1. "Current state of problem of rational associated petroleum gas use in Russian Federation" General Director LLC "EcoNefteGazControl" Alexey N. Aksenov

2. Level of APG utilization by the leading Russian oil companies Level of APG utilization, % Year

3. Resources of the useful components in APG (according to Russian State Statistics Service) Volume, thou. tons sulfur ethane propane butane pentane and higher (stable condensate) Year

4. TechnicalEconomicalInstitutional 1. Limited capacity of gas transmission systems; 2. Current condition of APG processing capacities; 3. Shortcomings (lack) of product transportation infrastructure from gas processing plants (broad fractions of light hydrocarbons, liquefied hydrocarbon gases) 1. State control of the APG wholesale prices; 2. Pricing on the market of APG products (LHCG, dry stripped gas); 3. Dry gas transport and sales costs; 4. Cost of transportation for liquid products obtained from APG processing. 1. APG has not been designated as mineral resource, no state control of APG use; 2. Uncertainty as to who owns APG produced from the subsoil; 3. Not all of licensing agreements establish mandatory level of APG utilization; 4. No requirements outlined concerning introduction of mandatory account of APG resources, extraction volumes and utilization ; 5. No procedures developed for state control of APG utilization; 6. Procedures for access of oil companies to the APG transport and processing capacities are not legally formalized; 7. No effective pricing system developed to insure balance between interests of oil companies and natural monopoly entities. Main reasons for wide-scale associated petroleum gas flaring

5. In order to commercialize APG, following will be required: 1.Joint efforts of oil producing and oil processing companies; 2. Well-planned long-term strategy of the Government including, along with state control and monitoring, the mechanisms to stimulate investment projects involving APG utilization with innovative technologies and equipment.

6. Name of Russian Federation territorial subdivision Quantity of flare devices (gas bleeders) Gas bleeders Availability of instruments on flare systems as of 01.01.08. As of 01.01.12. (preliminary) EquippedNot equipped% equipped Northwest Federal District Arkhangelsk Region2 020.0100 Kaliningrad Region17 14382.4100 Nenets Autonomous Area24 19579.297 Komi Republic72 413155.693 Total for Northwest Federal District1150744164.495 Southern Federal district Astrakhan Region1 10100.0100 Volgograd Region27 0 0.093 Krasnodar Territory6 5183.3100 Republic of Dagestan15 0 0.067 Republic of Ingushetia15 0 0.080 Republic of Kalmykia14 10471.493 Republic of North Ossetiya - Alania 1 010.0100 Stavropol Territory13 21115.477 Chechen Republic9 090.00 Total for Southern Federal District1010188317.883 Summary register of flair devices of oil & gas companies by Russian Federation territorial subdivisions

7. Name of Russian Federation territorial subdivision Quantity of flare devices (gas bleeders) Gas bleeders Availability of instruments on flare systems as of 01.01.08. As of 01.01.12. (preliminary) EquippedNot equipped% equipped Volga Federal district Orenburg Region109 238621.185 Perm Region216310910750.564 Republic of Bashkortostan152 1054769.190 Samara Region127 379029.188 Saratov Region60 124820.050 Republic of Tatarstan966187818.872 Udmurt Republic43 142932.684 Ulyanovsk Region12 21016.767 Total for Volga Federal District815932049539.376 Ural Federal district Tyumen Region3 30100.0100 Khanty-Mansi Autonomous Area - Yugra 561 37218966.393 Yamalo-Nenets Autonomous Area147 628542.284 Total for Ural Federal District711043727461.592

8. Name of Russian Federation territorial subdivision Quantity of flare devices (gas bleeders) Gas bleeders Availability of instruments on flare systems as of 01.01.08. As of 01.01.12. (preliminary) EquippedNot equipped% equipped Siberian Federal district Krasnoyarsk Territory3 30100.0100 Novosibirsk Region5 4180.0100 Omsk Region2 20100.0100 Tomsk Region68 402858.891 Total for Siberian Federal District780492962.892 Far Eastern Federal District Yakutia (Sakha) Republic5 50.0100 Sakhalin Region7 6185.7100 Total for Far Eastern Federal District 1206650.0100 Total, Russian Federation:1833990192348.984

9. Bottlenecks in the production chain from well to the output of liquefied hydrocarbon gases Production chain elementsBottlenecks : production Bottlenecks : government role and its incentives Wells (oil deposits) APG production and use accountingTechnical regulation measures; APG utilization programs in the development projects (licenses) Gas-gathering infrastructuresHigh capital expenditures and their questionable profitability for oil companies; APG price level Technical regulation measures; government participation in the investments; prices for APG liberalized Gas Processing Plants and GFUs (Gas Fractionation Units) Shortage of capacities Exemptions from VAT and customs duties on the equipment imported; government participation in the investments; prices for LHCG liberalized Transport of broad fractions of light hydrocarbons, liquefied hydrocarbon gases Shortage of capacities (loading racks, stations) Encouragement of investments; government participation in the investments Gas transmission network, main gas pipeline Limited capacity of areas critical for dry gas sale Ensuring priority access of dry gas to the gas transmission network; encouraging investments to the gas transmission network capacity expansions

10. Share of flare systems in their total number in terms of APG quantity burned

11. Following approach can be utilized to attract funds for comprehensive programs of APG use and processing : Oil companies and Russian Federation territorial subdivisions jointly invest into APG pipelines; Gas and chemical companies and federal center (e.g., within Federal Target Program) invest to create infrastructure for the sales of Gas processing plant products (filling racks, pipelines for dry gas and broad fractions); All parties have a share of profits (from the sales under the entire program) proportional to contributed investments.

12. THANK YOU!