish their scientific articles in leading local and foreign magazines and newspapers. The exchange of experience is regularly made at the enterprises of foreign shareholders – Wintershall Holding GmbH and E.ON Ruhrgas E&P GmbH.

In order to attract young professionals, the Company organizes internships for students of sector institutions for higher and secondary vocational education. 34 students took internship during the reporting period.

OJSC Severneftegazprom offers its employees education grants to obtain postgraduate and doctoral degrees. The maximum grant amount for the entire education period is: for post-graduate students – 210 000 rubles; for doctoral students – 300 000 rubles.

The activity of OJSC Severneftegazprom is socially significant and a legacy of the successful development of the Company is the creation of welfare work favourable atmosphere when every company employee can feel certain about future stability.

Professional skills competitions as well as sports and cultural events in mini-football, volleyball, etc. are conducted on a regular basis among the employees. The plans of OJSC Severneftegazprom include continual improvement of social programmes, provision of a system of continual interaction with employees, normalization of bilateral dialogue and solution of all problems arising.

Labour protection and industrial safety One of OJSC Severneftegazprom’s priorities is labour protection and industrial safety since the economic efficiency of industrial activity depends on reliable and secure operation of the equipment and on qualified actions of personnel.

On a regular basis, the Company carries out inspection of labour conditions at workplaces, observance of safety requirements while operating high-risk facilities, as well as implementation of rules of labour protection and industrial safety.

Operation of industrial objects of the Company is performed on the basis and according to the requirements of the Russian Law, as well as corporate and international standards.

Organization of training and checking the knowledge of the Company’s employees with regard to labour protection and industrial safety is carried out in accordance with the regulatory requirements of the Russian Federation and corporate standards. Training on fire safety measures for the Company’s employees is organized and conducted in accordance with the fire safety regulations – “Training of the enterprises’ employees on fire safety measures” approved by the Order of EMERCOM (Emergency Control Ministry) of Russia No. 645 dated 12.12.2007.

Within the framework of integrated quality management system, the Company is certified for compliance with the requirements of international standards in the sphere of professional health and safety – OHSAS 18001:2007 “Occupational Health and Safety Management Systems”. In the reporting period, the Company spent 12 042 200 rubles for labour protection activities. The majority of these funds (9 559 100 rubles) was spent for Krasnoselkup District where the main production capacities of the Company operate.

Assessment of workplaces is carried out on a continuing basis. Since 2011, the Action Plan on improvement and perfection of labour conditions has come into force.

ANNUAL REPORT 2011

Sustainable development

OJSC Severneftegazprom annually conducts pre-employment and periodic medical examinations of employees. In the reporting period, based on the results of the periodic medical examination, no any occupational diseases were detected. With the purpose of rendering first aid to gas field workers there is the first aid unit licensed to carry out the medical activities in the rotational camp. The first aid unit performs the prevention of disease, injuries, infectious and virus diseases, provides emergency and immediate medical care, and carries out pre-trip and post-trip medical check-ups of vehicle drivers. Medical staff can be called at any time of day or night, if required. Structure of the first aid unit’s activities Microtraumas

Medical procedures

779

Diseases

1 615

Medical check-ups

44 037

In total:

46 491

In order to prevent disease in April and November 2011, nonspecific immunization (multivitamin intake) was carried out among gas field workers, as a result of which the flu outbreak was avoided. One more measure to prevent infectious and virus diseases is a medical check-up of workers living in the rotational camp. During the reporting period, one accident took place – falling from an elevation that was classified as “breakdown in the technological process”. As a result of disability of the injured person during the accident, 130 man-days were lost. In accordance with the requirements of the law, an investigation was carried out, accident causes were determined, and an extraordinary briefing for employees on the rules of safe performance of work at heights was conducted. OJSC Severneftegazprom pays a great attention to ensuring the fire safety. The Company’s Fire Department consisting of

56 workers organizes fire prevention activities. Continuous control over the condition of firefighting equipment, devices, systems of automatic fire protection and fire alarm, as well as over safe operation of facilities is carried out. Maintenance of firefighting equipment is conducted. There were no any cases of fire at the Company’s facilities in 2011. The Central Permanent Commission (CPC) continued its work, its responsibilities include the following: control over the condition of labour protection, fire and environmental safety at the Company’s facilities. The CPC conducts regular inspections to ensure the fire safety. In October 2011, the state fire supervision authority carried out the scheduled inspection over the fulfilment of licensed requirements by the Company in the sphere of fire safety. No deviations were found, it was confirmed that the Company’s facilities that should be protected comply with the law requirements. The Company identified its hazardous production facilities and included them into the State register of hazardous production facilities. At present, the Company operates 16 hazardous production facilities. The hazardous production facilities are insured against liability for damage caused to the life, health or property of the third parties and damage caused to environment in case of any incident or accident. . In 2011, the Regulations on industrial inspection of observance of industrial safety requirements at hazardous production facilities of the Company were updated, according to which the Company carries out industrial inspection at the hazardous production facilities. In 2011, the regional service of the Federal Environmental, Process and Nuclear Supervision Agency (Rostekhnadzor) (the Novy Urengoy integrated department of the Severo-Uralsk Administration of the Federal Environmental, Process and Nuclear Supervision Agency) executed two inspections of the Company’s facilities, during which no violations were detected. During the reporting period no incidents and accidents at hazardous production facilities or traffic accidents with participation of the Company’s motor vehicles were registered.

Environmental protection and ecological safety Production activity of OJSC Severneftegazprom is inextricably linked to the environment and environmental care, which is a legacy of efficient development of the company. In this connection, the Company pays great attention to the delicate ecosystem of the Far North.

One of the most important principles of the Company’s work is a solicitous attitude to environment, conservation and rational use of natural resources. Continuous and planned reduction of the environmental impact of the manufacturing process while using modern technologies and self-engineered products allows to

Sustainable development

the Company to reach high indicators in environmental protection and ecological safety activities. The Company implements its activity based on the principles of strict observance of the norms of the law and standards in the sphere of environmental protection.

In accordance with the requirements of Russian Law, the Company: has required permits (licences in the sphere of the natural resources use), including for execution of activities of collection, use, deactivation, transporting, placement of hazardous wastes (OT-59-000262 (89)); for the right to use natural resources for extraction of fresh subsurface water for drinking and industrial water supply of the objects of development (SLKh 01821 VE); for extraction of fresh subsurface drinking and industrial water supply of cluster sites during construction of operating wells (SLKh No. 01383 VE); conducts industrial inspection of emissions and discharges of pollutants; carries out water abstraction from underground sources within established limits; observes standards and limits of pollution emissions into the atmosphere, deep well injection of wastes, formation and disposal of wastes; makes payments for negative environmental impact in a timely manner and in full; carries out technical and biological reclamation of lands disturbed as a result of construction works; conducts industrial ecological inspection and monitoring.

In accordance with the corporate and international standards the Company: controls greenhouse gas emissions; implements a programme of gas flaring reduction that gives an opportunity to reduce main greenhouse gas emissions; implements a programme of electric power reduction. Within the framework of the integrated quality management system, the Company is certified for compliance with the requirements of international standards in the sphere of environmental protection – ISO 14001:2004 “Environmental Management Systems”. The Company also meets the requirements of the International Finance Corporation’s performance standards. The total volume of emissions into atmosphere caused by industrial activity sources was 2 023.639 tons which is greater by 345.048 tons than in 2010. The increase in the total weight of pollution emissions is connected with commissioning the first phase of the Boost Compressor Station in November 2010. Hazardous substance Methane

Weight of emissions (tons) 1 326.783

Hydrocarbon oxide

337.676

NOх expressed as NO2

205.167

Methanol

93.644

Sulfur dioxide

1.467

ANNUAL REPORT 2011

Sustainable development

Hazardous substance Volatile organic compounds (VOCs) Solid contaminants Emissions from stationary emission sources Emissions from fugitive emission sources

Weight of emissions (tons) 151.774 0.771 1 775.160 248.479

In 2011, the authorized volume of pollution emissions into the atmosphere by production facilities was 11 143.534 tons, by drilling targets – 461.5 tons, and in Urengoy settlement – 5.436 tons.

CO2-equivalent (there were 272 tons of indirect emissions among them, according to calculation methods of HSE MS of Wintershall Holding GmbH (WINS) – (HSE MS)), that is greater by 94 172 tons than in 2010. The rise in emissions is connected with the increase of the cumulative operating time of gas-compressor units of the Boost Compressor Station. Special heat stabilizers represented by hermetically-sealed metal pipes buried up to 8 meters underground are used for freezing and temperature stabilization of permanently frozen soil. Carbonic acid totalling 1 kg is used as a cooling agent. Replenishment or replacement of carbonic acid is not envisaged during the operation life of heat stabilizers.

Pollution emissions into the atmosphere (tons) Authorized emissions

11 610.47

Actual emissions

2 023.639

The basic mass of emissions – methane – was formed during emptying of equipment, as well as commissioning and shutting down of gas-compressor units of the Boost Compressor Station. A significant amount of carbon oxide was formed while burning gas at gas-burners during the survey of wells. The emission structure contains methane (65.5%), carbonic oxide (16.6%), nitric oxide (10.1%), as well as other substances, including solid aerosols and volatile organic compounds (7.8%). The specific weight of pollutants emitted to the atmosphere was 0.078 t/mln. m3 of produced gas. From the total emission mass, the emission from production facilities is 1929.149 tons, and the emission from well construction is 94.49 tons. Regular inspection of toxicity of motor vehicle exhaust gases is carried out while implementing maintenance works in the mechanical-repair department of the gas field. In 2011, the Company conducted activities on emission reduction. In particular, generation and use of electric power for lighting of gas field facilities was reduced by installing LED floodlights and lamps, as well as the reliability of pipelines and equipment increased as a result of technical diagnostics of gas flow-lines. In the future, the Company plans to reduce flaring of degassing gas at the Gas Treatment Facility by use of degassing gas as a fuel at the heat regeneration block of three-ethylene glycol. A non-flare system of gas production is under development: selection of technology for reversion of degassing gas of process liquids and gas while emptying reservoirs and pipelines in the technological cycle of gas production. In 2011, neither significant nor insignificant spills occurred, and emergency emissions and discharges of pollutants into the atmosphere were not registered. In the reporting year, the total amount of greenhouse gas emissions (records are kept based on STO Gazprom Standards – 1022011 “Greenhouse gas emissions inventory”) was 181 918 tons of

As for ozone-depleting substances included in Annexes A, B, C and E of the Montreal Protocol on Substances that Deplete the Ozone Layer, there was no emission of them in 2011. Refrigerant gas (R404а) used for air conditioning and refrigerating units (designed for food storage) has zero ozone depletion potential. As of today, no limitations for utilization of Refrigerant gas R404a are planned in Russia until 2020, which corresponds to the requirements of the Montreal Protocol. The Company supplies water from aquifers. Water intake from superficial reservoirs was not implemented. Water supply was carried out on the basis of all the required permission documents.

Total volume of produced water in 2011 was 64 600 m3, including: 56 440 m3 from underground aquifers (60 490 m3 in 2010); 81 60 m3 – formation water produced jointly with natural gas. Production of underground water was only 28.4% of the established limit (30.4% in 2010). Water produced from underground aquifers is treated in domestic water purification units in accordance with the sanitary standards. Reduction of water consumption in 2011 compared with 2010 was caused as a result of lessening of need in water during the construction of development wells that was related to completion of drilling works in the first quarter of 2011. A domestic wastewater disposal system operates in gas field. It provides deep injection of industrial and domestic wastes after their treatment at the special units of the Company. 2 093 tons of wastes were utilized in 2011 compared to 3 848 tons in 2010. 98.8% of the total quantity of the produced wastes are low-hazard wastes. 71% of all wastes are utilized in the Company’s own solid wastes landfills, the rest part is transferred for repeated use or utilization by outside organizations. The Company maintains technical condition of the production equipment at the corresponding level, implements environmental protection measures for maximum possible prevention of environment contamination and reduction of negative impact of the industrial and economic activity on nature.

Sustainable development

Main indicators of environmental protection activities Unit of measurement

2010

2011

Deviation from 2010, %

Forecast for 2012

thous. tons

1.678

2.023

20.6

3.132

within permissible emission limits (PEL)

-”-

1.678

1.996

3.132

within temporarily approved emission limit (TAEL) (above PEL)

-”-

above-limit emissions (above TAEL)

-”-

0.026

100

-”-

0.908

1.326

1.431

Specific NOx emissions (per transport unit)

tons/bln. m3•km

Specific NOx emissions (per unit of fuel gas)

thous. tons /mln. m3

0.002

0.008

No. 1.

Indicator Gross emissions of dangerous wastes into the atmosphere – total Including:

Including: gross emissions of methane

Intake of water – total

thous. m3

86.57

56.4

-34.9

Water discharge – total

thous. m

47.87

52.72

10.1

63.96

Wastes per year – total

thous. tons

3.848

2.093

-45.6

0.264

Including wastes sent for disposal

thous. tons

3.751

1.998

-46.7

0.171

% of amount of waste produced during the reporting period taking into consideration waste availability for the beginning of the year

97.45

95.4

-2

1 687.06

160.7

-90.5

mln. rub.

384.7

103.5

-73

213.2

Waste ratio sent for disposal

Land re-cultivated area per year

Expenses for environmental protection – total

Current expenses for environmental protection measures – total

thous. rub.

103 837

103 502

-0.3

207 945

Expenses for development and approval of environmental documents

thous. rub.

93.76

1 182

1 160

1 053

10.

Expenses for production environmental monitoring and production ecological control

thous. rub.

6 772.36

6 006

-11.3

4737

11.

Expenses for major repair of fixed assets on environmental protection

thous. rub.

10 320.3

-100

12.

Payment for negative environmental impacts – total

thous. rub.

1 423.68

1 108.4

-22.1

491.6

environmental impact within permitted limits (emissions, discharges, waste disposal)

-”-

1 423.68

1 026.6

-27.9

491.6

environmental impact above permitted limits (emissions, discharges, waste disposal)

-”-

81.8

100

Fines imposed for breaking of environmental regulations

thous. rub.

Legal actions for recovery of compensation of damage caused to environment, including resulting from accidents

thous. rub.

Including:

13.

Investments into Fixed capital, directed to environmental protection – total

mln. rub.

280.94

-100

4.816

14.

Number of inspections by state environmental agencies

number

15.

Number of violations of environmental regulations (according to inspection acts of state environmental agencies)

number

ANNUAL REPORT 2011

Sustainable development

Main directions of regional policy and interaction with interested parties Sustainable development of OJSC Severneftegazprom is inextricably linked with the establishment of long-term partnership with operations areas and interaction with interested parties through implementation of mutual projects in accordance with the following principles: respect of opinion of an interested party; timely notification of interested parties; interaction on a regular basis; observance of obligations undertaken and the requirement to observe them by interested parties.

the process of production activity implementation and selection of channels of interaction with such people and organizations, the Company has developed an internal document – the Public Con. sultation and Disclosure Plan (PCDP). The document describes the procedures of information disclosure in accordance with the requirements of the Russian Law and international standards, carrying out consultations of the Company with interested parties, as well as describes the mechanism of recording the responses and opinions of population and employees of the Company on a regular basis during the entire life cycle of the project.

In order to determine key interested parties of social links integration which can influence, or on the contrary, can be influenced in

The generalized information regarding the interested parties with which the Company has an active dialogue is presented below:

Sector

Organization/representative

Interaction subject

Administration of Municipal Formation Fulfilment of conditions of the Licence of Krasnoselkup District Agreement, charitable and sponsorship assistance, interaction on social and economic issues of the region, periodical Administration of Municipal Formation reporting on activity including reporting on of Purovskiy District proper use of funds.

Periodicity

Interaction method

Discussion of amount, types and directions of use of charitable and sponsorship assistance in the medium-term and shortterm planning horizons.

Personal meetings, preparation of information letters, formation of additional agreements to the General agreements for the coming period, reporting on fulfillment of contractual obligations.

In accordance with the requirements of the law of the Russian Federation, if required.

Personal meetings, preparation of information letters and reporting documents.

“Lesa Yamala” (“Forests of Yamal”) District Autonomous Institution

State agencies and institutions

Directorate of the Federal Supervisory Natural Resources Management Service (Rosprirodnadzor) for Yamalo-Nenetsky Autonomous District Directorate of the Federal Environmental, Process and Nuclear Supervision Agency of the Russian Federation (Rostekhnadzor) for Yamalo-Nenetsky Autonomous District Directorate of the Federal Service on Customers’ Rights Protection and Human Well-Being Surveillance (Rospotrebnadzor) for YamaloNenetsky Autonomous District

Regular reporting, obtaining permissions – interaction established by the law of the Russian Federation.

Department for Natural Resources Management and Oil and Gas Complex Development of the Administration of Yamalo-Nenetsky Autonomous District “Yamal-nedra” State Administration Federal Agency for Water Resources for Yamalo-Nenetsky Autonomous District Nizhneobskoye Basin and Water Resources Authority (Department for Yamalo-Nenetsky Autonomous District)

Sustainable development

Training given by the representatives of the Labour Protection and Fire Safety Department on a regular basis in accordance with the internal normative documents

Employees of subcontracting organizations working in gas fields

Fulfilment of requirements to environmental protection

Training given by the representatives of the Environmental Protection Department after starting the works at the site

Security guards working in the territory of gas deposits

Requirements and responsibilities in the process of work

Population

Citizens of Krasnoselkup and Purovskiy regions

Mass media

Employees of the Company (offices in Moscow, city of Novy Urengoy, Krasnoselkup settlement, Urengoy settlement)

Municipal media (“Severniy Kray” (“Northern Territory”) newspaper, “Alliance” television and radio broadcasting company, “Severniy Luch” (“Northern Ray”) newspaper, “Luch” (“Ray”) television and radio broadcasting company “Polyarniy” Sovkhoz . (Krasnoselkup settlement) OJSC Gazprom

Organizations

Wintershall Holding GmbH

Determination of the Company’s development strategy, approval of reports on execution of annual budgets and work programmes

E.ON Ruhrgas E&P GmbH CJSC Gazprom YRGM Trading CJSC Gazprom YRGM Development Suppliers and contractors

Work within the framework of liabilities under the gas supply agreement, monthly payments for gas supply Within the framework of contractual relations

Non-governmental organizations

Syndicate of banks participating in the Project financing project finance transaction

Russian Association of Indigenous Peoples of the North “Yamal to our descendants!” (Krasnoselkup and Purovsk departments)

Sponsorship assistance. Notification on the project (changes in production process, environmental and social innovations). Acceptance of responses and opinions

Being aware of its responsibility for the development of operations areas, OJSC Severneftegazprom tends to develop those areas where its industrial and economic activity is carried out.

Periodicity

Fulfilment of requirements of labour protection and fire safety

Gas field workers

Employees

Interaction subject

Interaction method

Personal meetings. Information on the project is placed on information bulletin boards (operation and maintenance block, rotational camp). Boxes for collecting responses and opinions. Submission of written statements to top management. Telephone hotline

Requirements and responsibilities in the process of work shall be stated in the Agreement with the Private Security Agency

In accordance with the Publication Plan (according to the Budget of income and expenditures of the Company)

Notification on the project – when required newsworthy information.

Organization/representative

Notification on the project (changes in production process, environmental and social innovations). Acceptance of responses and opinions.

Sector

News distribution by email. Submission of written statements to top management. Boxes for collecting responses and opinions. Telephone hotline Mass media. Boxes for collecting responses and opinions. Telephone hotline

Placement of announcements, articles, interviews, reports, video plots

Mass Media Agreements on Cooperation

In accordance with the working meeting plan: Committee on technical issues, Technical Dialogue, Board of Directors

Monthly.. If required, when any business issue arises

Personal meetings. Submission of written statements. Telephone communication

Within the framework of contractual relations Regular reporting on production activity and financial results

Discussion of sponsorship assistance – for the current period, notification on the project – when there is any newsworthy information

Annual additional agreements (one of the parties). Personal meetings. Mass media. Boxes for collecting responses and opinions

The traditional areas of activity of OJSC Severneftegazprom include Krasnoselkup and Purovskiy districts of Yamalo-Nenets Autonomous District – the lands originally inhabited by indigenous smallnumbered peoples of the North of Russia – the Selkups and the

ANNUAL REPORT 2011

Sustainable development

Nenets. Mutual relations with native citizens, government bodies and local self-government bodies are regulated on the basis of the General Agreements on cooperation concluded between the Company and Administrations of Purovskiy and Krasnoselkup districts, as well as additional agreements to them concluded annually. The priorities of the General Agreements include the lines of activity such as rational and effective use of the subsoil and lands located in the territory of regions where the Company carries out its economic activity. Within the framework of these Agreements the Company implements the activities directed to social and economic development of these territories provides significant support to traditional sectors of agriculture and life of small-numbered peoples of the North.

Some of the brightest examples of mutual activities include the following: reconstruction of a dormitory block of the boarding school for future construction of kindergarten in Tolka settlement; repair of a church in Krasnoselkup settlement; construction of a medical and obstetric centre in Ratta settlement; acquisition of accommodation for employees of OJSC Kharampurovskaya Agricultural Community; acquisition of an oil barge to deliver fuel and lubricants to remote trading posts and fishing areas of OJSC Kharampurovskaya Agricultural Community. The volume of financing activities carried out by the Company in the reporting period was 31 mln. rubles for Krasnoselkup district, and 10 mln. rubles for Purovskiy district. While financing social programmes, the Company creates a reliable basis for further development of Krasnoselkup and Purovskiy districts in the long term. While maintaining economic development in its operations areas, OJSC Severneftegazprom observes the obligations stipulated in the Licence Agreement and its own competitive bidding policy, and all other things being equal, it gives preference to the Russian enterprises and, first of all, to local suppliers registered in the territory of Yamalo-Nenetsky Autonomous District. An important component of the OJSC Severneftegazprom’s influence on communities in order to achieve long-term success is to render charitable assistance. The Company actively finances various charitable activities: purchase of gifts to the Fisher’s Day and Reindeer Herder’s Day, assistance during the construction of churches, reimbursement of expenses for public utilities to retired veterans, etc. Interaction with mass media is carried out at federal and municipal levels. The main interaction direction is media coverage of industrial and social activities, events and festivities of . OJSC Severneftegazprom. In particular, the media organizes regular coverage of the industrial and social activities, events and celebrations held by the Company in the framework of social support of the regional population.

Interaction with the local population is carried out in accordance with the interests and rights of small-numbered peoples of the Far North to keep their traditional way of life and preserve their natural habitat. Indigenous small-numbered peoples do not live on the licensed site of OJSC Severneftegazprom or nearby, and this territory is not an area of their traditional land tenure, thus, the Company’s activity does not have a negative impact on keeping the traditional common and cultural way of life of the local population and customary forms of its occupation. OJSC Severneftegazprom has made a significant contribution to upbringing and educating the rising generation of native northerners of Krasnoselkup region. In particular, the contribution included providing grants to teachers and students of educational institutions, paying tuition fees for students of higher educational institutions, purchasing musical instruments for the Center of leisure and folk arts, repairing the buildings of schools and kindergartens, and providing motor and air transport. In order to support traditional crafts, the Company subsidizes the purchase of special clothing, repair of special equipment, and finances the celebration of public holidays. OJSC Severneftegazprom has a respectful attitude towards sports providing sponsorship support to “Geologist” Children and Youth Sports School. The Sports School’s alumni are multiple champions of Yamalo-Nenetsky Autonomous District and winners of Russian and international tournaments. Supporting sports teams, providing them with material resources, organizing matches, all these are the Company’s contribution to youth sports development in the operations area. The effective interaction of the Company and local population results in the fact that during the entire period of the Company’s industrial activity there was no protest from indigenous smallnumbered peoples of the North. The Company understands that rendering active assistance to the native population is not only a method of paying homage to working people, but also an opportunity to preserve the rich cultural heritage for their descendants and create favourable conditions for living and work in difficult climatic conditions.

REPORT ON COMPLIANCE WITH THE CODE OF CORPORATE CONDUCT 62

OJSC Severneftegazprom, an open joint stock company, strives to comply with the following provisions of the Code of Corporate Conduct recommended according to the Order issued by the Federal Commission for the Securities Market of Russia under No. 421/r on 4 April, 2002: The shareholders must have access to the list of persons entitled to take part in the general meeting of shareholders beginning from the date when information about holding the general meeting of shareholders was published and until the closure of the general meeting of shareholders held in person, and in case of an absentee general meeting of shareholders – prior to the deadline fixed for accepting voting bulletins; The shareholder must have the opportunity to bring in items for the agenda of a general meeting of shareholders or require the convocation of a general meeting of shareholders without presenting an extract from the register of shareholders if the shareholder’s right to shares is registered with the system of maintenance of the register of shareholders; The Charter of the Company must provide for authorities of the Board of Directors related to annual approval of the Company’s financial and economic plan; Absence of people found guilty of committing crimes in the field of economic activities or crimes against state authorities, interests of state service and local governments or people, on which administrative punishments were imposed for civil injuries in the field of entrepreneurial activities, finances, taxes, charges or securities market, among members of the Company’s Board of Directors; Persons being a general director, a member of the management board or an employee of a legal person competing with the Company must not occupy positions in the Company’s Board of Directors; The Charter of the Company must provide for the requirement to elect the Board of Directors by cumulative voting; Sessions of the Company’s Board of Directors must be held for the year of preparing the annual report with a frequency of not less than once every six weeks; Presence of the Company’s internal documents approved by the Board of Directors providing for the procedure of forming and operating standing committees of the Board of Directors; The procedure of approving of operations exceeding the limits of the Company’s financial and economic plan must be provided in the Company’s inner documents; A special official (the Company’s secretary) in charge of compliance with the procedural requirements guaranteeing the implementation of rights and legal interests of the Company’s shareholders by the Company’s bodies and officials must be employed by the Company; The Charter of the Company or internal documents must provide for the requirement about approval of a large-scale transaction prior to it being implemented; The Charter of the Company must not exempt the transferee from the obligation to offer shareholders to sell the ordinary shares held by them in the Company upon redemption; Presence of a special department in the Company providing for compliance with the internal control procedures (internal audit department); Absence of people found guilty of committing crimes in the field of economic activities or crimes against state authorities, interests of state service and local governments or people, on which administrative punishments were imposed for civil injuries in the field of entrepreneurial activities, finances, taxes, charges or securities market, among members of the audit service; Persons being members of the Company’s executive authorities as well as people being a general director, members of the management bodies or employee of a legal person competing with the Company must not occupy positions in the audit service.

ANNUAL REPORT 2011

This report provides an analysis of the corporate activity in connection with exploration and production of natural gas, the economic activity, social policy, industrial safety and environment protection. It is the first time that the Company discloses information pursuant to the provisions of the GRI and integrates them into its Annual Report.

Boundaries and Scope of the Report The report records the activity of the Company in the Russian Federation as well as its relationship with international partners. The information used herein has been prepared using the consistent methods applied in the previous reporting periods. In preparation of the Report, research was carried out according to which some aspects are highlighted which may be of interested to the widest range of interested parties. In the compilation of the Report, all significant information was taken into account which may provide the presumed users hereof with an adequate representation of the influence of the Company to economics, the environment and society.

Principles Applied to Ensure Quality of the Report In its Report, the Company has tried to provide a balanced representation of items required by Russian law and of interest to interested parties. The Report includes data officially recognized by the Company and supported by internal documents and publicly available information. The Report generally does not contain either professional terms or data requiring special knowledge. One of the purposes of the Report is to explain to interested parties the nature of the Companyâ&#x20AC;&#x2122;s activity and the characteristics of the decisions made by it.

Report Parameters

The Content of the Report

Contact information for issues regarding the Report: Anatoliy Anatolyevich Vecherka Deputy General Director for Legal Issues and Corporate Management Telephone: +7 (495) 620 6333 E-mail: VecherkaAA@sngp.org

Disclosure of Information 64

Appendix 1. Index of Standards . of the General Reporting Initiative. . . . . . . . . . 65 Appendix 2. List of the Company’s . transactions in the year of 2011, . considered as interested party . transactions in conformance . with the Federal law . ‘On joint stock companies’. . . . . . . . . . . . . . . . . 69 Appendix 3. List of the Company’s . transactions in 2011 considered as major transactions in conformance with the Federal law ‘On joint stock companies’ as well as other transactions subject to the procedure of approval of major transactions pursuant . to the Company’s Charter. . . . . . . . . . . . . . . . . . 76

ANNUAL REPORT 2011

Disclosure of Information

Appendix 1. Index of Standards of the General Reporting Initiative Page

Comments

1. STRATEGY AND ANALYSIS 1.1

Statement from the most senior decision-maker of the organization (e.g., CEO, chair, or equivalent senior position) about the relevance of sustainability to the organization and its strategy

1.2

Key impacts, risks and opportunities

4-7 45-49

2. ORGANIZATIONAL PROFILE 2.1

Name of the organization

2.2

Primary brands, products and services

2.3

Operational structure

2.4

Location of organizationâ&#x20AC;&#x2122;s headquarters and operations

2.5

Number of countries in which the organization operates and name of countries where its main operations are located or are especially relevant to the questions of sustainability covered by the report

2.6

Nature of ownership and legal form

2.7

Markets served

2.8

Markets attended (including a geographic description, sectors attended, and types of clients/ beneficiaries)

2.9

Significant changes regarding size, structure or ownership during the reporting period

2.10

Awards received in the reporting period

22-27 12 12,19 12 19-20 19-20, 51-52 13-15 9

3. REPORT PARAMETERS 3.1

Reporting period (such as fiscal/calendar year) for the information provided

3.2

Date of most recent previous report (if any)

3.3

Reporting cycle (annual, biennial, etc.)

3.4

Contact information

3.5

Defining report content

3.6

Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers). See GRI Boundary Protocol for further guidance

3.7

Statement about any specific limitations on the scope or boundary of the report

3.8

Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organizations

3.9

Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report

3.10

Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g.,mergers/acquisitions, change of base years/periods, nature of business, measurement methods)

Irrelevant: the Company announces Global Reporting Initiative indicators for the first time

3.11

Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report

Irrelevant: the Company announces Global Reporting Initiative indicators for the first time

3.12

Table identifying the location of the Standard Disclosures in the report

3.13

Policy and current practice with regard to seeking external assurance for the report

Irrelevant: the Company announces Global Reporting Initiative indicators for the first time

65-68

4. GOVERNANCE, COMMITMENTS AND ENGAGEMENT 4.1

Governance structure of the organization

4.2

Indicate whether the Chair of the highest governance body is also an executive officer (and, if so, their function within the organizationâ&#x20AC;&#x2122;s management and the reasons for this arrangement)

21-27 General director is not the Chairman of the Board of Directors.

Disclosure of Information

Page 4.3

For organizations that have a unitary board structure, state the number of members of the highest governance body that are independent and/or non-executive members

4.4

Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body

4.14

List of stakeholder groups engaged by the organization

4.15

Basis for identification and selection of stakeholders with whom to engage

Comments There are no independent members

24-25, 53 59-60 59

ECONOMIC PERFORMANCE INDICATORS EC1

Direct economic value generated and distributed, including revenues, operating costs, employee compensation, donations and other community investments, retained earnings, and payments to capital providers and governments

EC2

Financial implications and other risks and opportunities for the organization's activities due to climate change

EC3

Coverage of the organization's defined benefit plan obligations

EC4

Significant financial assistance received from government

EC5

Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation

EC6

Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation

EC7

Procedures for local hiring and proportion of senior management hired from the local community at significant locations of operation

EC8

Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind, or pro bono engagement

34-44

ENVIRONMENTAL PERFORMANCE INDICATORS EN1

Materials used by weight or volume

EN2

Percentage of materials used that are recycled input materials

EN3

Direct energy consumption by primary energy source

EN4

Indirect energy consumption by primary source

EN5

Energy saved due to conservation and efficiency improvements

EN6

Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives

EN7

Initiatives to reduce indirect energy consumption and reductions achieved

EN8

Total water withdrawal by source

EN9

Water sources significantly affected by the removal of water

EN10

Percentage and total volume of water recycled and reused

EN11

Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas

EN12

Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas

EN13

Habitats protected or restored

EN14

Strategies, current actions, and future plans for managing impacts on biodiversity

EN15

Number of IUCN Red List species and national conservation lists species with habitats in areas affected by operations, by level of extinction risk

EN16

Total direct and indirect greenhouse gas emissions by weight

EN17

Other relevant indirect greenhouse gas emissions by weight

EN18

Initiatives to reduce greenhouse gas emissions and reductions achieved

EN19

Emissions of ozone-depleting substances by weight

EN20 NOx, SOx, and other significant air emissions by type and weight

56, 58

ANNUAL REPORT 2011

Disclosure of Information

Page EN21

Comments

Total water discharge by quality and destination

EN22 Total weight of waste by type and disposal method EN23 Total number and volume of significant spills EN24

Weight of transported, imported, exported or treated waste deemed hazardous under the terms of the Basel Convention – Annex I, II, III and VIII, and percentage of transported waste shipped internationally

EN25

Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organization’s discharges of water and runoff

EN26 Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation EN27 Percentage of products sold and their packaging materials that are reclaimed by category EN28

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

EN29

Significant environmental impacts of transporting products and other goods and materials used for the organization’s operations, and transporting members of the workforce

EN30 Total environmental protection expenditures and investments by type PERFORMANCE INDICATORS ON APPROACHES TO LABOUR PRACTICES AND DECENT WORK LA1

Total workforce by employment type, employment contract, and region

51-52

LA2

Total number and rate of employee turnover by age group, gender, and region

51-52

LA3

Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations

LA4

Percentage of employees covered by collective bargaining agreements

LA5

Minimum notice period(s) regarding significant operational changes, including whether it is specified in collective agreements

LA6

Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advice on occupational health and safety programmes

LA7

Rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities by region

LA8

Education, training, counseling, prevention, and risk-control programmes in place to assist workforce members, their families, or community members regarding serious diseases

LA9

Health and safety topics covered in formal agreements with trade union

LA10

Average hours of training per year per employee by employee category

LA11

Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

LA12

Percentage of employees receiving regular performance and career development reviews

LA13

Composition of governance bodies and breakdown of employees per category according to gender, age group, minority group membership, and other indicators of diversity

LA14

Ratio of basic salary of men to women by employee category

54-55

53-54

HUMAN RIGHTS PERFORMANCE INDICATORS HR1

Percentage and total number of significant investment agreements that include human rights clauses or that have undergone human rights screening

HR2

Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken

HR3

Total hours of employee training on policies and procedures concerning aspects of human rights relevant to operations, including the percentage of employees trained

HR4

Total number of incidents of discrimination and actions taken

HR5

Operations identified in which the right to exercise freedom of association and collective bargaining may be at significant risk and actions taken to support these rights

HR6

Operations identified as having significant risk for incidents of child labour, and measures taken to contribute to the elimination of child labour

Disclosure of Information

Page HR7

Operations identified as having significant risk for incidents of forced or compulsory labour, and measures taken to contribute to the elimination of forced or compulsory labour

HR8

Percentage of security personnel trained in the organization’s policies or procedures concerning aspects of human rights that are relevant to operations

HR9

Total number of incidents of violations involving rights of indigenous people and actions taken

Comments

SOCIETY PERFORMANCE INDICATORS SO1

Nature, scope, and effectiveness of any programmes and practices that assess and manage the impacts of operations on communities, including entering, operating, and exiting

SO2

Percentage and total number of business units analyzed for risks related to corruption

SO3

Percentage of employees trained in organization’s anti-corruption policies and procedures

SO4

Actions taken in response to incidents of corruption

SO5

Public policy positions and participation in public policy development and lobbying

SO6

Total value of financial and in-kind contributions to political parties, politicians and related institutions by country

SO7

Total number of legal actions for SO7 anti-competitive behaviour, anti-trust, and monopoly practices and their outcomes

SO8

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations

59-61

PRODUCT RESPONSIBILITY PERFORMANCE INDICATORS PR1

Life cycle stages in which health and safety impacts of products and services are assessed for improvement, and percentage of significant products and services categories subject to such procedures

PR2

Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes

PR3

Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements

PR4

Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling by type of outcomes

PR5

Practices related to customer satisfaction, including results of surveys measuring customer satisfaction

PR6

Programmes for adherence to laws, standards, and voluntary codes related to marketing communications, including advertising, promotion, and sponsorship

PR7

Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship, by type of outcomes

PR8

Total number of substantiated complaints regarding breaches of privacy and loss of customer data

PR9

Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services

– fully disclosed – partially disclosed – not disclosed

ANNUAL REPORT 2011

Disclosure of Information

Appendix 2. List of the Company’s transactions in the year of 2011, considered as interested party transactions in conformance with the Federal law ‘On joint stock companies’. Essential conditions

Persons interested in settlement of the transaction

Management body that took the decision on approval of the transaction

Supplementary Agreement No. 01/11 of 01.01.2011 to Agreement No.272 of 01.04.2007 concluded with LLC Gazprom Svyaz according to which LLC Gazprom OAO Gazprom, shareholder of the Company Svyaz provides telecommunications services with an access through Gazprom network. The agreement amount is RUB 241 711.20.

Annual General Meeting, Minutes of 29.06.2010 No. 11/2010

Agreement No. S1-11/045 of 18.03.2011 concluded with LLC Gazprom Gazobezopasnost (the Contractor) according to which the Contractor undertakes to ensure blowout safety control during construction (drilling, cementing and development) of key wells of the Yuzhno-Russkiy licence area. The agreement amount is 781 322.84 incl. VAT.

OAO Gazprom, shareholder of the Company

Annual General Meeting, Minutes of 29.06.2010 No. 11/2010

Agreement No. 10007 AN 28.04.2011 concluded with OJSC YuzhNIIgiprogaz for designer’s supervision of construction of ‘Health rehabilitation centre at the Shift village of the Yuzhno- Russkoye oil and gas condensate field’. The agreement amount is RUB 2 066 723.98 incl. VAT. Performance time: from 01 May to 30 December, 2011.

OAO Gazprom, shareholder of the Company

Annual General Meeting, Minutes of 29.06.2010 No. 11/2010

Agreement No. 16/SNGP-2011/11PP085 of 29.01.2011 concluded with SOJSC Orgenergogaz for the acquisition of rights, installation, support and maintenance OAO Gazprom, shareholder of the Company of Remote Terminal of Infotech Data Acquisition System software. The agreement amount is RUB 3 500 000 (incl. VAT of RUB 251 694.92).

Annual General Meeting, Minutes of 29.06.2010 No. 11/2010

Project Finance Agreement regarding Yuzhno- Russkoye oil and gas field w/n of 16.03.2011 concluded between the Company (the Borrower) and a group of foreign banks: UniCredit Bank AG, ING Bank N.V., Credit Agricole CIB CJSC, Credit Agricole CIB, Société Européenne de Banque; Credit Agricole Corporate and Investment Bank; Gazprombank (Open Joint Stock Company); ING Bank N.V.; Mizuho Corporate Bank Nederland N.V.; Natixis; SGBT Asset Based Funding S.A.; OAO Gazprom, shareholder of the Company Sumitomo Mitsui Finance Dublin Limited; Bank of Tokyo-Mitsubishi UFJ (Holland) N.V.; UniCredit Bank AG; UniCredit Bank CJSC; BNP Paribas; BNP Pariba Bank (CJSC); WestLB AG, London Branch; DZ Bank AG, London Branch) (the Creditors). The Borrower was granted a term triple-currency loan facility in Euro, USD and Rubles of not more than the amount equivalent to Euro 1 100 000 000.

General Meeting, Minutes No. 16/2011 of 15.03.2011

G&I Loan of 21.04.2011 regarding guarantee provision by OJSC Gazprom between the Company (the Borrower) and OJSC Gazprom (the Lender). The Borrower acting as the guarantor pursuant to Guarantee Agreement shall undertake a liability before the security agent to provide any amount to the Borrower payable by the guarantor pursuant to the Guarantee Agreement under the terms of the Loan Facility Agreement. The borrowed assets shall amount up to RUB 100 000 000 000. Interest under the Loan shall be 5.6% per annum or any other interest rate as may be agreed by the parties.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

General Meeting, Minutes No. 16/2011 of 15.03.2011

Agreement of 21.04.2011 on terms of discharge of claims arising from subrogation rights (G&I Resulting Loan) concluded by and between the Company (the Borrower) and OJSC Gazprom (the Lender). The Borrower acting as the guarantor shall be granted a subrogation right regarding OJSC Severneftegazprom in relation to any amounts payable by the guarantor in favour of the guarantee agent under the Guarantee Agreement. The debt arising from the subrogation rights shall not exceed that equivalent to EUR 506 000 000 (as fixed in USD, Euro and Rubles as of the date of signing of project finance agreement). Annual interest rate: for Euro, 2,50% and EURIBOR over 6 months; for USD, 2.50% and LIBOR over six months; for Ruble, 11.4%; or any other interest rate as may be agreed by the parties.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

General Meeting, Minutes No. 16/2011 of 15.03.2011

G&I Loan Agreement of 21.04.2011 (CJSC Gazprom YRGM Trading) concluded by and between concluded by and between the Company (the Borrower) and CJSC Gazprom YRGM Trading (the Lender). The Lender acting as the guarantor under the guarantee agreement undertakes before the security agent to provide the Company with any amount payable by the guarantor pursuant to the Guarantee Agreement pursuant to the terms of the Loan Agreement. Borrowed assets shall amount up to RUB 88 000 000 000. Interest rate: 5.6% per annum or any other interest rate as may be agreed by the parties.

OAO Gazprom, shareholder of the Company

General Meeting, Minutes No. 16/2011 of 15.03.2011

Disclosure of Information

Persons interested in settlement of the transaction

Management body that took the decision on approval of the transaction

Agreement on terms of discharge of claims arising from subrogation rights (G&I Resulting Loan) of 21.04.2011 (CJSC Gazprom YRGM Trading) concluded by and between the Company (the Borrower) and CJSC Gazprom YRGM Trading (the Lender). The Lender acting as the guarantor shall be entitled to a subrogation right against the Company in relation to any amounts payable by the guarantor OAO Gazprom, shareholder of the Company in favour of the security agent under the Guarantee Agreement. The debt arising from the subrogation rights shall not exceed that equivalent to EUR 442 750 000. Annual interest rate: for Euro, 2.50% and EURIBOR over 6 months; for USD, 2 50% and LIBOR over six months; for Ruble, 11.4%; or any other interest rate as may be agreed by the parties.

General Meeting, Minutes No. 16/2011 of 15.03.2011

10.

G&I Loan Agreement of 21.04.2011 (CJSC Gazprom YRGM Development) concluded by and between the Company (the Borrower) and CJSC Gazprom YRGM Development (the Lender). The Lender acting as the guarantor shall unconditionally and irrevocably undertake before the security agent to provide the Company acting as the seller with any amount payable by the guarantor pursuant to the Guarantee Agreement under the Loan Agreement. Borrowed assets amount up to RUB 63 000 000 000. Interest rate on the Loan: 5.6% per annum or any other interest rate as may be agreed by the parties.

OAO Gazprom, shareholder of the Company

General Meeting, Minutes No. 16/2011 of 15.03.2011

11.

Agreement on terms of discharge of claims arising from subrogation rights (G&I Resulting Loan) of 21.04.2011 (CJSC Gazprom YRGM Development) concluded by and between the Company (the Borrower) and CJSC Gazprom YRGM Development (the Lender). The Lender acting as the guarantor is entitled to the subrogation rights against the Company in relation to any amounts paid by the guarantor in favour of the security agent under the Guarantee Agreement. The amount of debt arising from the subrogation rights shall not exceed that equivalent to EUR 316 250 000. Annual interest rate: for Euro, 2,50% and EURIBOR over 6 months; for USD, 2.50% and LIBOR over six months; for Ruble, 11.4%; or any other interest rate as may be agreed by the parties.

OAO Gazprom, shareholder of the Company

General Meeting, Minutes No. 16/2011 of 15.03.2011

12.

Gazprom TradeCo 1 Loan Agreement of 21.04.2011 concluded by and between the Company (the Borrower) and OJSC Gazprom (the Lender). The Lender acting as the guarantor shall unconditionally and irrevocably undertake before the security agent to provide the Company acting as the seller with any amount payable by the guarantor pursuant to the Guarantee Agreement under the Loan Agreement. Borrowed assets amount up to RUB 88 000 000 000. Interest rate under the Loan: 5.6% per annum or any other interest rate as may be agreed by the parties.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

General Meeting, Minutes No. 16/2011 of 15.03.2011

13.

Agreement on terms of discharge of claims arising from subrogation rights (Gazprom TradeCo 1 Resulting Loan) of 21.04.2011 concluded by and between the Company (the Borrower) and OJSC Gazprom (the Lender). The Lender acting as the guarantor is entitled to the subrogation rights against the Company in relation to any amount paid by the guarantor in favour of the security agent pursuant to the Guarantee Agreement. The amount of debt arising from the subrogation rights shall not exceed that equivalent to EUR 442,750,000. Annual interest rate: for Euro, 2.50% and EURIBOR over 6 months; for USD, 2.50% and LIBOR over six months; for Ruble, 11.4%; or any other interest rate as may be agreed by the parties.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: A. I. Medvedev, O. P. Pavlova, V. V. Cherepanov

General Meeting, Minutes No. 16/2011 of 15.03.2011

14.

Gazprom TradeCo 2 Loan Agreement of 21.04.2011 concluded by and between the Company (the Borrower) and OJSC Gazprom (the Lender). The Lender acting as the guarantor shall unconditionally and irrevocably undertake before the security agent to provide OJSC Severneftegazprom, acting as the seller, with any amount payable by the guarantor pursuant to the Guarantee Agreement under the Loan Agreement. Borrowed assets amount up to RUB 63 000 000 000. Interest rate on the Loan: 5.6% per annum or any other interest rate as may be agreed by the parties.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

General Meeting, Minutes No. 16/2011 of 15.03.2011

15.

Agreement on terms of discharge of claims arising from subrogation rights (Gazprom TradeCo 2 Resulting Loan) of 21.04.2011 concluded by and between the Company (the Borrower) and OJSC Gazprom (the Lender). The Lender acting as the guarantor is entitled to the subrogation rights against the Company in relation to any amount paid by the guarantor in favour of the security agent pursuant to the Guarantee Agreement. The amount of debt arising from the subrogation rights shall not exceed that equivalent to EUR 316 250 000. Annual interest rate: for Euro, 2.50% and EURIBOR over 6 months; for USD, 2.50% and LIBOR over six months; for Ruble, 11.4%; or any other interest rate as may be agreed by the parties.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

General Meeting, Minutes No. 16/2011 of 15.03.2011

16.

Operation accounts direct debit agreement of 16.03.2011 concluded by an between the Company (the Client), UniCredit Bank AG (the facility agent) and OJSC Gazprombank (operation accounts bank). To ensure fulfilment of the Companyâ&#x20AC;&#x2122;s obligations under the Project Finance Agreement UniCredit Bank AG was granted a right to directly debit funds off the accounts of OJSC Severneftegazprom opened with OJSC Gazprombank in cases set out in the Direct Debit Agreement.

OAO Gazprom, shareholder of the Company

General Meeting, Minutes No. 16/2011 of 15.03.2011

Essential conditions

ANNUAL REPORT 2011

Disclosure of Information

Essential conditions

Persons interested in settlement of the transaction

Management body that took the decision on approval of the transaction

17.

BASF TradeCo 1 Loan Agreement of 21.04.2011 concluded by and between the Company (the Borrower) and BASF SE (the Lender). The Lender acting as the guarantor shall undertake before the security agent to provide the Company, acting as the seller, with any amount payable by the guarantor pursuant to the Guarantee Agreement under the Loan Agreement. Borrowed assets amount up to RUB 88 000 000 000. Interest rate on the Loan: 5.6% per annum or any other interest rate as may be agreed by the parties.

Wintershall Holding GmbH, shareholder of the Company

General Meeting, Minutes No. 16/2011 of 15.03.2011

18.

Agreement on terms of discharge of claims arising from subrogation rights (BASF TradeCo 1 Resulting Loan) of 21.04.2011 concluded by and between the Company (the Borrower) and BASF SE (the Lender). The Lender acting as the guarantor is entitled to the subrogation rights against the Company any amount payable by the Wintershall Holding GmbH, shareholder of guarantor in favour of the security agent pursuant to the Guarantee Agreement. the Company The amount of debt arising from the subrogation rights shall not exceed that equivalent to Euro 442 750 000. Annual interest rate: for Euro, 2,50% and EURIBOR over 6 months; for USD, 2.50% and LIBOR over six months; for Ruble, 11.4%; or any other interest rate as may be agreed by the parties.

General Meeting, Minutes No. 16/2011 of 15.03.2011

19.

E.ON AG TradeCo 2 Loan Agreement of 21.04.2011 concluded by and between the Company (the Borrower) and E.ON AG (the Lender). The Lender acting as the guarantor shall undertake before the security agent to provide the Company, acting as the seller, with any amount payable by the guarantor pursuant to the Guarantee Agreement under the Loan Agreement. Borrowed assets amount up to RUB 63 000 000 000. Interest rate on the Loan: 5.6% per annum or any other interest rate as may be agreed by the parties.

E.ON Ruhrgas E&P GmbH, shareholder of the Company

General Meeting, Minutes No. 16/2011 of 15.03.2011

20.

Agreement on terms of discharge of claims arising from subrogation rights (E.ON AG TradeCo 2 Resulting Loan) of 21.04.2011 concluded by and between the Company (the Borrower) and E.ON AG (the Lender). The Lender acting as the guarantor is entitled to the subrogation rights against the Company in relation to any amount paid by the guarantor in favour of the security agent pursuant to the Guarantee Agreement. The amount of debt arising from the subrogation rights shall not exceed that equivalent to Euro 316,250,000. Annual interest rate: for Euro, 2.50% and EURIBOR over 6 months; for USD, 2.50% and LIBOR over six months; for Ruble, 11.4%; or any other interest rate as may be agreed by the parties.

E.ON Ruhrgas E&P GmbH, shareholder of the Company

General Meeting, Minutes No. 16/2011 of 15.03.2011

21.

Loan Facility Agreement No. 1/11 of 28.03.2011 concluded with OJSC Gazprom on granting the Company with an amount of no more than RUB 13 000 000 000.00. Interest rate shall be no more than 10% (ten per cent) per annum on actual loans receivable. The loan (together with any accrued and unpaid interest) shall be repaid on or before 30 September, 2011. The loan shall be used for repayment of debt related to the loans granted by the group of banks.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

General Meeting, Minutes No. 16/2011 of 15.03.2011

22.

Loan Facility Agreement No. 3/E.ON-3 of 28.03.2011 concluded with E.ON Ruhrgas E & P GmbH on granting the Company with an amount of no more than RUB 8 125 000 000.00. Interest rate shall be no more than 10% (ten per cent) per annum on actual loans receivable. The loan (together with any accrued and unpaid interest) shall be repaid on or before 30 September, 2011. The loan shall be used for repayment of debt related to the loans granted by the group of banks.

GmbH, E.ON Ruhrgas E&P GmbH, shareholder of the Company, members of the Board of Directors Frank Allan Sivertsen

General Meeting, Minutes No. 16/2011 of 15.03.2011

23.

Loan Facility Agreement No. 10/WH-15 of 28.03.2011 concluded with Wintershall Vermรถgensverwaltungsgesellschaft mbH on granting the Company with an amount of no more than RUB 11 375 000 000.00. Interest rate shall be no more OAO Gazprom, Wintershall Holding GmbH, than 10% (ten per cent) per annum on actual loans receivable. The loan (together shareholders of the Company with any accrued and unpaid interest) shall be repaid on or before 30 September, 2011. The loan shall be used for repayment of debt related to the loans granted by the group of banks.

General Meeting, Minutes No. 16/2011 of 15.03.2011

24.

Supplementary Agreement No. 11 of 30.06.2011 to Gas Supply Agreement No.25 Pk-2007 of 13.12.2007 concluded with OJSC Gazprom on setting the price of gas supplied in the second half of the year of 2011 in the amount of RUB 981.55 per 1 000 cub.m. of gas (excl. VAT).

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

General Meeting, Minutes No. 18/2011 of 24.06.2011

25.

Supplementary Agreement No. 9 of 30.06.2011 to Gas Supply Agreement No.28 Pk-2007 of 13.12.2007 concluded with CJSC Gazprom YRGM Trading on setting the price of gas supplied in the second half of the year of 2011 in the amount of RUB 981.55 per 1 000 cub.m. of gas (excl. VAT).

OAO Gazprom, shareholder of the Company

General Meeting, Minutes No. 18/2011 of 24.06.2011

26.

Supplementary Agreement No. 5 of 30.06.2011 to Gas Supply Agreement No.144/ SNGP-2009 of 29.10.2009 concluded with CJSC Gazprom YRGM Development OAO Gazprom, shareholder of the Company on setting the price of gas supplied in the second half of the year of 2011 in the amount of RUB 981.55 per 1 000 cub.m. of gas (excl. VAT).

General Meeting, Minutes No. 18/2011 of 24.06.2011

27.

Agreement No. S1-11/175/112 of 16.06.2011 concluded with OJSC Gazprom Gazobezopasnost on performance of gas dangerous works on replacement of the valve of the annular space without killing well No. 43. The agreement amount is RUB 316 198 (incl. VAT).

Annual General Meeting, Minutes No. 19/2011 of 30.06.2011

OAO Gazprom, shareholder of the Company

Disclosure of Information

Management body that took the decision on approval of the transaction

Essential conditions

Persons interested in settlement of the transaction

28.

Agreement No. 91/SNGP-2011 of 21.03.2011 concluded with OJSC Georesurs for performance of geophysical exploration and works in wells during development of Yuzhno- Russkoye oil and gas field. The agreement amount is RUB 57 0244 993.9 incl. VAT. Implementation time from 01 April, 2011 and until 31 January, 2012.

OAO Gazprom, shareholder of the Company

Annual General Meeting, Minutes No. 19/2011 of 30.06.2011

29.

Agreement No. 25/11 of 20.10.2011 concluded with OJSC Gazprom Dobycha Urengoy for medical services in relation with mandatory before-trip and after-trip OAO Gazprom, shareholder of the Company medical examination of drivers. The agreement amount is RUB 689,000 (not subject to VAT). Performance time from 01 January to 31 December, 2012.

Annual General Meeting, Minutes No. 19/2011 of 30.06.2011

30.

Agreements of deposits in Rubles and foreign currency with the maximum amount on each transaction not exceeding RUB 1,000,000,000 pursuant to General Agreement No. 34/SNGP-2009 of 11.03.2009 concluded with Gazprombank (Open Joint Stock Company).

OAO Gazprom, shareholder of the Company

Annual General Meeting, Minutes No. 19/2011 of 30.06.2011

31.

Supplementary Agreement No. 12 of 27.12.2011 to Gas Supply Agreement No. 25 Pk-2007 of 13 December, 2007 concluded with OJSC Gazprom for supply of annual agreed quantity of gas in the volume of 9 961 448 000 cub.m. and setting the price of gas supplied within first half of the year of 2012 in the amount of RUB 1 276.35 per 1 000 cub.m. of gas (excl. VAT). Change of specifications.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

General Meeting, Minutes No. 23/2011 of 26.12.2011

32.

Supplementary Agreement No. 10 of 27.12.2011 to Gas Supply Agreement No. 28 Pk-2007 of 13 December, 2007 concluded with CJSC Gazprom YRGM Trading for supply of annual agreed quantity of gas in the volume of 8 716 267 000 cub.m. and setting the price of gas supplied within first half of the year of 2012 in the amount of RUB 1 276.35 per 1 000 m3 of gas (excl. VAT). Change of specifications.

OAO Gazprom, shareholder of the Company

General Meeting, Minutes No. 23/2011 of 26.12.2011

33.

Supplementary Agreement No. 6 of 27.12.2011 to Gas Supply Agreement No. 144/SNGP-2009 of 29 October, 2009 concluded with CJSC Gazprom YRGM Development for supply of annual agreed quantity of gas in the volume of 6 225 904 000 cub.m. and setting the price of gas supplied within first half of the year of 2012 in the amount of RUB 1 276.35 per 1 000 cub.m. of gas (excl. VAT). Change of specifications.

OAO Gazprom, shareholder of the Company

General Meeting, Minutes No. 23/2011 of 26.12.2011

34.

Agreement No. 310-2010 of 31.01.2011 concluded with LLC TyumenNIIgiprogaz for development of the â&#x20AC;&#x2DC;Project of Development of Senoman Gas Deposit of the Yuzhno- Russkoye Fieldâ&#x20AC;&#x2122; in accordance with the technical specifications. The amount of the Agreement is RUB 24 999 952 incl. VAT. Implementation time from 11 January to 15 October, 2011.

OAO Gazprom, shareholder of the Company

Board of Directors, Minutes No. 41/2011 of 04.02.2011

35.

Direct agreement in relation to the gas sales agreement of 21.04.2011 regarding the Agreement for supply of gas for the project of Yuzhno- Russkoye oil and gas field (OJSC Gazprom) concluded by and between the Company (the Seller), OJSC Gazprom (the Customer) and ING Bank N.V. (the security agent). The Customer shall undertake before the security agent not to terminate, not to express an intention to terminate and not take any steps to terminate or suspend their obligations under Gas Supply Agreement No. 25 Pk-2007 of 13 December, 2007 except for the respective provisions of the Gas Supply Agreement and subject to compliance with the provisions of the Direct agreement.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

Board of Directors, Minutes No. 42/2011 of 22.02.2011

36.

Direct agreement in relation to the gas sales agreement of 21.04.2011 regarding the Agreement for supply of gas for the project of Yuzhno- Russkoye oil and gas field (CJSC Gazprom YRGM Trading) concluded by and between the Company (the Seller), CJSC Gazprom YRGM Trading (the Customer) and ING Bank N.V. (the security agent). The Customer shall undertake before the security agent not to terminate, not to express an intention to terminate and not take any steps to terminate or suspend their obligations under Gas Supply Agreement 28 Pk-2007 of 13 December, 2007 except for the respective provisions of the Gas Supply Agreement and subject to compliance with the provisions of the Direct agreement.

OAO Gazprom, shareholder of the Company

Board of Directors, Minutes No. 42/2011 of 22.02.2011

37.

Direct agreement in relation to the gas sales agreement of 21.04.2011 regarding the Agreement for supply of gas for the project of Yuzhno- Russkoye oil and gas field (CJSC Gazprom YRGM Development) concluded by and between the Company (the Seller), CJSC Gazprom YRGM Development (the Customer) and ING Bank N.V. (the security agent). The Customer shall undertake before the security agent not to terminate, not to express an intention to terminate and not take any steps to terminate or suspend their obligations under Gas Supply Agreement No. 144/SNGP-2009 of 29 October, 2009 except for the respective provisions of the Gas Supply Agreement and subject to compliance with the provisions of the Direct agreement.

OAO Gazprom, shareholder of the Company

Board of Directors, Minutes No. 42/2011 of 22.02.2011

ANNUAL REPORT 2011

Disclosure of Information

Essential conditions

Persons interested in settlement of the transaction

Management body that took the decision on approval of the transaction

38.

Direct agreement in relation to the shareholdersâ&#x20AC;&#x2122; agreement of the company 21.04.2011 concluded by and between E.ON Ruhrgas E&P GmbH, OJSC Gazprom and Wintershall Holding GmbH (the shareholders), the Company (the Company), ING Bank N.V. (the security agent), UniCredit Bank AG (the facility agent) and Credit Agricole CIB (the technical bank). The shareholders undertake not to modify any material provision of the Shareholdersâ&#x20AC;&#x2122; agreement and the Company Charter (as defined in the Direct agreement), make efforts to ensure that the directors elected by a shareholder for the board of directors of the Company do not modify the material provisions of the Long-term development plan or waive performance of the Long-term development plan, or order to reduce gas production in any year, or suspend gas production completely.

OAO Gazprom, Wintershall Holding GmbH, E.ON Ruhrgas E&P GmbH, shareholders of the Company

Board of Directors, Minutes No. 42/2011 of 22.02.2011

39.

Deed of limited recourse performance guarantee and indemnity and undertaking to lend in respect of gas sale agreement trigger events of 21.04.2011 (OJSC Gazprom) concluded by and between the Company (the Seller), OJSC Gazprom (the guarantor), UniCredit Bank AG (the facility agent) and ING Bank N.V. (the security agent). OJSC Gazprom assumes the following obligations: under the guarantee of performance by OJSC Severneftegazprom of all of its obligations before the facility agent and the banks under the project finance agreement in case the reserve amount of service of the debt of OJSC Severneftegazprom under project finance agreement has not been paid; shall provide a loan to OJSC Severneftegazprom as the seller under gas supply agreement No. 25 Pk-2007 of 13 December, 2007 in the amount calculated pursuant to Guarantee agreement, upon occurrence of the conditions of provision of the loan (as defined below) and occurrence of the conditions of guarantee reimburse the facility agent for any documented costs, damages or losses in case the Guarantee becomes impractical or legally void through any reason.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

Board of Directors, Minutes No. 42/2011 of 22.02.2011

40.

Deed of limited recourse performance guarantee and indemnity and undertaking to lend in respect of gas sale agreement trigger events of 21.04.2011 (CJSC Gazprom YRGM Trading) concluded by and between the Company (the Seller), CJSC Gazprom YRGM Trading (the guarantor), UniCredit Bank AG (the facility agent) and ING Bank N.V. (the security agent). OJSC Gazprom YRGM Trading assumes the following obligations: under the guarantee of performance by OJSC Severneftegazprom of all of its obligations before the facility agent and the banks under the project finance agreement in case the reserve amount of service of the OAO Gazprom, shareholder of the Company debt of OJSC Severneftegazprom under project finance agreement has not been paid; shall provide a loan to OJSC Severneftegazprom as the seller under gas supply agreement No. 25 Pk-2007 of 13 December, 2007 in the amount calculated pursuant to Guarantee agreement, upon occurrence of the conditions of provision of the loan (as defined below) and occurrence of the conditions of guarantee reimburse the facility agent for any documented costs, damages or losses in case the Guarantee becomes impractical or legally void through any reason.

Board of Directors, Minutes No. 42/2011 of 22.02.2011

41.

Deed of limited recourse performance guarantee and indemnity and undertaking to lend in respect of gas sale agreement trigger events of 21.04.2011 (CJSC Gazprom YRGM Development concluded by and between the Company (the Seller), CJSC Gazprom YRGM Development (the guarantor), UniCredit Bank AG (the facility agent) and ING Bank N.V. (the security agent). CJSC Gazprom YRGM Development Trading assumes the following obligations: under the guarantee of performance by OJSC Severneftegazprom of all of its obligations before the facility agent and the banks under the project finance agreement in case the reserve amount of service of the debt of OJSC Severneftegazprom under project finance agreement in the amount of interest and scheduled payments has not been paid; shall provide a loan to OJSC Severneftegazprom as the seller under gas supply agreement No. 144/SNGP-2009 of 29 October, 2009 in the amount calculated pursuant to Guarantee agreement, upon occurrence of the conditions of provision of the loan (as defined below) and occurrence of the conditions of guarantee reimburse the facility agent for any documented costs, damages or losses in case the Guarantee becomes impractical or legally void through any reason.

OAO Gazprom, shareholder of the Company

Board of Directors, Minutes No. 42/2011 of 22.02.2011

42.

Deed of limited recourse guarantee and undertaking to lend in respect of certain obligations of TradeCo 1of 21.04.2011 (OJSC Gazprom) concluded by and between the Company (the Seller), OJSC Gazprom (the guarantor), CJSC Gazprom YRGM Trading (the purchaser), UniCredit Bank AG (the facility agent) and ING Bank N.V. (the security agent). OJSC Gazprom assumes the following obligations: under the guarantee of performance by OJSC Severneftegazprom of all of its obligations before the facility agent and the banks under the project finance agreement to the extent of the payment obligations under the Guarantee agreement upon occurrence of the Conditions and in case the reserve amount of service of the debt of OJSC Severneftegazprom in the amount of interest and scheduled payments has not been paid; shall provide a loan to OJSC Severneftegazprom as the seller under gas supply agreement No. 28 Pk2007 of 13 December, 2007 in the amount calculated pursuant to Guarantee agreement, upon occurrence and effect of the Condition, and upon occurrence of the Conditions under the Guarantee agreement reimburse the facility agent for any documented costs, damages or losses in case the Guarantee becomes impractical or legally void through any reason.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

Board of Directors, Minutes No. 42/2011 of 22.02.2011

Disclosure of Information

Essential conditions

Persons interested in settlement of the transaction

Management body that took the decision on approval of the transaction

43.

BASF Deed of limited recourse guarantee and undertaking to lend in respect of certain obligations of TradeCo 1of 21.04.2011 concluded by and between the Company (the Seller), BASF SE (the guarantor), CJSC Gazprom YRGM Trading (the purchaser), UniCredit Bank AG (the facility agent) and ING Bank N.V. (the security agent). BASF SE assumes the following obligations: under the guarantee of performance by OJSC Severneftegazprom of all of its obligations before the facility agent and the banks under the project finance agreement to the extent of the payment obligations under the Guarantee agreement upon occurrence of the Conditions and in case the reserve amount of service of the debt of OJSC Severneftegazprom in the amount of interest and scheduled payments has not been paid; shall provide a loan to OJSC Severneftegazprom as the seller under gas supply agreement No. 28 Pk-2007 of 13 December, 2007 upon occurrence and effect of the Condition, and upon occurrence of the Conditions under the Guarantee agreement reimburse the facility agent for any documented costs, damages or losses in case the Guarantee becomes impractical or legally void through any reason.

Wintershall Holding GmbH, shareholder of the Company

Board of Directors, Minutes No. 42/2011 of 22.02.2011

44.

Deed of limited recourse guarantee and undertaking to lend in respect of certain obligations of TradeCo 2 of 21.04.2011 (OJSC Gazprom) concluded by and between the Company (the Seller), OJSC Gazprom (the guarantor), CJSC Gazprom YRGM Development (the purchaser), UniCredit Bank AG (the facility agent) and ING Bank N.V. (the security agent). OJSC Gazprom assumes the following obligations: under the guarantee of performance by OJSC Severneftegazprom of all of its obligations before the facility agent and the banks under the project finance agreement to the extent of the payment obligations under the Guarantee agreement upon occurrence of the Conditions and in case the reserve amount of service of the debt of OJSC Severneftegazprom in the amount of interest and scheduled payments has not been paid; shall provide a loan to OJSC Severneftegazprom as the seller under gas supply agreement No. 144/SNGP-2009 of 29 December9, 2009 in the amount calculated pursuant to Guarantee agreement, upon occurrence and effect of the Condition, and upon occurrence of the Conditions under the Guarantee agreement reimburse the facility agent for any documented costs, damages or losses in case the Guarantee becomes impractical or legally void through any reason.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

Board of Directors, Minutes No. 42/2011 of 22.02.2011

45.

Deed of limited recourse guarantee and undertaking to lend in respect of certain obligations of TradeCo 2 of 21.04.2011 (E.ON AG) concluded by and between the Company (the Seller), E.ON AG (the guarantor), CJSC Gazprom YRGM Development (the purchaser), UniCredit Bank AG (the facility agent) and ING Bank N.V. (the security agent). E.ON AG assumes the following obligations: under the guarantee of performance by OJSC Severneftegazprom of all of its obligations before the facility agent and the banks under the project finance agreement to the extent of the payment obligations under the Guarantee agreement upon E.ON Ruhrgas E&P GmbH, shareholder of occurrence of the Conditions and in case the reserve amount of service of the Company the debt of OJSC Severneftegazprom in the amount of interest and scheduled payments has not been paid; shall provide a loan to OJSC Severneftegazprom as the seller under gas supply agreement No. 144/SNGP-2009 of 29 December, 2009 in the amount calculated pursuant to Guarantee agreement, upon occurrence and effect of the Condition, and upon occurrence of the Conditions under the Guarantee agreement reimburse the facility agent for any documented costs, damages or losses in case the Guarantee becomes impractical or legally void through any reason.

Board of Directors, Minutes No. 42/2011 of 22.02.2011

46.

Supplementary Agreement No. 10 of 18.04.2011 to Gas Supply Agreement No. 25 Pk-2007 of 13.12.2007 concluded with OJSC Gazprom. Any due payments shall be made to the settlement account of the respective party. This party has provided its bank details to the other party. In the absence of the notification any due amount shall be transferred to the account of the respective party as set out in the Gas Supply Agreement.

OAO Gazprom, shareholder of the Company, Members of the Board of Directors: . A. I. Medvedev, O. P. Pavlova, . V. V. Cherepanov

Board of Directors, Minutes No. 42/2011 of 22.02.2011

47.

Supplementary Agreement No. 8 of 18.04.2011 to Gas Supply Agreement No. 28 Pk-2007 of 13.12.2007 concluded with CJSC Gazprom YRGM Trading. Any due payments shall be made to the settlement account of the respective party. This party has provided its bank details to the other party. In the absence of the notification any due amount shall be transferred to the account of the respective party as set out in the Gas Supply Agreement.

OAO Gazprom, shareholder of the Company

Board of Directors, Minutes No. 42/2011 of 22.02.2011

48.

Supplementary Agreement No. 4 of 12.04.2011 to Gas Supply Agreement No. 144/SNGP-2009 of 29.10.2009 concluded with CJSC Gazprom YRGM Development. Any due payments shall be made to the settlement account of the OAO Gazprom, shareholder of the Company respective party. This party has provided its bank details to the other party. In the absence of the notification any due amount shall be transferred to the account of the respective party as set out in the Gas Supply Agreement.

Board of Directors, Minutes No. 42/2011 of 22.02.2011

ANNUAL REPORT 2011

Disclosure of Information

Essential conditions

Persons interested in settlement of the transaction

Management body that took the decision on approval of the transaction

49.

Priority deed of 21.04.2011 concluded by and between the Company (the borrower), OJSC Gazprom and E.ON Ruhrgas E&P GmbH and Wintershall Holding GmbH (shareholders, purchasers, guarantors, junior creditors), BASF SE, E.ON AG (the guarantor of TradeCo), CJSC Gazprom YRGM Trading and CJSC Gazprom YRGM Development (the Purchasers), Wintershall Vermögensverwaltungsgesells OAO Gazprom, Wintershall Holding GmbH, chaft mbH (junior creditor). Pursuant to the agreement between the creditors the E.ON Ruhrgas E&P GmbH, shareholders of parties assume obligations before senior creditors and agree that the senior debt the Company shall be of more priority than the junior debt in terms of the rights to the payment and the payment priority. The agreement was made to establish the priority of various classes of junior debts and settle certain issues of payment priority between the parties.

Board of Directors, Minutes No. 42/2011 of 22.02.2011

50.

Deed of undertaking relating to registration of share pledges of 19.05.2011 concluded by and between the Company, OAO Gazprom, E.ON Ruhrgas E&P GmbH and Wintershall Holding GmbH. The obligations of shareholders and the borrower under simultaneous registration pertaining to registration of the pledge created through share pledge agreements.

OAO Gazprom, Wintershall Holding GmbH, E.ON Ruhrgas E&P GmbH, shareholders of the Company

Board of Directors, Minutes No. 42/2011 of 22.02.2011

51.

Intershareholder deed of 21.04.2011 concluded by and between the Company (the company), OAO Gazprom, E.ON Ruhrgas E&P GmbH and Wintershall Holding GmbH (the shareholders) for the purpose of assuming certain obligations OAO Gazprom, Wintershall Holding GmbH, related to the right to offer similar conditions for purchase of shares of OJSC E.ON Ruhrgas E&P GmbH, shareholders of Severneftegazprom upon agreement on the agreement of the company the Company shareholders to be concluded by and between, among other, E.ON Ruhrgas E&P GmbH, OAO Gazprom, Wintershall Holding GmbH as shareholders, OJSC Severneftegazprom as the company and UniCredit Bank AG as the facility agent.

Board of Directors, Minutes No. 42/2011 of 22.02.2011

52.

Intercreditor deed of 21.04.2011 concluded with, among others, the Company (the borrower), OAO Gazprom, E.ON Ruhrgas E&P GmbH and Wintershall Holding GmbH (shareholders, purchasers, guarantors, junior creditors), Société Européenne de Banque; Credit Agricole Corporate and Investment Bank; Gazprombank (Open Joint Stock Company); ING Bank N.V.; Mizuho Corporate Bank Nederland N.V.; Natixis; SGBT Asset Based Funding S.A.; Sumitomo Mitsui Finance Dublin Limited; Bank of Tokyo-Mitsubishi UFJ (Holland) N.V.; UniCredit OAO Gazprom, Wintershall Holding GmbH, Bank AG; UniCredit Bank CJSC; BNP Paribas; BNP Pariba Bank (CJSC); WestLB E.ON Ruhrgas E&P GmbH, shareholders of AG, London Branch; DZ Bank AG, London Branch – original creditors, BASF SE, the Company E.ON AG (the guarantor of TradeCo), CJSC Gazprom YRGM Trading and CJSC Gazprom YRGM Development (the Purchasers), Wintershall Vermögensverwalt ungsgesellschaft mbH (junior creditor), UniCredit Bank AG as the facility agent; ING Bank N.V. as the joint and several creditors; and ING Bank N.V. as the security agent. The Company, the Junior finance parties and Senior creditors assume the main obligations regarding the Senior debt and the Junior debt in relation with the Project Finance Agreement of 16.03.2011.

Board of Directors, Minutes No. 42/2011 of 22.02.2011

53.

Agreement No. 315-2011 of 25.04.2011 concluded with LLC TyumenNIIgiprogaz for scientific and research works on the subject ‘Development of the methods for processing the results of well flow tests carried out in subhorizontal wells of the Yuzhno- Russkoye oil and gas field’. The cost of works is RUB 4 999 955.00 incl. VAT. Implementation time from 01 February and until 10 December, 2011.

OAO Gazprom, shareholder of the Company

Board of Directors, Minutes No. 42/2011 of 22.04.2011

54.

Agreement No. 115/SNGP-2011/201119818 of 04.04.2011 concluded with LLC Gazprom VNIIGAZ for scientific and research works and development engineering works on the subject ‘Study of the conditions facilitation formation of hydrates OAO Gazprom, shareholder of the Company during development, testing and operation of Turonian deposits (T1, T2) of the Yuzhno- Russkoye oil and gas field’ in the amount of RUB 6 000 000 (not subject to VAT). Implementation time from 04 April 2011 and until 01 March, 2012.

Board of Directors, Minutes No. 42/2011 of 22.04.2011

55.

Agreement No. 321-2011 of 20.06.2011 concluded with LLC TyumenNIIgiprogaz for development of works on the subject ‘Process schematics of development of Turonian gas deposit of the Yuzhno- Russkoye oil and gas field’ in the amount of RUB 19 998 640.00 incl. VAT. Implementation time from 01 May, 2011 and until 30 April, 2012.

OAO Gazprom, shareholder of the Company

Board of Directors, Minutes No. 42/2011 of 22.04.2011

56.

Agreement No. 174/SNGP-2011 of 19.09.2011 concluded with SOJSC Gazproektengineering for performance of preinvestment studies of the technical security equipment set implemented at the Yuzhno- Russkoye oil and gas field. The agreement amount is RUB 847 240.00 incl. VAT. Implementation time from 01 October to 30 October, 2011

OAO Gazprom, shareholder of the Company

Board of Directors, Minutes No. 52/2011 of 30.08.2011

57.

Agreement No. 11092 of 24.11.2011 concluded with OJSC YUZHNIIGIPROGAZ for development of ‘Estimation of the cost of abandonment operations of the facilities of the Yuzhno- Russkoye oil and gas field’ in the amount of RUB 1 084 OAO Gazprom, shareholder of the Company 660.72 incl. VAT. Implementation time from 30 September and until 10 December, 2011

Board of Directors, Minutes No.54/2011 of 24.11.2011

58.

Non-residential premises lease agreement concluded by and between the Company (the Landlord) and CJSC Gazprom YRGM Trading (the Tenant) for the OAO Gazprom, shareholder of the Company period from 01 September, 2011 and until 31 July, 2012 in the amount of RUB 494 714 incl. VAT.

Board of Directors, Minutes No.54/2011 of 24.11.2011

Disclosure of Information

Appendix 3. List of the Company’s transactions in 2011 considered as major transactions in conformance with the Federal law ‘On joint stock companies’ as well as other transactions subject to the procedure of approval of major transactions pursuant to the Company’s Charter Essential conditions

Management body that took the decision on approval of the transaction

Agreement on the pledge of rights under the on-shore bank account agreements of 16.03.2011 concluded by and between the Company (the pledger) and ING Bank N.V. (the pledgee) to secure performance of the obligations of OJSC Severneftegazprom under the project finance agreement. The object of the pledge is the rights of OJSC Severneftegazprom under bank account agreements concluded with CJSC Credit Agricole CIB. For the purpose of article 339 of the Civil Code of the Russian Federation, the pledged rights have been estimated at RUB 86 145 000 000.00.

Agreement on the pledge of rights under the operation accounts bank account agreements of 16.03.2011 concluded by and between the Company (the pledger) and ING Bank N.V. (the pledgee) to secure performance of the Company’s obligations under General Meeting, Minutes No.16/2011 of the project finance agreement. The object of the pledge is the rights of the Company under bank account agreements concluded 15.03.2011 with OJSC Gazprombank. For the purpose of article 339 of the Civil Code of the Russian Federation, the pledged rights have been estimated at RUB 1 000 000 000.00.

Charge over off-shore accounts agreement of 16.03.2011 concluded by and between the Company (the Borrower) and ING Bank N.V. (the security agent) to secure performance of the Company’s obligations under the project finance agreement.

General Meeting, Minutes No.16/2011 of 15.03.2011

On-shore accounts direct debit agreement of 16.03.2011 concluded by and between the Company (the client, UniCredit Bank AG (the facility agent) and CJSC Credit Agricole CIB (on-shore accounts bank) to secure performance of the Company’s obligations under the project finance agreement. UniCredit Bank AG was granted the right to directly debit funds off the accounts of OJSC Severneftegazprom opened with CJSC Credit Agricole CIB in cases set out in the Direct Debit Agreement.

General Meeting, Minutes No.16/2011 of 15.03.2011

Mortgage agreement of 16.03.2011 concluded by and between the Company (the pledger) and ING Bank N.V. (the pledgee) to secure performance of the obligations of the Company (as the borrower) under the project finance agreement. Mortgaged real property includes gas wells, gas pipe, gas processing facility and the lease rights regarding land plots under lease agreements. For the purpose of article 339 of the Civil Code of the Russian Federation the mortgaged rights have been estimated at RUB 26 209 616 644.01.

General Meeting, Minutes No.16/2011 of 15.03.2011

Agreement on the pledge of rights under the gas sale agreements of 16.03.2011 concluded by and between the Company (the pledger) and ING Bank N.V. (the pledgee) to secure performance of the obligations of the Company (as the borrower) under the project finance agreement. The object of the pledge is the rights of the Company under gas supply agreements No. 25 Pk-2007 of 13 December, 2007 (as amended); No. 28 Pk-2007 of 13 December, 2007 (as amended); and No. 144/SNGP-2009 of 29 October, 2009 (as amended). For the purpose of article 339 of the Civil Code of the Russian Federation the mortgaged rights have been estimated at RUB 13 356 826 479.00.

General Meeting, Minutes No.16/2011 of 15.03.2011

Agreement on the pledge of rights under the insurances of 16.03.2011 concluded by and between the Company (the pledger) and ING Bank N.V. (the pledgee) to secure performance of the obligations of the Company under the project finance agreement. For General Meeting, Minutes No.16/2011 of the purpose of article 339 of the Civil Code of the Russian Federation the mortgaged rights have been estimated at RUB 1 498 15.03.2011 160 496.00.

General Meeting, Minutes No.16/2011 of 15.03.2011

ANNUAL REPORT 2011