Enhancing Effectiveness of APG Utilization and Expanding APG Processing – Strategic Goals of SIBUR Holding JSC

Presentation for the round-table discussion on APG utilization in Russia

OWN FEEDSTOCK-BASED BUSINESSES ALLOW SIBUR TO DEVELOP PETROCHEMICAL OPERATIONS IN A PROFITABLE MANNER

SIBUR Holding Gas Processing Enterprises

WESTERN SIBERIA HAS A HIGH-CAPACITY INFRASTRUCTURE FOR APG PROCESSING

Nyagan GPP Gubkinsky GPP Urengoy Chelyabinsk Urengoy-Surgut Vyngayakhinskaya CS Urengoy-Center Muravlenkovsky GPP Vyngapurovsk oye GPP Vyngapurovskaya CS Varyeganskaya CS Yu.-Balyksky GPP Tobolsk Neftekhim Belozerny GPP Surgutsky CSP Surgutsky GPP C GRES NV GRES Nizhnevartovsky GPP Parabel Kuzbass

Notes: • Shown in the flow chart are only major constituents of transport infrastructure of Sibur feedstock-based businesses and Gazprom-used units: Product pipelines Gas pipelines SIBUR Holding gas processing plants and compressor stations Loading rack Gas mainlines and other Gazprom units GPPs and CSPs (condensate stabilization plants) of third parties

EXPANSION OF APG PROCESSING IS HINDERED BY OBJECTIVE DIFFICULTIES…

Worn-out capital assets Current situation

Major gas processing facilities were build in the 70-80s: – Gubkinsky GPP 1989-90 – – Muravlenkovsky GPP Nizhnevartovsky GPP 1989-90 1975-80 – – – – Belozerny GPP Yuzhno-Balyksky GPP Nyagan GPP Product Pipeline “Nizhnevartovsky GPP – Yuzho-Balyksky GPP” 1980 1980 1989-90 1976

Consequences/ Risks

High maintenance costs and limited potential for enhancement of the existing facilities’ efficiency

High capital intensity of the sector

High construction costs of new transportation and operating facilities, long pay-off periods

Long lead times of project implementation

– Project planning – Construction 1- 1.5 years 2.5- 3 years Risks related to changes in price and technological issues of the project

…HOWEVER SIBUR HOLDING KEEPS ON INCREASING THE APG VOLUMES PROCESSED

APG intake by SIBUR Holding processing facilities

bn m3/year SIBUR Holding strategy 2011 stipulates a vast expansion of gas processing facilities in Western Siberia 20.40** 10.92

12.26

13.20

13.94* 8.53

2002 2003 2004 2005 2006 * Estimates for 2006 ** Provided the planned development program is fully implemented Source: SIBUR Holding JSC 2011

MAJOR PROJECTS FOR THE INCREASE OF APG INTAKE BY SIBUR HOLDING ENTERPRISES

Project

Expansion of Yuzhno-Balyksky gas processing complex

Increase of APG intake by gas

processing facilities* bn m3/year 2.0

Expansion of Nizhnevartovsky gas processing complex 2.0

Construction of Vyngapurovsky gas processing plant 2.0

Modernization of Nyagangazpererabotka production facilities

Total

* Provided the planned development program is fully implemented Source: SIBUR Holding JSC 0.5

6.5

APG PROCESSING PROJECTS CALL FOR COOPERATION BETWEEN SIBUR HOLDING, GAZPROM AND OIL COMPANIES

Oil companies’ area of responsibility Gas processing enterprises’ area of responsibility

Gas processing plant Compressor station Gas gathering infrastructure Pressure residue gas pipeline Gas fractionation plant

Gazprom area of responsibility Main gas pipeline

Oil fields NGL pipeline Oil companies, gas processing companies and Gazprom need to collaborate to increase APG processing: • Oil companies need guarantees regarding intake of APG to invest in gas gathering infrastructure • Expansion of gas processing facilities requires positive outlook on future APG supplies and residue gas marketing on the part of gas processing companies • Certainty in sustainability of gas resources is needed for Gazprom to expand gas transportation system

SIBUR HOLDING IS ACTIVELY COOPERATING WITH OIL COMPANIES AND GAZPROM ON GAS PROCESSING

Partners Joint Venture Long-Term APG Supply Agreement Arrangements on residue gas intake by gas transportation system Partnership Status

• In early 2007, SIBUR Holding and TNK-BP Holding will form a JV on base of Nizhnevartovsky and Belozerny gas processing complexes, which will allow coordinate activities for the increase of APG gathering by oil companies and its intake and processing by gas processing enterprises • Talks regarding extension of cooperation on APG utilization at Yamalo-Nenetsky AO (Muravlenkovsky GPP and Vyngapurovsko-Vyngayakhinsky region) are in progress • Talks regarding extension of cooperation on APG utilization at Gubkinsky GPP are in progress • Close cooperation within the project on Yuzhno-Balyksky GPP expansion has been organized •Negotiations on additional access to gas pipeline Urengoy Chelyabinsk for intake of extra residue gas from Nizhnevartovsky and Yuzhno-Balyksky GPP are soon to be finalized

INCREASED APG PROCESSING WILL IMPROVE ECOLOGICAL SITUATION AND HELP DEVELOP THE NATIONAL PETROCHEMISTRY – A HIGH VALUE ADDED SECTOR

•SIBUR Holding has worked out a program on the development of petrochemical operations, which aims to enhance the processing of domestic hydrocarbon feedstock.

Execution of this program will help

increase the share of high technology operations in the

GDP, which is a strategically important issue, and decrease dependency on import •Successful execution of this program is deemed impossible without expansion of own feedstock base – production of liquefied petroleum gases (LPG) from APG processing products. Virtually all LPG produced from additional volumes of processed APG will go into new SIBUR Holding petrochemical projects

SIBUR Holding Projects on Petrochemical Operations Development Enterprise Processes

Tobolsk-Neftekhim Sibur-Neftekhim Tomskneftekhim Sibur-Химпром Tobolsk-Neftekhim Uralorgsintes Tobolsk-Neftekhim Propane dehydration Pyrolysis Pyrolysis Pyrolysis Butane  Buradiene Isobutane  Isoprene Isobutane  Isobutylene

Additional LPG demand will approximate 1.5 mln t/year

GOVERNMENT CAN OFFER SUBSTANTIAL SUPPORT TO GAS PROCESSING AND GAS & CHEMICAL PROJECTS

Investment Fund of the Russian Federation Tools of Support

• Attracting Investment Fund means (cheaper than commercial credit funds) for joint financing of projects on construction of capital intensive infrastructure for APG production and transportation of gas processing products

Special Economic Zones

• Establishment and development of high-technology refineries and petrochemical operations in special economic zones (SIBUR Holding - the first enterprise registered in a special economic zone that was established on base of Tomskneftekhim LLC). Moreover, the Company’s participation in establishing and operating industrial SEZs at other RF regions is under consideration at the moment

Tax benefits, reimbursement of costs and other types of government support

•Consider tax benefits and reimbursement of costs related to strategic projects on APG processing and development of oil refining and gas processing

THE GOVERNMENT SHOULD EMPLOY AN ARRAY OF MEASURES TO HELP ENHANCE THE EFFECTIVENESS OF GAS PROCESSING AND GAS & CHEMICAL PRODUCTION State-regulated APG use aims to:

• Ensure a maximal volume and extent of APG processing; • Decrease environmental impact to the minimum; • Create favorable conditions for APG processing to obtain petrochemical feedstock; • Assist in the development of Russian gas and petrochemical sector to create new jobs, improve export ratio by decreasing feedstock share and increasing the share of downstream value-added products

Possible lines of national policy in the field of APG utilization:

• • Inducing enhancement of industrial and environmental safety during production, processing and transportation of APG Creating economic conditions and legislative basis for the development of APG processing and transportation facilities

The government is required to create favorable and sufficient conditions (legal, economic, and financial) on the federal and regional level to accelerate development of gas processing and gas & chemical sectors Federal level:

• Developing and implementing national policy in the field of APG utilization

Regional level:

• Executing the RF policy in the field of APG utilization at a corresponding region