Gazprom and Rosneft Conclude Strategic Cooperation Deal

On November 28, 2006, the heads of Rosneft and Gazprom, Sergei Bogdanchikov and Alexei Miller, signed a bilateral Strategic Cooperation Agreement in Gazprom's Moscow headquarters.

As agreed, Rosneft and Gazprom will cooperate in exploration for, production, transportation and processing of hydrocarbons; the acquisition and sale of natural and associated gas; the generation and sale of electricity and thermal energy; the manufacture of petroleum field and power-generating equipment; the development of production facilities and infrastructure; research and technology, information, environmental, social and staffing support.

The document states specifically that the parties intend to participate jointly in tenders and auctions for subsoil use rights, and in the implementation of joint projects. Rosneft and Gazprom will coordinate their actions and exchange geological information on their joint projects when performing exploration and geological prospecting works, and when developing and creating geological and geophysical information databases.

When considering issues of participation in joint projects involving geological prospecting and the development of deposits, the parties will base themselves on an equal distribution of their participatory shares in such projects. The companies stated their desire for maximum cooperation in work on the efficient use of natural gas liquids, natural and associated gas in the gas chemical industry and as an alternative motor fuel; in the manufacture of polymer materials, elastomers and articles based on such, and in the production of synthetic liquid fuels using the GTL (gas to liquid) technology. Gazprom and Rosneft also intend to collaborate on projects involving the creation of gas-processing and gas chemical facilities in East Siberia and the Far East.

Under the Agreement, Gazprom will acquire natural gas from Rosneft (at the West Siberian fields connected to Gazprom's gas transportation system) in actual output volumes which shall not be less than the 2006 output volumes. As regards the gas produced at those fields which have not yet been connected to the gas transportation system, the companies agreed that they will approve the sales volumes, terms and timeframe in supplementary agreements.

To optimize their joint operations, the parties intend to create a coordination committee made up of 10 members (one co-chairman and 4 committee members from each company). As part of this committee, a working group is to be set up in the near future to prepare a Memorandum of Understanding on the principal terms of the sale and purchase of the gas extracted by Rosneft, and proposals on the joint implementation of future projects in Russia and abroad.

The strategic partnership agreement has been concluded up until 2015 inclusive, and may be extended for subsequent five-year periods.