OREANDA-NEWS. September 27, 2011. The Gazprom Board of Directors approved the adjusted Gazprom Investment Program, Budget (Financial Plan) and Cost Optimization (Reduction) Program for 2011.

Pursuant to the adjusted Investment Program for 2011, the total amount of investments will make up RUB 1.2765 trillion which is RUB 460.11 billion more as compared to the Investment Program approved in November 2010. At the same time, capital investments will amount to RUB 1.1867 trillion (a RUB 456.85 billion increase versus the Investment Program endorsed in November 2010), of which RUB 1.15 trillion and RUB 36.69 billion will be allocated for capital construction and acquisition of non-current assets, thus showing an increase of RUB 422.75 billion and RUB 34.1 billion accordingly. The amount of long-term financial investments will stand at RUB 89.76 billion (RUB 3.26 billion up on the Investment Program approved in November 2010).

According to the adjusted Budget for 2011, revenues and gains will total RUB 4.3308 trillion while liabilities, expenditures and investments – RUB 4.811 trillion. The external financial borrowings are determined at RUB 150 billion, showing a RUB 60 billion rise versus the Budget approved in November 2010. The increase in borrowings is explained by the need to finance the current Investment Program and refinance the previously raised loans. At the same time, the relative debt ratios will remain at the level favorable for Gazprom: for instance, the total debt to EBITDA ratio will presumably be equal to 0.8.

The Budget surplus (inclusive of the cash balance as of early 2011) will make up RUB 0.5 billion.

The adjusted Cost Optimization (Reduction) Program for 2011 envisages measures aimed at cost optimization (reduction) to result in a cumulative effect of RUB 19.6 billion.

The 2011 Investment Program adjustment is mainly driven by the need to increase investments in the key projects for natural gas production, transmission and underground storage. Special attention is paid to the projects for establishing new gas centers in Yamal, Eastern Siberia and the Far East.

The Budget adjustment stems from volumetric and price changes in Gazprom's gas marketing and macroeconomic indicators.
Background

The adjusted Gazprom Investment Program for 2011 stipulates larger capital investments in pre-development of the Bovanenkovo and Kirinskoye fields.

The document envisages an investment increase for key gas transmission projects such as the Bovanenkovo – Ukhta and Ukhta – Torzhok gas trunkline systems as well as the Sakhalin – Khabarovsk – Vladivostok gas transmission system and a gas pipeline running from the onshore processing facility (OPF) in the Kirinskoye field to the Sakhalin main compressor station (MCS). Investments will be raised to construct the Gryazovets – Vyborg, Pochinki – Gryazovets and Dzhubga – Lazarevskoye – Sochi gas pipelines.

The Investment Program provides for increasing investments to ensure operability of gas production and transmission facilities during peak loads of the 2011–2012 and 2012–2013 autumn/winter periods as well as to develop the underground gas storage system. In addition, capital investments will be increased for the project entitled the Industry-Specific Integrated Information and Management System of Gazprom.

The adjusted Investment Program for 2011 also stipulates raising expenditures on non-current assets due to the purchase of RUSIA Petroleum owned assets.

Pursuant to the adjusted Investment Program for 2011, the following production projects will remain the top-priority investment recipients in capital construction: pre-development of the Bovanenkovo field, the Apt-Albian deposits of the Nyda area of the Medvezhye gas and condensate field, the Achimov deposits of the Urengoy oil, gas and condensate field and others.

The gas transmission priorities will include construction of the Bovanenkovo – Ukhta and Ukhta – Torzhok gas trunklines, the Gryazovets – Vyborg, Pochinki – Gryazovets and SRTO – Torzhok gas pipelines.

As part of the Eastern Gas Program, the Investment Program will still be focused on the Sakhalin – Khabarovsk – Vladivostok gas transmission system, the gas pipeline connecting the Kirinskoye field OPF with the Sakhalin MCS, pre-development of the Kshukskoye, Nizhne-Kvakchikskoye and Kirinskoye fields.

Funds are also earmarked for Gazprom's projects stipulated by the governmentally approved Program for Construction of Olympic Venues and Development of Sochi as a Mountain Climate Resort.

The long-term financial investment plan for 2011 prioritizes, inter alia, Gazprom's participation in the Shtokman and Prirazlomnoye fields development as well as the Nord Stream and South Stream gas pipelines construction. In addition, the Company intends to allocate funds for power generation projects, including the Adler CHPS construction.