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Sibneft Statement on Local Tax Payments in Omsk and Other Operating Regions

Moscow/Omsk, November 24, 2005. Gazprom views Sibneft as a company whose tax base should be employed as effective socially-oriented support for the regions where the company operates. Sibneft has a broad geography – stretching from European Russia to the Far East – and the concentration of most of its local tax payments in one region is not in line with Gazprom’s regional policy. Gazprom believes that the distribution of local tax obligations should be proportionally weighted, taking into account the location of the company’s various divisions and assets.

This policy would rule out the removal of significant tax revenues from the Omsk region. The Omsk Refinery and its operations provide a high level of social support to the region and guarantee a substantial contribution to the regional budget. The re-registration of the company is also not an open question. The emotional debate currently taking place in Omsk region with regards to Sibneft’s tax payments is excessive, unnecessary and unfounded.

It would be incorrect to rule out the redistribution of a part of Sibneft’s local tax payments to other regions that are vital to the company’s operations, to its main shareholder, or to the development of its future business interests. This has been the case before with Sibneft, as the company directed significant tax payments and private investment in social projects in order to assist in the development of the Chukotka Autonomous District.

In accordance with its policy of corporate transparency, Gazprom is prepared to enter into an active dialogue on this issue with the relevant Omsk region officials.