novatek open joint-stock company novatek’s annual report is prepared in accordance with the...

PRE-APPROVED by a resolution of the Board of Directors of OAO NOVATEK on 25 March 2010 Minutes No. 123

DATA ACCURACY CERTIFIED by OAO NOVATEK‘s Revision Commission on 23 March 2010

ANNUAL REPORT

of

NOVATEK

Open Joint-Stock Company

for the Year 2009

Chairman of the Management Board

___________________ L.V. Mikhelson Chief Accountant ___________________ S.V. Protosenya

APPROVED by a resolution of the annual

General Meeting of Shareholders of OAO NOVATEK

on _______ 2010 Minutes No. _____

NOVATEK’s Annual Report is prepared in accordance with the Regulation of the Federal Financial Market Service “On information disclosure by the securities issuers”

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CONTENTS

COMPANY OVERVIEW ................................................................................................................................... 3

NOVATEK‘S POSITION IN THE MARKET ................................................................................................... 4

NOVATEK'S STRATEGIC GOALS IN 2009.................................................................................................. 5

REPORT OF THE BOARD OF DIRECTORS ON THE RESULTS OF THE COMPANY‘S

DEVELOPMENT IN LINE WITH ITS STRATEGIC OBJECTIVES ............................................................ 6

EXPLORATION AND PRODUCTION ................................................................................................................... 6

PROCESSING ................................................................................................................................................... 12

MARKETING .................................................................................................................................................... 13

INDUSTRIAL .................................................................................................................................................... 15

ENVIRONMENTAL AND SOCIAL RESPONSIBILITY ........................................................................................... 16

OAO NOVATEK DEVELOPMENT PROSPECTS ...................................................................................... 21

REPORT ON PAYMENT OF DIVIDENDS ON NOVATEK SHARES ...................................................... 22

MAJOR RISK FACTORS ASSOCIATED WITH THE COMPANY‘S OPERATIONS ............................ 23

MAJOR TRANSACTIONS AND INTERESTED PARTY TRANSACTIONS ........................................... 27

NOVATEK‘S BOARD OF DIRECTORS ....................................................................................................... 28

NOVATEK‘S MANAGEMENT COMMITTEE............................................................................................... 34

INFORMATION ON PAYMENTS MADE TO MEMBERS OF THE COMPANY‘S BOARD OF

DIRECTORS AND THE MANAGEMENT COMMITTEE IN 2009 ............................................................ 40

INFORMATION ON THE COMPANY‘S COMPLIANCE WITH THE CORPORATE GOVERNANCE

CODE ................................................................................................................................................................ 41


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COMPANY OVERVIEW

Full Corporate Name:

NOVATEK Open Joint-Stock Company

Short Corporate Name: OAO NOVATEK

Registered Office: 22А Pobedy Street, the Town of Tarko-Sale, Purovsky district, Yamal-Nenets Autonomous Region, Russian Federation

Mailing Address: 12А Nametkin street, 117420, Moscow, Russian Federation

Company‘s Registrar ZAO National Registration Company, License No. 10-000-1-00252 of September 6, 2002

Company‘s Auditor ZAO PricewaterhouseCoopersAudit, License No. Е 000376 as of 20 May 2002

OAO NOVATEK (also referred to as ―NOVATEK‖ or the ―Company‖) is the administrative center for planning and managing industrial, economic, financial, and investment activities of its subsidiary companies which are engaged in natural gas and liquid hydrocarbons exploration, production, processing, transportation, and sales.

Structure of NOVATEK’s Core Assets

Field of Operation Enterprises Ownership interest of OAO NOVATEK

Exploration & Production

OOO NOVATEK-TARKOSALENEFTEGAS OOO NOVATEK-YURKHAROVNEFTEGAS OOO Terneftegas

1

OAO Yamal LNG OOO YARGEO

100.0% 100.0% 100.0% 51.0%

51.0%

Processing OOO NOVATEK-PUROVSKY ZPK

100.0%

Transportation OOO NOVATEK-TRANSERVICE

100.0%

Sales OOO NOVATEK NORTH-WEST Runitek GmbH

2

OOO NOVATEK – AZK

100.0% 100.0% 100.0%

Industrial OOO NOVATEK-POLYMER

100.0%

1 In December 2009, NOVATEK signed a Sales and Purchase contract and Shareholder agreement with Total Termokarstovoye B.V.,

anaffiliate of Total, in accordance with which NOVATEK‘s share in Terneftegas will decrease to 51% by the end of 2010. The transaction was not closed as of the end of 2009

2 Ownership through a subsidiary – Novatek Overseas AG


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NOVATEK’S POSITION IN THE MARKET

NOVATEK is the largest Russian independent natural gas producer and the second largest producer of natural gas in Russia after OAO Gazprom. The Company is ranked among the top ten publicly traded companies in terms of natural gas reserves with 967 billion cubic meters (bcm) of proved reserves, and is also recognized as one of the lowest cost producers globally.

NOVATEK‘s primary business activities include exploration and production, processing, transportation and marketing of natural gas and liquid hydrocarbons. The Company‘s primary production and processing assets are located in the Yamal-Nenets Autonomous Region (YNAO) and their close proximity to each other and transportation infrastructure has provided the basis for their cost effective development.

Over the years, NOVATEK has successfully grown its natural gas and liquid hydrocarbon production and consistently replaced over 100% of its annual production volumes. In 2009, the Company‘s reserve replacement rate was 898% and its five year average reserve replacement rate is 315%. NOVATEK‘s total reserves3 (SEC) as of the 31 December 2009 totaled 6,853 million barrels of oil equivalent (boe), of which approximately 92% was natural gas, and its reserve to production life was 29 years.

In 2009, the Company accounted for approximately six percent of total Russian natural gas production and 27% of natural gas produced by Russian independent producers. NOVATEK plays a significant role in Russia‘s energy balance providing 9.7% of total 2009 natural gas deliveries through the Unified Gas Supply System (UGSS) to the domestic market.

Despite the unstable economic environment in both the global and Russian domestic markets during 2009, NOVATEK was able to increase natural gas production by 6.2% and liquid hydrocarbon production by 17.9%, compared to respective production volumes in 2008. In 2009, the Company‘s gross production totaled 32.8 bcm of natural gas and 3.0 million tons of liquid hydrocarbons.

A large portion of NOVATEK‘s reserve base is concentrated in deeper gas condensate bearing layers and requires additional processing capacity to be successfully developed. In order to realize its development strategy the Company‘s wholly-owned subsidiary, OOO ―NOVATEK-PUROVSKY ZPK‖, has constructed a gas condensate processing facility, the Purovsky Gas Condensate Stabilization Plant (Purovsky Plant), near the Company‘s production assets. The plant has allowed NOVATEK to more effectively develop its fields and maximize the quality of hydrocarbons produced.

The Purovsky Plant has the capacity to process up to five million tons of un-stable gas condensate per annum and produces both stable gas condensate and liquid petroleum gases (LPG) which meet the highest international quality standards. The plant currently provides NOVATEK with sufficient processing capacity to continue developing its gas condensate fields without having to rely on third party processing facilities.

NOVATEK has been able to effectively diversify its hydrocarbon sales both geographically and by customer segment allowing the Company to adapt to changes in market conditions and optimize its marketing channels for natural gas and liquid hydrocarbon sales.

3 The Company‘s reserve results are based on reserve appraisal reports for the East-Tarkosalinskoye, Khancheyskoye, North

Khancheyskoye, Yurkharovskoye, Termokarstovoye, West Yurkharovskoye, South Tambeyskoye and Yarudeyskoye fields and the Zapadno-Urengoyskiy and Olimpiyskiy license areas.

The evaluations were conducted on a U.S. Securities and Exchange (―SEC‖)

basis. Due to a lack of clear SEC guidance, D&M has relied on our representations that we intend to (i) extend the term of our licenses to the end of the economic lives of the fields and (ii) proceed accordingly with the development and operation of the fields, in order to include certain volumes of reserves estimated to be producible beyond the primary terms of the licenses. Reserve information in this Report includes reserves recoverable up to as well as beyond the current license expiration dates. The SEC based reserve appraisals do not include estimates for probable and possible reserves.


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NOVATEK‘s fields are located in close proximity to the UGSS through which the Company delivers natural gas to end-customers. In 2009, NOVATEK delivered natural gas to over 35 regions of the Russian Federation. The largest volumes, approximately 82% of total end-customer sales, were delivered to the Yamal-Nenets and Khanty Mansiysk Autonomous Regions, the Chelyabinsk, Perm and Moscow districts, the republics of Bashkortostan and Tatarstan as well as the city of Moscow.

Liquid hydrocarbons are transported by rail from the Purovsky Plant to both domestic and export markets. Stable gas condensate volumes bound for export markets are transported to the all season Port of Vitino located in Murmansk Region on the White Sea. In 2009, NOVATEK geographically expanded its stable gas condensate deliveries to the Asian Pacific region to customers in South Korea, Singapore and China. The Company also significantly increased its sales volumes of LPG to export markets thereby taking advantage of the Russian government‘s decision to temporarily cancel export duties on LPG export sales.

During 2009, NOVATEK has continued the expansion of its network of domestic retail refueling stations which provide dedicated marketing channels for LPG produced at the Purovsky Plant.

At the end of 2009, the Company owned five multi-fuel auto refueling stations, six conventional gas stations, one wholesale commercial refueling station and rented one wholesale commercial refueling station.

Despite the decline in 2009 domestic industrial output and the subsequent decrease in overall Russian demand for natural gas, NOVATEK was able to maintain natural gas sales volumes in-line with those of 2008. The Company increased sales volumes of liquid hydrocarbons by approximately 19% by taking advantage of the increased production capacity for gas and gas condensate at the Yurkharovskoye field as a result of the launch of the second stage of the field‘s second phase of development. The share of NOVATEK's liquid hydrocarbons sold to the export market increased to 83% of total liquid hydrocarbons sold in 2009 compared to 68% in 2008.

In line with the Company's stated strategy to expand its resource base through strategic acquisitions of greenfield projects NOVATEK acquired 51% of the shares in Yamal LNG in June 2009. Yamal LNG holds the license for exploration and production at the South Tambeyskoye field which, according to the latest reserve appraisal report as at 31 December 2009, holds 194 bcm of net proved (SEC) natural gas reserves or approximately 20% of the Company's total 2009 net proved natural gas reserves.

The Company has continued its strategy of forming joint ventures with strategic partners to expand geographically and to facilitate knowledge and technology transfers. Since 2007, NOVATEK has held a 50% participation interest in the concession for exploration and development of the El-Arish off-shore block in the Arab Republic of Egypt. In December 2009, NOVATEK and TOTAL Termokarstovoye BV (an affiliated company of TOTAL) signed a sales and purchase agreement and shareholder agreement which provides for the acquisition of up to 49% of the shares of ZAO Terneftegas (100% subsidiary of NOVATEK) by TOTAL Termokarstovoye BV by the end of 2010. ZAO Terneftegas holds the license for geological exploration and production of hydrocarbons at the Termokarstovoye field.

NOVATEK'S STRATEGIC GOALS IN 2009

- Continue prospecting and exploration works to identify new fields and deposits; - Continue the development of new and current fields; - Concentrate on expanding the production capacity of gas condensate fields; - Continue expanding processing capaсity; - Diversify and increase sales of natural gas, gas condensate, LPG's and crude oil; - Increase the environmental and industrial safety levels at NOVATEK's operating facilities; and - Implement environmental and social support programs.


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REPORT OF THE BOARD OF DIRECTORS ON THE RESULTS OF THE COMPANY’S DEVELOPMENT IN LINE WITH ITS STRATEGIC OBJECTIVES

EXPLORATION AND PRODUCTION

Exploration

NOVATEK has been able to expand its resource base through geological exploration works at fields and license areas in close proximity to existing transportation and production infrastructure. By utilizing state-of-the-art exploration and development technologies the Company continues to efficiently develop its reserve base and increase the ultimate level of hydrocarbon recovery at its fields.

In 2009, NOVATEK achieved significant growth in its reserves due to a combination of exploration and development work carried out at existing fields and license areas and the strategic acquisition of the South Tambeyskoye field; a greenfield development project located on the northeastern portion of the Yamal Peninsula. The acquisition of 51% of the shares in Yamal LNG, which holds the license for exploration and development of the South Tambeyskoye field, increased NOVATEK‘s net total proved natural gas reserves (SEC) by 194 bcm, or 70% of the total increase in 2009 net proved natural gas reserves.

At 31 December 2009, NOVATEK‘s net proved natural gas and liquid hydrocarbon reserves (SEC) amounted to 967 bcm and 63 mmt, respectively, while total net proved reserves (natural gas and liquid hydrocarbons) on a boe basis increased by 38% or by 1,890 mm boe, to 6,853 mm boe. In 2009, NOVATEK‘s reserve replacement rate, based on reserves appraised under SEC methodology was 898%.

Proved Reserves as at 31 December 2009 and 20084

Natural gas, bcm 2009 2008

SEC 967 690

PRMS5 1,080 734

Liquid hydrocarbons, mmt

SEC 63 55

PRMS 79 67

Total proved reserves, mm boe6

SEC 6,853 4,963

PRMS 7,711 5,354

4 Proved and proved plus probable reserves are indicated inclusive of NOVATEK‘s and its subsidiaries share

5 The appraisal reports were conducted under the PRMS reserves reporting methodology, which was approved in March 2007 by the

Society of Petroleum Engineers, the World Petroleum Council, the American Association of Petroleum Geologist, and the Society of Petroleum Evaluation Engineers. The Company‘s 2009 reserves are based on appraisal reports for the East-Tarkosalinskoye, Khancheyskoye, North Khancheyskoye, Yurkharovskoye, West Yurkharovskoye, South Tambeyskoye, Yarudeyskoye and Termokarstovoye fields, as well as the Olimpiyskiy and Zapadno-Urengoyskiy license areas. 6 Conversion ratio: 1000 m

3 = 6.54 boe. To convert crude oil and gas condensate reserves from tons to barrels we used various

coefficients depending on the liquid density at each field according to D&M‘s appraisal of our reserves as of 31 December 2005 and 2009.


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Proved plus probable reserves as at 31 December 2009 and 2008

Natural gas, bcm 2009 2008

PRMS 1,462 1,017

Liquid hydrocarbons, mmt

PRMS 124 104

Total proved plus probable reserves, mm boe

PRMS 10,589 7,498

NOVATEK‘s five year (2005 – 2009) average reserve replacement rate amounted to 315% and the Company‘s 2009 reserve to production ratio was 29 years for all hydrocarbons and 30 years for natural gas.

As part of its field development process, NOVATEK relies on the experience and expertise of the specialists in its geology department. The Company ‗s geologists use a systematic approach to exploration and development of new fields, beginning with the collection and interpretation of seismic data to the creation of dynamic field models and the placement of exploration and production wells.

In 2009, NOVATEK‘s exploration activities included 4.2 thousand meters of exploration drilling and 310 square kilometers of 3D seismic. The exploration activities at our fields targeted gas condensate and crude oil bearing Lower Cretaceous and Jurassic deposits at depths of between 2,300 to 4,300 meters.

As a result of exploration work carried out in 2009, NOVATEK discovered the Severo Yubileynoye gas condensate and oil field and nine new deposits, including one gas condensate and oil deposit at the Severo Yubileynoe field, one gas condensate and oil deposit at the Yarudeyskoe field and seven gas condensate deposits at existing fields.

Production

In 2009, NOVATEK‘s gross production from all fields amounted to 240 mm boe of which, approximately 89% was natural gas.

Hydrocarbon production7

Units 2009 2008 Change, %

Natural gas bcm 32.78 30.88 6.2%

mm boe 214.3 202.0

Liquid hydrocarbons mmt 3.049 2.586 17.9%

mm boe 25.5 21.4

Total production mm boe 239.8 223.4 7.4%

In 2009, total gross production amounted to 32.8 bcm of natural gas and 3,049 mt of liquid hydrocarbons. Natural gas production increased by 1.9 bcm, or 6.2%, while liquids production increased by 463 mt, or 17.9%, compared to the respective production volumes in 2008.The

7 Total gross production by OAO NOVATEK and its subsidiaries


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Company‘s total gas preparation capacity at the end of 2009 amounted to 120 mmcm per day or over 44 bcm per annum.

The launch of the first stage of the second phase of development at the Yurkharovskoye field in the fourth quarter of 2008 has enabled the Company to optimize the production from its fields. In order to maximize its 2009 revenue streams of natural gas and gas condensate NOVATEK decreased the production of dry gas from the cenomanian layers of the East-Tarkosalinskoye and Khancheyskoye fields and increased the production of natural gas from the gas condensate layers of the Yurkharovskoye field.

Core Fields

NOVATEK‘s fields and license areas are located in the YNAO of the Russian Federation which, is the world‘s largest natural gas producing region and accounts for approximately 18% of global natural gas production and approximately 87% of Russian natural gas production. The concentration of the Company‘s producing and prospective fields, license areas and processing facilities in this region combined with the regions overall oil and gas infrastructure have allowed NOVATEK to minimize the risks associated with developing its assets and expanding its resource base. The Company has many years of experience working in this region, which has enabled it to effectively capitalize on the growth opportunities resident there and increase shareholder value.

In 2009, the Company‘s three core fields, Yurkharovskoye, East-Tarkosalinskoye and Khancheyskoye accounted for approximately 99% of NOVATEK‘s total gross production and 75% of its proved reserves. The three fields are located in close proximity to the unified gas supply system (UGSS) the largest gas transportation system in the world which is owned and operated by OAO Gazprom. The resources of the Company‘s three core fields form the foundation for NOVATEK‘s current production and mid-term production growth.

The Yurkharovskoye field. The field was discovered in 1970 and is located within the polar circle on the southeast shore of the Tazov Peninsula. The Company‘s wholly-owned subsidiary OOO NOVATEK-YURKHAROVNEFTEGAS holds the license for exploration and production of hydrocarbons at the field which is valid until 2034. The field has been producing natural gas and gas condensate since 2003 and is connected to the UGSS via pipeline which enables the transport of up to 34 bcm per annum. In September 2008, an 87 kilometer natural gas pipeline with diameter of 1,420 mm was launched which, together with the existing pipeline with diameter of 1,220 mm, makes up the 103 kilometers from the field to the UGSS.

In 2009, the Yurkharovksoye field became the largest of the Company‘s exploration and production assets in terms of reserves and production and is the driver for NOVATEK‗s mid-term production growth. The field has 22 productive hydrocarbon layers including one dry gas layer, 18 gas condensate layers and three gas condensate and oil layers which range in depth from 1,000 meters to 2,950 meters.

In October 2009, NOVATEK launched the second stage of the second phase of the Yurkharovskoye field development, which added additional production capacity of approximately seven bcm of natural gas and 600 thousand tons of unstable gas condensate. As a result, the field‘s annual natural gas and gas condensate production capacity at the end of 2009 amounted to 23 bcm of natural gas and two million tons of gas condensate.

NOVATEK employs state-of-the-art equipment and technologies in order to maintain its industry leading cost advantage and to increase the productivity of its fields. In 2009, the Company modernized the field‘s gas condensate separator unit, which was part of the first phase of the field‘s development and increased unstable gas condensate production capacity by approximately

5 mt per annum. NOVATEK plans to continue with the modernization of the remaining six


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technological lines which should increase gas condensate production capacity by 36 mt per annum.

Total marketable (sales) production in 2009:

Natural gas: 17.7 bcm Liquid hydrocarbons: 1,484 mt

Proved reserves (SEC) at 31 December 2009:

Natural gas: 443.6 bcm Liquid hydrocarbons: 22.4 mmt

Russian reserve classification (ABC1+C2) at 31 December 2009:


East-Tarkosalinskoye Field. The East-Tarkosalinskoye field was discovered in 1971 and is located 40 kilometers to the east of the city of Tarko-Sale. The field‘s license for exploration and production of hydrocarbons is held by NOVATEK‘s wholly-owned subsidiary OOO NOVATEK-TARKOSALENEFTEGAS and is valid until 2043. The field began producing crude oil in 1994 and natural gas and gas condensate in 1998 and 2001 respectively. Currently, the East-Tarkosalinskoye field has reached its peak production capacity for natural gas and gas condensate production. The Company‘s field development plan will focus on maintaining production levels of natural gas and gas condensate and developing new crude oil layers. The field is connected to the UGSS by a 22.4 kilometer natural gas pipeline with diameter of 1,020 mm which enables the transport of up to 20 bcm of natural gas per annum.

The East-Tarkosalinskoye field has one dry gas layer with an area of approximately 950 square

kilometers, the top of which occurs at a depth of approximately 1,200 meters. The field also has

13 gas condensate layers which occur at depths of 2,850 meters to 3,000 meters, the largest of which has an area of approximately 125 square kilometers. The field‘s 11 crude oil layers occur at depths of between 3,000 meters to 3,200 meters over an area of approximately 1,100 square kilometers.

In December 2009, the Company launched the second stage of the compressor booster station at the East-Tarkosalinskoye‘s cenomanian gas field with capacity of 48 MW that allows NOVATEK to maintain dry gas production levels at the field in spite of a decrease in reservoir pressure.


Natural gas: 11,5 bcm Liquid hydrocarbons: 896 mt






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Khancheyskoye Field. The Khancheyskoye field was discovered in 1990 and is located 65 kilometers to the east of the East-Tarkosalinskoye field. The license for exploration and production of hydrocarbons at the field is valid through 2019 and is held by OOO NOVATEK-TARKOSALENEFTEGAS. The field began producing natural gas and gas condensate in 2001 and crude oil in 2007. The field is connected to the transportation infrastructure of the East-Tarkosalinskoye field by way of a 70 kilometer natural gas pipeline with diameter of 720 mm which enables the field to transport up to 7.5 bcm per annum.

The field has 32 hydrocarbon layers including two dry gas layers, 23 gas condensate layers, five crude oil layers and 2 gas condensate and crude oil layers. The layers occur at depths of approximately 1,100 meters to 3,200 meters and the overall area of the layers is approximately 113 square kilometers.

In November 2009, the Company‘s gas condensate de-ethanization units which service the East-Tarkosalinskoye and Khancheyskoye fields were upgraded resulting in an increase in capacity of approximately 1.8 million tons per annum, or by 10%, and an associated increase in the quality of de-ethanized condensate produced. The changes to the units have also pushed back their scheduled maintenance period by one to two years.


Natural gas: 3.0 bcm Liquid hydrocarbons: 618 mt


Natural gas: 41.2 bcm Liquid hydrocarbons: 5.1 mm tons



Prospective fields and license areas

NOVATEK continued exploration work at its other fields and license areas located within the territory of the YNAO. Currently, the most perspective of these assets are the South Tambeyskoye and Termokarstovoye fields, the Olimipiyskiy license area and the El-Arish off-shore block in the Arab Republic of Egypt. These assets have the potential to increase production and reserves and diversify marketing channels in the mid- to long-term.

South Tambeyskoye field. The South Tambeyskoye field was discovered in 1974 and is located in the northeastern portion of the Yamal Peninsula. The license for exploration and production at the field is held by NOVATEK‘s subsidiary Yamal LNG and is valid until 2045. The field has been extensively explored with a total of 55 exploration wells, 1,060 square kilometers of 3D seismic data as well as 2D seismic data. The field currently consists of 72 commercially productive layers within 33 horizons including five shallow dry gas horizons and 28 deeper gas condensate horizons. The depth of the horizons varies from between 900 to 2,850 meters. Approximately 80% of the reserves are ready for commercial development. In 2009, the Company carried out additional 2D seismic work which, it plans to continue in 2010 in order to complete the exploration of the field and develop a comprehensive geological field development model.


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Net proved reserves (SEC) at 31 December 2009:


Net Russian reserve classification (ABC1+C2) at 31 December 2009:


Termokarstovoye field. The Termokarstovoye field was discovered in 1988 and is located 30 kilometers from the town of Krasnoselkup in the YNAO. The license for exploration and production of gas and gas condensate at the field is held by NOVATEK‘s wholly-owned subsidiary ZAO TERNEFTEGAS. The field currently consists of five gas condensate layers with depths of between 2,550 and 3,000 meters, the largest of which has an area of approximately 80 square kilometers. In June 2009, NOVATEK and TOTAL signed a heads of agreement establishing the framework for joint cooperation in exploring and developing the Termokarstovoye gas condensate field. In accordance with the subsequent sales and purchase and shareholder agreements signed in December 2009 between NOVATEK and TOTAL Termokarstovoye B.V. (an affiliated company of TOTAL) the Company‘s share in ZAO Terneftegas will be reduced to 51% by the end of 2010.





Olimpiyskiy license area. The license for exploration and production of hydrocarbons at the Olimpiyskiy license area is valid through 2026 and is held by OOO NOVATEK-TARKOSALENEFTEGAS. The Sterkhovoye field and part of the Urengoyskoye field are located within the Olimpiyskiy license area and are included in our annual independent reserve appraisals. The portion of the Urengoyskoye field located within the Olimpiyskiy license area has six gas condensate layers occurring at depths of between 3,600 meters to 3,900 meters while the Sterkhovoye field consists of two gas condensate layers which occur at depths of between 3,400 and 3,600 meters. We are currently interpreting seismic data from the northern portion of the license area and plan to increase development drilling over the next two years.

The Company has constructed and launched a complex gas preparation unit at the Sterkhovoye field with capacity of 0.7 bcm per annum and commercial production at the field commenced in April 2009. The field is connected to the UGSS by way of a 14 kilometer natural gas pipeline with diameter of 530 mm and annual transportation capacity of 3.1 bcm per annum. De-ethanized gas condensate from the Sterkhovoye field is sent to the Purovsky Plant by way of 12 kilometer pipeline with diameter of 219 mm.


Natural gas: 63.0 mmcm Liquid hydrocarbons: 32.4 mt

8 On the base of 100% NOVATEK‘s ownership


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El-Arish off-shore block. NOVATEK owns a 50% participation interest in the concession agreement for exploration and production of hydrocarbons at the El-Arish off-shore block. In 2009, the Company continued the interpretation and processing of seismic data from the off-shore block which is located in the Arab Republic of Egypt‘s territorial waters in the Mediterranean Sea.

Other fields and license areas

At the end of the 2009, NOVATEK held licenses for prospecting, exploration and production at the Yumantilskiy and Zapadno-Urengoyskiy license areas as well as three licenses for prospecting at the Severo Termokarstoviy, Severo Yubileniy and New Yurkharovskiy license areas. In 2009, NOVATEK received confirmation from the Natural Resources Ministry of the Russian Federation of the successful conversion of four exploration licenses to production licenses for the North Khancheyskoye, West Yurkharovskoye, Yarudeyskoye and Raduzhnoye fields which were initially discovered in the period from 2007 to 2008.

The North Khancheyskoye, West Yurkharovskoye and Yarudeyskoye fields as well as the Zapadno-Urengoyskiy license area were included in our 2009 independent reserve appraisal and total aggregated proved (SEC) reserves totaled 27.4 mm boe.

In 2009 the Severo Yubileyniy field was discovered and the resources attributable to this discovery have been confirmed by the Russian State Committee for Reserves. Currently, the Company is in the process of filing for a change in the license terms from prospecting to production.

Total reserves for six fields and license areas (Yarudyskoye, Raduzhnoye, North Khancheyskoye and West Yurkharovskoye as well as the Yumantilskiy and Zapadno-Urengoyskiy license areas) under the Russian reserve classification ABC1 + C2 totaled 37.3 bcm of natural gas and 27.2 mmt of liquid hydrocarbons.

NOVATEK also has a 25% participation interest in associate companies that hold exploration licenses to the Sredniy Chaselskiy, Severo Russkiy, Zapadno-Tazovskiy, Anomalniy and Severo-Yamsoveyskiy license areas. NOVATEK‘s wholly owned subsidiaries, NOVATEK-TARKOSALENEFTEGAS and NOVATEK-YURKHAROVNEFTEGAS, are acting as operators for exploration works at the license areas. In 2008, NOVATEK discovered the Zapadno-Chaselskoye field within the Sredniy Chaselskiy license area and in 2009 the Company drilled an exploratory well and carried out geophysical work at the Severo Russkiy license area.

PROCESSING

NOVATEK‘s primary processing asset is the Purovsky Gas Condensate Stabilization Plant (Purovksy Plant) which is located in the YNAO and in close proximity to the East-Tarkosalinskoye field.

In line with its strategy to further develop its capacity for hydrocarbon processing and increase sales volumes of higher value added products NOVATEK launched the first phase of the Purovsky Plant in June 2005 providing the Company with two million tons per annum of unstable gas


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condensate processing capacity.

In November 2008, the plant‘s processing capacity was expanded to five million tons per annum allowing it to produce approximately 3.8 million tons of stable gas condensate and 1.3 million tons of liquefied petroleum gas (LPG) per annum. The expansion also included increasing the plant‘s storage capacity for stable gas condensate to 90 thousand cubic meters.

In 2009, the Purovsky Plant processed 2.8 million tons of de-ethanized unstable gas condensate, or 28% more than in 2008, resulting in the commercial production of 2.1 million tons of stable gas condensate and 760 thousand tons of LPG as well as 6.3 thousand tons of methanol produced during the LPG scrubbing process. The Purovsky Plant operated at approximately 60% of full capacity during 2009 providing the Company with the ability to continue developing its geologically complex fields.

Improvements to the Purovsky Plant in 2009 included the launch of an LPG scrubber with capacity of 1.3 million tons per annum, which is the first of its kind to be used in Russia, and a doubling of the plant‘s LPG storage capacity to 15,600 cubic meters. The LPG scrubber strips out water and methanol during LPG processing which results in a cleaner end product that meets the highest European quality standards. The methanol which is stripped out during the scrubbing process is reused during the production process at NOVATEK‘s fields resulting in a decrease of methanol purchase and transportation costs as well as minimizing environmental risks associated with transportation.

The launch of the Purovsky Plant has allowed the Company to optimize its gas condensate marketing channels and establish a platform for realizing its strategy to move further down the hydrocarbon processing chain. In 2009, NOVATEK continued site preparation work for the Ust-Luga transshipment and fractionation facility for processing stable gas condensate produced from the Purovsky Plant. The facility is located on the Baltic Sea and has a total planned capacity of six million tons per annum. The fractionation unit‘s production slate will be comprised of kerosene, diesel fuel, naphtha and other light distillates.

MARKETING

In 2009, the Company demonstrated significant flexibility in optimizing its sales channels for natural gas and liquid hydrocarbons. During 2009, NOVATEK supplied natural gas to 35 regions of the Russian Federation, expanded deliveries of stable gas condensate to customers in the Asian-Pacific region and increased export sales of LPG to take advantage of the higher margins in this market due to the cessation of export duties. The Company also geographically expanded its LPG sales to include markets in Turkey and Slovenia.

Natural gas sales

Total Russian natural gas production decreased by 12.3% in 2009 however Russia maintained its position as the second largest consumer of natural gas in the world using approximately 394 bcm in 20099. The largest Russian consumer of natural gas is the power generation sector where over 50% of its primary energy supply comes from natural gas. In 2009, NOVATEK‘s share in natural gas deliveries to the domestic market through the UGSS increased to 9.7% from 9.4% in 2008.

In 2009, NOVATEK‘s natural gas sales volumes amounted to 32.9 bcm, a decrease of 1% compared to 2008 sales volumes of 33.3 bcm, of which 22.4 bcm was sold to the end-customer segment and 10.5 bcm was sold ex-field to the wholesale trader segment. The decrease in sales volumes was primarily due to an increase in natural gas inventory balances in underground storage facilities and a decrease in purchases from third parties. The decrease in purchases was

9 According to the Central Dispatch Administration of the Fuel and Energy Complex


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offset by a 6.2% increase in the Company‘s own gross production volumes in 2009 to 32.8 bcm compared to 30.9 bcm in 2008.

In April 2009, the Company renegotiated the terms of its natural gas supply agreement with OOO Mezhregiongaz, on a temporary basis, from ex-field to delivered to the regions where the gas is sold. As a result sales to end-customers increased in 2009 to 68% of total natural gas sales from 47% in 2008.

The following regions, districts, republics and cities made up the majority of our natural gas deliveries to end-customers in 2009; the Yamal-Nenets and Khanty Mansiysk Autonomous Regions, the Chelyabinsk, Perm and Moscow districts, the republics of Bashkortostan and Tatarstan as well as the city of Moscow. The primary consumers were the power generation and metallurgical sectors as well as other industrial users and regional gas distributors.

In order to maintain production levels during periods of seasonality in demand NOVATEK has entered into an agreement with OAO Gazprom for the use of the latter‘s underground storage facilities on a space available basis. Historically, natural gas is injected into underground storage facilities during warmer periods when demand is lower and later withdrawn during periods of colder weather and increased demand.

In 2009, NOVATEK withdrew 225 mmcm of natural gas from underground storage facilities during periods of high demand and injected 509 mmcm when space was available. At the end of 2009, the Company had 584 mmcm of natural gas in storage and available for withdraw in future periods.

Liquid Hydrocarbon Sales

The Company‘s primary liquid hydrocarbon sales volumes are comprised of stable gas condensate and liquefied petroleum gases (LPG). The stable gas condensate is primarily used in the petrochemical and oil refining industries as an alternative to naphtha and ultra-light crude oil, respectively. Our LPG is sold to both the chemical processing industry, as a feedstock, and the retail and wholesale fuel markets where its high energy content, environmental safety and ease of storage and transportation make it an attractive fuel source for automobiles and residential usage.

The Company‘s liquid hydrocarbon sales results demonstrate its success in diversifying both its product slate, to higher value added products, and geographic markets. The launch of the Purovsky Plant has enabled NOVATEK to optimize its marketing strategy based on the reliable supply of high quality processed hydrocarbons to both the domestic and export markets. Based on this strategy, the Company has developed stable relationships for off-takers of stable gas condensate in Europe and the US and in 2009 expanded its marketing reach to include off-takers in the Asian-Pacific region. The Company also took advantage of the temporary cessation in export duties on LPG sales during 2009 to penetrate new markets in Turkey and Slovenia in addition to increasing sales volumes to its existing markets in Poland and the CIS countries.

Total sales volumes of liquid hydrocarbons in 2009 amounted to 3,128 mt, a 19% increase over 2008 volumes. During the period, NOVATEK sold 36 tankers of stable gas condensate of which 67% were sold to markets in the USA, 25% to countries in the Asian-Pacific Region and 8% to markets in Europe. Over 97% of our 2009 stable gas condensate sales volumes were sold to the export market.

The Company sells its LPG volumes to both the export and domestic markets. In 2009, export sales volumes, including sales to the CIS, of LPG accounted for 55% of total LPG sales volumes and were primarily sold to markets in Eastern Europe. In 2009, NOVTEK actively expanded domestic sales of LPG through its network of retail and small wholesale stations. At the end of 2009, the Company owned five multi-fuel auto refueling stations, six conventional gas stations, one wholesale commercial refueling station and rented one wholesale commercial refueling station. In 2009, sales of LPG and oil products via our own retail network amounted to 14.4 thousand tons and 1.6 thousand tons, respectively.


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At the end of 2009, the Company‘s total rolling stock for transportation of liquid hydrocarbons totaled 4,536 rail cisterns of which, 2,387 were used for LPG transport (420 of which are owned by the Company) and the remaining were used for transporting stable gas condensate and are owned by OAO Russian Railways. We increased our rolling stock in 2009 to ensure that we had sufficient capacity to accommodate the increase in the Purovsky Plant‘s throughput.

Stable gas condensate is transported by rail from the Purovsky Plant to the loading and storage facilities we have constructed, together with OAO Belomorskaya Neftebazа, at the all season Port of Vitino. In 2009, we loaded 2,060 mt at the port or 40% more than in 2008.

INDUSTRIAL

NOVATEK-Polimer is the core subsidiary in our industrial manufacturing business segment and one of the largest Russian producers of anti-corrosive insulating materials used on underground pipelines in the oil and gas industry. It produces more than a dozen types of polyethylene based insulating tape, including polymer tape and wrap, heat–shrinkable tape and sleeves to protect welded pipe joints.

In June 2005, we commissioned a modern BOPP (Biaxially Oriented Polypropylene) Film plant for the production of film wrap, which is widely used as a packaging material in the food, tobacco, perfume, pharmaceutical and textile industries.

At present, sales of cold applied tape are decreasing while the demand for heat–shrinkable tape is continuing to grow in line with the overall trend on the insulation materials market. In 2009, insulation materials production volumes decreased by 26% due to the changes in timing of capital projects for the domestic oil and gas industry. The main consumers of our insulation materials are Russian oil and gas producing companies while our polymer products are exported to Uzbekistan and Kazakhstan.

The main consumers of our BOPP film wrap are large print shops in Russia, Belorussia and Kazakhstan. In 2009, the production of BOPP film wrap decreased significantly, by approximately 13% compared to 2008. During the year, NOVATEK increased its marketing activities to attract new consumers and wholesale traders and started production of three new film types.

Plastic pipes used for gas, water supply and plumbing are sold mainly on the domestic market. In 2009 our main consumers of plastic pipes were in the Samara and Ulyanov regions, the republic of Bashkortostan and Kazakhstan. The Company significantly increased its production of large diameter pipes in 2009 compared to the previous year.

Although polymer production is not our core business, we continue to expand our production capacity and improve the range and quality of our products. We see our diversification into polymer production as complementary and value-additive to our overall strategy in the industrial manufacturing sector.

http://www.uzbekistan.org/


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ENVIRONMENTAL AND SOCIAL RESPONSIBILITY

NOVATEK adheres to the principles of effective and responsible business conduct and considers the welfare of its employees and their families, environmental and industrial safety, the creation of a stable and beneficial social environment as well as contributing to Russia‘s economic development as a priorities and a Company responsibility.

Personnel and Social Programs.

In its current activities and future development plans, NOVATEK considers its employees as the Company‘s most important resource. The human resource management system at NOVATEK is based on the principles of fairness, respect, equal opportunity and open dialogue between management and personnel. NOVATEK also provides continuous, comprehensive training and development for the Company‘s employees at all levels.

As of the end of 2009, NOVATEK had 4,417 employees, 46% of whom work in exploration and production and 42% in plant operations, processing, transportation and sales.

Personnel Training and Development.

NOVATEK has created a multilevel system of training and professional development within which target programs are implemented for on-the-job development of the Company‘s employees. Training takes place at both its own training centers as well as off-site centers in specialized Russian educational institutions, including; Skolkovo Moscow School of Management, Gubkin Russian State University of Oil and Gas, PricewaterhouseCoopers Russia and institutions located abroad. The training and professional development programs are equally accessible to all Company employees and in accordance with their professional specialization.

In 2009, NOVATEK continued its efforts to increase employee training, improve working conditions and ensure a safe environment at its production facilities. More than 27% of employees have completed certified employee and industrial safety courses and 21% of engineers, technicians, specialists and line workers have upgraded their respective qualifications.

NOVATEK continued the implementation of the ―Leadership Horizons‖ program for developing future managers. In 2009, 110 employees underwent training in two modules: ―Task Management‖ and ―Basics of Finance and Management Decisions‖

The IV Interregional Research-to-Practice Conference for NOVATEK‘s young specialists was held in Moscow in September 2009 28 of the Company‘s employees took part in the conference. Based on the results of the competition, six winners were awarded a trip to an oil and gas training center in Norway and the second- and third-place winners were given cash awards. The top projects advanced to the Fuel and Energy Complex (FEC)-2009 Competition of Youth Projects sponsored by the Ministry of Energy of the Russian Federation.

In 2009, three of NOVATEK‘s young specialists who were winners of the FEC-2008 Competition of Youth Projects received commendations from the Ministry of Energy of the Russian Federation

Social Programs.

The central feature of NOVATEK‘s social policy is a systematic approach to solving social problems. According to the Core Concept of the Company‘s social policy which was adopted in 2006, the social benefits package for employees includes the following programs:

– Voluntary medical insurance for employees

– Therapeutic resort and spa treatment for employees and members of their families

– Provision of special-purpose short-term loans

– Special-purpose compensation and social support payments


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– Provision of special-purpose interest-free loans to purchase housing

– Pension program.

Social Policy and Charity.

NOVATEK continued to implement its socio-economic development strategy in the regions where it operates throughout 2009. Special priority was given to the performance of our long-term agreements with municipalities of the Yamal-Nenets Autonomous Region (YNAO) and the Samara Region for financing programs targeting education and youths, development and modernization of social infrastructure and preservation of the cultural heritage of the indigenous peoples of the North and Russia as a whole.

Cooperation with Indigenous Peoples of the Far North. During the year NOVATEK financed projects aimed at preserving the culture and way of life of the minority populations of indigenous peoples of the North and developing community infrastructure, including the construction of housing and social and cultural facilities.

Throughout the year the Company provided sponsorship assistance to the following organizations:

– The Association of Minority Populations of Indigenous Peoples of the Far North, Siberia, and Far East of the Russian Federation, including support for their participation in the UN Permanent Forum and other international conferences

– The Administration of the YNAO in order to implement the program ―Culture, Language and Traditional Way of Life of Minority Populations of Indigenous Peoples of the Far North‖ that will create the conditions to enable a shift to sustainable development based on comprehensive solutions to problems of spiritual and cultural development, strengthening traditional means of subsistence and promoting employment

– The Yamal for Descendants Association and its district branches to support an Adaptation Center for students from the native villages of the indigenous peoples of the Far North

– The Icha Territorial Agricultural Community in order to purchase fuel

In September 2009, NOVATEK signed a Social Partnership Agreement with Yamalsky District of

the YNAO in connection with the planned development of the South Tambeyskoye field.

Educational Programs. Under the ―Gifted Children‖ program initiated by NOVATEK in 1999, special classes are formed on a competitive basis from the most talented students in the cities of Tarko-Sale and Novokuybyshevsk. The program is designed for students in grades 10 and 11 who have above-average test scores.

The ―Grants‖ program is another of the Company‘s initiatives to support schoolchildren. Since 2004, students in grades 5 through 11 living in the Purovsky District of the YNAO have been awarded grants from the Company to support their intellectual and creative development and encourage a responsible attitude towards their studies.

The ―Grants‖ program for teachers of the Purovsky District was launched in 2008 to raise the prestige of the teaching profession and create favorable conditions for developing new and talented teachers.

In its efforts to create the conditions for effective use of university and college (VUZ) resources in preparing students for future professional activities, the Company has developed and successfully implemented the NOVATEK-VUZ program in cooperation with St. Petersburg State Mining Institute and the Gubkin Russian State University of Oil and Gas. The NOVATEK-VUZ program operates on the basis of mutually beneficial cooperation agreements that include support for pre-university preparation of students, subject competitions and professional orientation.


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Support of Cultural Traditions. The strengthening of partnership relations between the Company and Russia‘s leading cultural and educational institutions, creative groups and charity funds has continued during 2009.

NOVATEK remains a General Partner of the Moscow Soloists Chamber Ensemble under the direction of soloist and conductor Yuri Bashmet. The Company also continued its long-term cooperation with the Russian State Museum (St. Petersburg), the Samara Regional Art Museum, the Moscow Kremlin Museum, the Tsaritsyno Estate Museum, the Moscow House of Photography Museum and Exhibition Complex and the Moscow Museum of Modern Art. NOVATEK was involved in the support and implementation of a number of arts projects with the aforementioned museums in 2009.

In 2009, the Company organized and sponsored a number of exhibitions jointly with the Russian State Museum, Samara Regional Art Musem, the Moscow Kremlin Museum, the Moscow house of Photography and the Moscow Museum of Modern Art. NOVATEK was also a sponsor of the Russian exhibit at the Venice Biennale in Venice, Italy.

Sports Projects. NOVATEK has continued its support for semi-professional and high-level amateur sports programs. The Company is the General Partner of the Spartak Basketball Club (St. Petersburg), the NOVA Volleyball Team (Novokuybyshevsk), and the MVD Hockey Club (Moscow).

Charitable Activities. The Company is expanding its cooperation with the ―Gift of Life‖ charity fund founded by Chulpan Khamatova. Funds raised from events are directed to children‘s hospitals in order to purchase modern medical equipment.

In 2009, NOVATEK also continued its active support of the fund‘s blood donor movement whereby twice a year the Company‘s Moscow office hosts blood donor sessions to benefit children from the Russian Children‘s Clinical Hospital.

Volunteer Work. In 2008, NOVATEK created the volunteer movement ―All Together‖ in which the Company‘s employees take part in charitable events and projects. The group has been active in a number of causes including; supporting orphans and children with various illnesses as well as supporting the blood donor sessions and the organization of various other charitable programs. Since the beginning of 2008, the volunteer movement has been a regular supporter of an orphanage in the Tver region and since September 2009 it has been a regular supporter of orphaned animals.

Environmental Protection

NOVATEK is committed to conducting its operations in full compliance with Russian legislation and international standards on environmental protection. In line with this, the Company promotes the rational use of natural resources, efficient energy usage and the reduction of adverse environmental effects throughout its operations.

Under the Company‘s approved environmental policy, NOVATEK does not operate on lands and water bodies designated as nature preserves, national parks, game reserves, natural monuments, UNESCO biosphere reserves and Ramsar wetlands.

The development of the energy sector, a global increase in energy consumption and increased public interest in the problem of climate change are creating fast-growing markets for low-hydrocarbon energy sources. NOVATEK considers its participation in these markets as an important part of its business strategy and in 2009 NOVATEK became one of the first Russian companies to take part in the Carbon Disclosure Project. This project is an international investment partnership, in close cooperation with the Global Reporting Initiative, which is intended to simplify the dialogue between shareholders and corporations by providing high-quality information on operations and energy-efficient production.


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NOVATEK is actively incorporating alternative energy sources into its production operations, for example, wind generators and solar panels will generate the necessary power to run the telemechanic system of the gas condensate pipeline from the Yurkharovskoye field to the Purovsky Plant. Implementation of this project has allowed the Company to abandon construction of a power line to service the 300-km-long system.

In 2009, NOVATEK‘s producing and processing facilities successfully passed compliance and recertification audits of their environmental management systems in accordance with ISO14001:2004 standards. Based on the audit results, it was recommended to extend certification of the environmental management systems.

For the purposes of advanced training and assimilation of new methods of professional problem-solving in the area of environmental safety, 105 of the Company‘s specialists and managers underwent training and certification in environmental safety in 2009.

NOVATEK‘s achievements in environmental protection, industrial safety and energy efficiency have received high ratings from public organizations. At the end of 2009, several employees from the Company‘s environmental department were awarded the title of European Environmentalist of the Year which is conferred annually by the European Scientific Society.

Labor Protection and Industrial Safety

In 2009, the Company‘s industrial safety and labor protection activities were based on programs developed in conformance with the Company‘s own internal policy in this area and accepted standards of the Integrated Environmental Protection, Industrial Safety and Labor Protection Management System.

A compliance audit carried out at NOVATEK and its operating subsidiaries confirmed their compliance with the OHSAS 18001-2007 standards.

Pursuant to the requirements of the laws of the Russian Federation and the implementation of the Environmental Protection, Industrial Safety and Labor Protection Policy at NOVATEK and its operating subsidiaries, the following regulations, measures and programs have been developed, approved and implemented:

– Regulations on organizing and carrying out in-process control over the observance of industrial safety requirements at hazardous production facilities

– Measures to improve and enhance working conditions in the workplace taking in to consideration occupational risks

– Workplace certification measures

– Production facility monitoring programs.

The preparedness of NOVATEK and its operating subsidiaries for possible accidents and incidents and the adequate response to them as well as the observation of legislative requirements for labor protection and industrial and fire safety are verified by annual comprehensive inspections at the production facilities.

In order to reduce the risk of fires and increase fire fighting effectiveness, the emergency response services successfully carried out fire safety team exercises, including a readiness evaluation for the flood- and fire-hazardous spring and summer seasons. The exercises enable the fire safety team to develop measures to ensure the safety of employees and implement up-to-date fire prevention and fire suppression techniques.

As a result of the Company‘s efforts to bring its production and processing assets into compliance with the requirements of fire safety regulations, there were no fires or serious fire safety violations at NOVATEK in 2009.


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In 2009, all of NOVATEK‘s emergency response services‘ personnel underwent training in salvage and cleanup of local oil and petroleum product spills and the Purovsky Plant was certified to carry out emergency response and cleanup operations for onshore oil spills.


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OAO NOVATEK DEVELOPMENT PROSPECTS

The implementation of NOVATEK‘s business strategy has had a positive impact on the Company‘s core operating and financial results. Through the efficient development of its existing reserve base and continued cost control combined with adjustments to the investment cycle due to changes in the industry environment NOVATEK has positioned itself as a dynamically developing hydrocarbon producer.

NOVATEK‘s long-term strategy is aimed at profitably exploiting the hydrocarbon value chain – from exploration and production to processing and marketing.

The Company‘s success in realizing this strategy is based on its competitive advantages, industry expertise and favorable operating environment, including: - Structure of the existing and potential resource base;

- Reserve base geography – proximity of the Company‘s core fields to the available infrastructure and trunk pipelines;

- Effective geological exploration and development program using state-of-the-art and advanced techniques;

- Fully developing the hydrocarbon value chain from production to the Company‘s own condensate processing facilities;

- Construction and operation of terminals to bring products to market; and

- Consistent policy of the Russian Government towards increasing domestic wholesale gas prices to achieve export netback parity.

In view of the above, the Company‘s investment decisions will be focused on:

- Production growth;

- Reserve base growth;

- Expanding capacity of the Company‘s processing facilities; and

- Marketing higher value added products.

The successful implementation of our business strategy will enable NOVATEK to continue to achieve its strategic goals and targets.


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REPORT ON PAYMENT OF DIVIDENDS ON NOVATEK SHARES

As of the beginning of 2009, the Company‘s charter capital totaled 303,630,600 Russian roubles divided into 3,036,306,000 ordinary shares with a par value of 0.1 Russian roubles each.

Accrued and Paid Dividends on NOVATEK Shares for the period 2004 to 2009

Dividend Accrual Period

Amount of Dividends, RR per Share

Total Amount of

Dividends Accrued, RR

Total Amount of Dividends Paid, RR

2004 898.00 2,221,775,101 2,221,775,101

2005 900.00 2,732,675,400 2,732,675,400

2006* 1.65 5,009,904,900 5,009,904,867

2007 2.35 7,135,319,100 7,135,319,100

2008 2.52 7,651,491,120 7,651,183,381

First 6 months of 2009 1.00 3,036,306,000 3,022,270,396

*In July 2006 the Company executed a share split in proportion of 1:1000 The amount of paid dividends accrued for the years 2006 to 2008, and for the first six months of 2009 is reported as of 31 December 2009. Partial payment of the accrued dividends was made due to:

Provision by shareholders (nominee holders) of incorrect postal and/or banking details;

Insufficient information regarding banking or postal details of shareholders.

On 25 March 2010, the Board of Directors of OAO NOVATEK recommended to the Annual General Meeting of Shareholders to pay dividends for FY 2009 in the amount of 1.75 Russian roubles per ordinary share, exclusive of 1.0 Russian roubles of interim dividends per ordinary share for the first six months of 2009.

Thus, should the General Meeting of Shareholders approve the above recommended dividend, the dividends for 2009 will total 2.75 Russian roubles per ordinary share, thus the total amount of dividends payable for 2009 will be 8,349,841,500 Russian roubles.


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MAJOR RISK FACTORS ASSOCIATED WITH THE COMPANY’S OPERATIONS

The risks provided herein are by no means exhaustive and only reflect the Company‘s own opinions and estimates10.

Industry Risks. The major risks associated with the Russian domestic gas market are largely attributable to the extensive government regulation of prices for natural gas sold on the domestic market as well as Gazprom‘s dominant position in the industry. The Russian Federation‘s Gas Balance has a large portion of natural gas supplied to the export market. With the decrease of natural gas consumption in European markets the companies of Gazprom Group could potentially increase natural gas supplies to the domestic market.

The following factors may adversely affect the Company‘s operations, or its financial and economic performance:

Government regulation of natural gas sales prices on the domestic market for Gazprom companies;

Dependence on throughput capacity of trunk pipelines;

Potential increases in government-regulated tariffs for gas transportation;

Decline in world prices for liquid hydrocarbons;

The Company‘s dependence on OAO AK Transneft and OAO Russian Railways for the use of liquid hydrocarbons‘ distribution networks;

Increasing competition in the Russian natural gas industry from independent natural gas producers and vertically integrated companies.

NOVATEK implements specific measures to minimize the potential impact of industry risks. In particular, the Company is actively building productive partnerships with key service suppliers, expanding its customer base, actively searching for purchasers of natural gas at agreed prices and entering into long-term contracts with them.

In addition, NOVATEK strives to diversify its marketed product line to include gas condensate, crude oil and petroleum derivatives, along with the marketing of natural gas.

Country and Regional Risks. NOVATEK is a Russian company operating in a number of Russian regions.

Country risk is defined by the fact that Russia is still an emerging economy. Despite the positive trend in the Russian economy; strong GDP growth, political stability, improving living standards, etc., the country‘s economy is still developing.

The Russian economy is commodity-based and oriented towards export of raw materials which explains the dependence of the country‘s industrial output on the demand for raw materials in world markets.

The Company produces and processes hydrocarbons on the territory of Western Siberia, a region with a challenging climate. The Company‘s vulnerability to region specific impacts is insignificant and is completely accounted for through the management of the Company‘s financial and economic operations. The Company has built an efficient system of interaction between its production and marketing units and its principal production facilities are concentrated in close proximity to the transportation networks in use.

Risks related to possible military conflicts, state of emergency announcements, or strikes, are non-existent, as the Company operates in economically and socially stable regions.

10

The complete review of the Company’s risks is available at NOVATEK site: www.novatek.ru


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Financial Risks. NOVATEK‘s financial performance is subject to financial risks associated with the fluctuation of foreign currency exchange rates, as the Company borrows funds in foreign denominated currencies and markets a portion of its products internationally.

With respect to the fluctuation of the Russian rouble in relation to other currencies, the marketing of products internationally substantially reduces this risk and balances out the adverse effects of the national currency‘s exchange value fluctuations. The inflow of export profits will secure payment of outstanding amounts due therefore, currency risks will not substantially impact the Company‘s operations.

In the case of an interest rate decline, repayment of outstanding amounts on existing loans and credits may become less attractive in comparison with current offers in the loan market. In this event, the Company will undertake to replace existing debt facilities with current market offers on better terms and conditions, including borrowing costs.

Overall interest rate growth may affect the Company‘s borrower liabilities, subject to change under specific conditions. The resulting dynamic behavior in the borrowed funds value restricts their use as a source of funds throughout ―expensive loan‖ periods.

Interest rate shifts in specific sectors of the debt market will result in the Company diversifying its funding sources and switching to market sectors with more attractive financial resources.

Commodity price Risks. NOVATEK‘s overall commercial trading strategy for natural gas, stable gas condensate, crude oil and related oil products is centrally managed. Changes in commodity prices could negatively or positively affect the Company‘s results of operations. The Company manages the exposure to commodity price risk by optimizing its core activities to achieve stable price margins. As an independent natural gas producer, the Group is not subject to the government‘s regulation of natural gas prices. Nevertheless, the Group‘s prices are strongly influenced by the prices regulated by the Federal Tariffs Service (FTS), a governmental agency. However, to effectively manage the margins achieved through its natural gas trading activities, management has established targets for volumes sold to wholesale traders and end-customers.

The Company sells all of its crude oil and related oil products and gas condensate under spot contracts. Gas condensate volumes sold to the US, European and Asian Pacific markets are based on benchmark reference prices plus a margin or discount, depending on the current market situation. Crude oil sold internationally is priced based on benchmark reference crude oil prices of Brent, plus a margin or a discount and on a transaction-by-transaction basis for volumes sold domestically. As a result, NOVATEK‘s revenues from the sales of liquid hydrocarbons are subject to commodity price volatility based on fluctuations or changes in benchmark reference prices. Presently, the Company does not use commodity derivative instruments for trading purposes to mitigate price volatility.

Credit risk. Credit risk refers to the risk exposure of the Company to a potential financial loss due to the default of counterparties on their contractual obligations. NOVATEK mitigates credit risk through the management of its cash and cash equivalents, including short-term deposits with banks, as well as credit exposure to customers, including outstanding trade receivables and committed transactions. Cash and cash equivalents are deposited only with banks that are considered by the Company at the time of deposit to have minimal risk of default. The Company‘s trade and other receivables consist of a large number of customers, spread across diverse industries and geographical areas. Most of NOVATEK‘s international liquid sales are made to customers with independent external ratings. All domestic sales of liquid hydrocarbons are made on a 100 percent prepayment basis. The Company also requires 100 percent prepayments from small customers for natural gas deliveries and partial advances from others. Although the


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Company does not require collateral in respect of trade and other receivables, it has developed standard credit payment terms and constantly monitors the status of trade receivables and the creditworthiness of the customers. Liquidity risk. Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company‘s approach to managing liquidity risk is to ensure that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company‘s reputation. In managing its liquidity risk, NOVATEK maintains adequate cash reserves and debt facilities, continuously monitors forecasted and actual cash flows and matches the maturity profiles of financial assets and liabilities. The Company prepares various financial plans (monthly, quarterly and annually) which ensures that the Company has sufficient cash on demand to meet expected operational expenses, financial obligations and investing activities for a period of 30 days or more. The Company has also entered into a number of short-term credit facilities, such as credit lines and overdraft facilities, which can be drawn down to meet short-term financing needs. To fund cash requirements of a more permanent nature, the Company will normally raise long-term debt in international and domestic markets.

Inflation Risks. The change in the consumer price index has an impact on NOVATEK‘s profitability and as a consequence, its financial standing and ability to pay on liabilities and securities.

However, this factor is not of great significance due to the fact, that the tariff policy of the Russian Federation contemplates a gradual increase in the domestic gas prices commensurate with the growth in inflation rates.

NOVATEK may not be able to predict the inflation level, since apart from the consumer price level it is necessary to take into account the change in real purchasing power of the Russian rouble, the pricing conditions in liquid hydrocarbon export markets and the government policy in relation to tariffs for natural gas.

NOVATEK monitors the consumer price index and takes this factor into account when determining its selling prices.

Risks related to the impact of the global financial crisis

The main risks relating to the impact of the global financial crisis are rouble devaluation and a decrease in demand for natural gas as a result of a decline in Russian industrial output.

A staged increase of the regulated domestic price for natural gas planned by the Russian government, combined with foreign currency denominated revenue received from export sales of liquids and cost reduction due to the decrease of domestic prices for materials and services, mitigate the consequences of potential rouble devaluation for NOVATEK.

The search for new customers along with provision of more flexible terms and conditions to existing contracts and stable demand from our main end-customer segment, public utilities, enable the Company to compensate for the slump in the domestic demand for natural gas from industrial consumers. To increase the competitiveness of its supplies the Company is developing a pricing strategy allowing it to switch to buyers who are less dependent on the external economic factors.

Legal Risks. The Company‘s operations are susceptible to risks resulting from changes in the statutory regulation of the following spheres:

Currency laws (in areas concerning borrowings and export/import operations);

Tax laws (in areas regulating taxation systems and rates applicable to companies in general, and to companies marketing natural gas and liquid hydrocarbons, specifically);


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Customs laws (in areas concerning the export of liquid hydrocarbons and their derivatives); and

Licensing requirements for natural resource extraction.

Operational Risks. The Company is not involved in any significant litigation and the risks pertaining to such litigation are minor.

The Company and its affiliates hold long-term field development licenses.

Certain risks exist for the Company‘s operations associated with field exploration and development. Exploration drilling incorporates multiple risks, including the risk of non-availability of commercial reserves. Information on the Company‘s fields‘ reserves is provided as estimated, subject to certain factors and assumptions. Actual production volumes across fields, along with the cost-effectiveness of reserve exploitation may deviate from estimated figures.

The Company‘s operations require substantial investment into field exploration and development, followed by the production, transportation, and processing of natural gas, oil, and gas condensate. Insufficient funding for these and other expenditures may affect the Company‘s financial standing and performance results.


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MAJOR TRANSACTIONS AND INTERESTED PARTY TRANSACTIONS

NOVATEK did not make any major transactions in 2009.

In 2009, the Company entered into two interested party transactions where the total amount of the transaction exceeded 2% of the Company‘s assets as of the last reporting date prior to the transaction:

1. Supplementary agreements No 31,32,33,34 to Gas Transport Service Contract No. 22 NPtr/k-2004 dated 06.10.2003 between OAO NOVATEK and OAO Gazprom.

The following are considered interested parties to the transaction: member of the Board of Directors of OAO NOVATEK K.G. Seleznev — who is a member of the Management Board of OAO Gazprom; member of the Board of Directors of OAO NOVATEK Burkhard Bergmann, who is a member of the Board of Directors of OAO Gazprom.

Main conditions of agreement:

− Service period: from 1 January 2009 to 31 December 2012, inclusive;

− Gas transport volume: up to 82,065,000,000 (Eighty-two billion sixty-five million) cubic meters;

− Price of services: up to 115,000,000,000 (One hundred fifteen billion) roubles, including 18% VAT. The price of services is calculated for the effective period of the Gas Transport Service Contract based on forecasted increases in gas transport tariffs for the Unified Gas Supply System.

The transaction was approved by a resolution of the Annual General Meeting of Shareholders of OAO NOVATEK (Minutes No. 106 dated 28.05.2009).

2. Credit line agreement No 237/09-р/2009-513-М between OAO NOVATEK as the Borrower and Gazprombank (OAO) as the Lender.

The following are considered interested parties to the transaction: member of the Board of Directors of OAO NOVATEK A.I. Akimov, who is also Chairman of the Management Board of Gazprombank (OAO).

Main conditions of agreement:

− Credit line limit is 10,000,000,000 (Ten billion) roubles (limit of total amount of funds available to the Borrower within the Credit Line);

− Credit repayment deadline is 02.11.2010.

The transaction was approved by a resolution of an extraordinary General Meeting of Shareholders of OAO NOVATEK (Minutes No. 107 dated 12.08.2009).


28

NOVATEK’S BOARD OF DIRECTORS

Since the Annual General Meeting of Shareholders held on 27 May 2009 NOVATEK‘s current Board of Directors is comprised of the following members:

Mr. Alexander Y. Natalenko (Chairman) Mr. Andrey I. Akimov Dr. Burkhard Bergmann Mr. Ruben K. Vardanian Mr. Mark A. Gyetvay Mr. Vladimir A. Dmitriev Mr. Leonid V. Mikhelson Mr. Kirill G. Seleznev Mr. Gennady N. Timchenko Before 27 May 2009, NOVATEK‘s Board of Directors, elected by the Annual general Meeting of Shareholders held on 23 May 2008, was comprised of the following members: Mr. Alexander Y. Natalenko (Chairman) Mr. Andrey I. Akimov Dr. Burkhard Bergmann Mr. Ruben K. Vardanian Mr. Mark A. Gyetvay Mr. Vladimir A. Dmitriev Mr. Leonid V. Mikhelson Mr. Kirill G. Seleznev Mr. Ilja A. Yuzhanov INFORMATION ON MEMBERS OF NOVATEK’S BOARD OF DIRECTORS MR. ALEXANDER Y. NATALENKO Chairman of NOVATEK’s Board of Directors and its Strategy and Investments Committee Born in 1946 Mr. Natalenko completed his studies at the Irkutsk State University in 1969 with a primary focus in Geological Engineering. Subsequently, he worked with the Yagodinskaya, Bagdarinskaya, Berelekhskaya, Anadirskaya and East-Chukotskaya geological expeditions. In 1986, Mr. Natalenko headed the North-East Industrial and Geological Association and, in 1992, he was elected president of АО Magadan Gold & Silver Company. He subsequently held various executive positions in Russian and foreign geological organizations. From 1996 to 2001, Mr. Natalelnko held the position of Deputy Minister of Natural Resources of the Russian Federation. Currently, Mr. Natalenko is Chairman of NOVATEK's Board of Directors. He is also Chairman of the Strategy and Investments Committee of NOVATEK‘s Board of Directors Mr. Natalenko is the recipient of the State Prize laureate of the Russian Federation and an Honored Geologist of Russia.


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MR. ANDREI I. AKIMOV Chairman of the Management Board of Gazprombank (OAO), Member of NOVATEK’s Board of Directors and its Audit Committee

Born in 1953 Mr. Akimov graduated from the Moscow Financial Institute in 1975 where he specialized in international economics. Between 1974 and 1987, Mr. Akimov held various executive positions in the Bank of Foreign Trade (Vneshtorgbank) of the USSR. From 1985 to 1987 he served as Deputy General Director of Vneshtorgbank‘s branch in Zurich (Switzerland) and between 1987 and 1990, Mr. Akimov headed Donau Bank in Vienna (Austria). From January 1991 to November 2002 he was Managing Director of financial company, IMAG GmbH Vienna (Austria) and, at the same time, served as an Advisor to the Chairman of Vneshtorgbank. Since November 2002, Mr. Akimov has been the Chairman of the Management Committee of Gazprombank (OAO). Since December 2006, he has been a member of NOVATEK‘s Board of Directors and its Audit Committee. DR. BURKHARD BERGAMNN

Member of NOVATEK’s Board of Directors, its Corporate Governance and Remuneration Committee and its Strategy and Investments Committee,

Deputy Chairman of the Executive Committee and member of the Committee on Eastern European Economic Relations,

Member of the Council Presidium of the German-Russian Chamber of Foreign Trade, Member of the Advisory Board of the Union of German Science Funds Born in 1943 Dr. Bergmann studied physics at the Freiburg and Aachen Universities from 1962 to 1968 and was awarded a Doctorate in Engineering by Aachen University of Technology in 1970. From 1968 to 1969, Dr. Bergmann worked at the German Federal Ministry for Research and Technology and

from 1969 to 1972 – at the Jülich Nuclear Research Center. In 1972, Dr. Bergmann joined

Ruhrgas AG (from 1 July 2004 – E.ON Ruhrgas AG), heading the LNG Purchasing Department. In 1978, he became Head of the Gas Purchasing Division responsible for gas purchasing, commercial aspects of gas transmission and storage, as well as gas billing. In 1980, he was elected as a member of the Management Board of E.ON Ruhrgas AG, serving from June 1996 as its Vice-Chairman and from June 2001 to February 2008 as its Chairman. From March 2003 to February 2008 he was also a member of the Management Board of E.ON AG. Dr. Bergmann is also a member of the Board of Directors of NordStream AG, OAO Gazprom, Allianz Lebensversicherungs-AG, Commerzbank AG, E.ON Energie AG, Jaeger Beteiligungsgesellschaft mbH & Co KG, Telenor. In addition, he is a member of the Advisory Boards for Dana Gas, Dubai Akkumulatorenwerke Hoppecke Carl Zoeellner& Sohn GmbH, Contilia GmbH, IVG Immobilien AG. Between 1998 and 2000, Dr. Bergmann held the positions of President of Eurogas (the European Union‘s natural gas industry regulatory body), Vice Chairman


30

of the Board of the German East-West Trade Committee and Honorary Consul of the Russian Federation for North Rhine-Westphalia. Dr. Bergmann holds the following distinctions; Commander of the Royal Norwegian Order of Merit (1997) and Order of Merit of the State of North Rhine-Westphalia (2004) as well as a Foreign Member of the Academy of Technological Sciences of the Russian Federation and winner of Director of the Year, Moscow (2007). Mr. Ruben Vardanian Chairman of the Board of Directors of Troika Dialog Group, Member of NOVATEK’s Board of Directors, Chairman of its Corporate Governance and Remuneration Committee and member of its Audit Committee Born in 1968

Ruben Vardanian is Troika Dialog's Board Chairman and CEO. An employee at Troika Dialog since the company's founding, Mr. Vardanian became head of the company in 1992. Since that time, Mr. Vardanian has solidified his role as a key figure in Russia's capital markets. Mr. Vardanian belongs to the Russian Union of Industrialists and Entrepreneurs, where he sits on the Management Committee. He also serves as Chairman of the organization's Corporate Governance Committee, as well as Arbitrator of its United Committee on Corporate Ethics. Mr. Vardanian is Board Chairman of AmeriaBank. He is a Board member at several more: AvtoVAZ, KAMAZ, AK BARS Bank, NOVATEK and Standard Bank Plc. As a member of several Boards of Directors, Mr. Vardanian has been a Chairman of the Human Resources and Compensations Committee of AvtoVAZ, Chairman of the Corporate Governance and Remuneration Committee of NOVATEK and a member of the Human Resources and Remuneration Committee of KAMAZ and AK BARS Bank and a member of the Audit Committee of NOVATEK. Between 2002 and 2004, Mr, Vardanian served as General Director of Rosgosstrakh and beginning from April 2004 through July 2005, he held a position of Chairman of the Board of Directors there. Mr. Vardanian is President of the Moscow-based Skolkovo School of Management and is represented on its Coordinating Council.He is also a member of the President‘s Council on Implementation of National Projects and Demographic Policy, a member of the RF Government‘s Competition and Entrepreneurship Council, a member of the South Korea President‘s Advisory Council on Education and a member of the Guardian Council of the Specialized Endowment Fund at the Russian Economic School. Mr. Vardanian is also a member of the Guardian Council of Armenia‘s National Competitiveness Fund, a member of International Advisory Council of FDC Business School (Brazil) and a member of the Supreme Religious Council of the Armenian Apostolic Church.The American Trade Chamber named Mr. Vardanian as ―Businessperson of the Year‖ for ―a considerable contribution to Russia‘s business development and abiding by high norms of professional ethics‖. He became a laureate of the ―Person 2003‖ national award and in 2001, Mr. Vardanian was included in the Fortune‘s prestigious list ―25 Rising Stars of the New Generation‖. The World Economic Forum (Davos) included Mr. Vardanian in a list of ―100 future world leaders‖. He was also included in the Top-22 Business Leaders of Russia for three consecutive years (rating by the ―Commersant‖ newspaper and Managers Association). Mr. Vardanian was named a winner of Ernst & Young Entrepreneur of the Year 2004 Award, Russia. He was recognized as the Best Investment Banker of 2004 in a competition named ―Stock Market Elite‖ conducted by NAUFOR (National Association of Stock Market Participants). Mr. Vardanina is a laureate of the prestigious ―ARISTOS‖ business award by the Association of Russia‘s Managers and Publishing House Commersant in the nomination ―For special merits in the Russian business development 2006‖. In 2008, he received the ―Finance‖ magazine‘s award ―For reputation in the financial market‖. Mr. Vardanian, graduated with honors from Moscow State University with a degree in Economics and subsequently received post-graduate training at BANCA CRT (1992, Italy) and at Merrill Lynch (1992, New York, USA). In 2000, he also completed executive management courses at INSEAD (Fontainbleau, France) and, in 2001 and 2005, he completed the courses at Harvard Business School (USA).


31

MR. MARK A. GYETVAY Member of NOVATEK’s Board of Directors and its Strategy and Investments Committee, Deputy Director of NOVATEK’s Management Board and Director of NOVATEK Finance and Development Strategy Department (CFO) Born in 1957 Mr. Gyetvay studied at Arizona State University (Bachelor of Science, Accounting, 1981) and later at Pace University, New York (Graduate Studies in Strategic Management, 1995). After graduation, Mr. Gyetvay worked in various capacities at a number of independent oil and gas companies (Champlin Petroleum Co., Texas, Ensource Inc. and MAG Enterprises, Colorado, and Amerada Hess Corporation, New Jersey and New York) where he specialized in financial and economic analysis for both upstream and downstream segments of the petroleum industry. In 1994, Mr. Gyetvay began his work at Coopers and Lybrand, New York, as Director, Strategic Energy Advisory Services working for oil and gas companies in the USA and abroad. He subsequently moved to Moscow in 1995 with Coopers & Lybrand to lead the oil and gas practice. He was admitted as a partner of PricewaterhouseCoopers Global Energy where he assumed the role of client service engagement partner, Utilities and Mining practice, based in Russia (Moscow office). Mr. Gyetvay was an engagement partner on various energy and mining clients providing overall project management, financial and operational expertise, maintaining and supporting client service relationships as well as serving as concurring partner on transaction services to the petroleum sector. Mr. Gyetvay is a Certified Public Accountant, a member of the American Institute of Certified Public Accountants and an associate member of the Society of Petroleum Engineers. In 2003, Mr. Gyetvay became a member of NOVATEK‘s Board of Directors and is also a member of the Strategy and Investments Committee of NOVATEK‘s Board of Directors. Since 2004, he has been Chief Financial Officer of NOVATEK and in 2005 Mr. Gyetvay was elected to NOVATEK‘s Management Board and in 2008 he became Deputy Director of NOVATEK‘s Management Board. MR. VLADIMIR A. DMITRIEV Chairman of the Board of Directors, Bank for Development and Foreign Economic Activities (Vnesheconombank), Member of NOVATEK’s Board of Directors and Chairman of its Audit Committee Born in 1953

Mr. Dmitriev graduated from the Moscow Financial Institute in 1975 where he specialized in International Economic Relations. From 1975 to 1979, Mr. Dmitriev began his professional career as an engineer at the State Committee for Foreign Economic Relations. From 1979 to 1986, he worked as an attaché and Third Secretary of a department at the Ministry of Foreign Affairs. From 1986 to 1987, he was a research officer at the Institute of World Economy and International Relations of the Russian Academy of Sciences. From 1987 to 1993, Mr. Dmitriev was appointed Second Secretary and subsequently First Secretary of the USSR‘s and Russian Federation‘s (―RF‖) Embassy in Sweden.

Between 1993 and 1995, Mr. Dmitriev served as the Deputy Head of the Currency Department of the RF Finance Ministry, and later from February 1995 through August 1997 as Deputy Head of Foreign Credits and External Debt Department of the RF Finance Ministry. Between 1997 and 2002, Mr. Dmitriev was appointed as First Deputy CEO of Vnesheconombank and between 2002 and 2004 he served as Deputy Chairman of Vneshtorgbank. In May 2004, Mr. Dmitriev was appointed Chairman of Vnesheconombank and in June 2007, by a Presidential Decree of the RF,


32

Mr. Dmitriev was appointed Chairman of the State Corporation Bank for Development and Foreign Economic Activities (Vnesheconombank). Mr. Dmitriev is a Candidate of Economic Sciences and a correspondent member of the Russian Academy of Natural Sciences.

MR. LEONID V. MIKHELSON Member of NOVATEK’s Board of Directors, Chairman of NOVATEK’s Management Board Born in 1955 Mr. Mikhelson received his primary degree from the Samara Institute of Civil Engineering in 1977, where he specialized in Industrial Civil Engineering. That same year, Mr. Mikhelson began his career as foreman of a construction and assembling company in Surgut, Tyumen region, where he worked on the construction of the first section of Urengoi-Chelyabinsk gas pipeline. In 1985, Mr. Mikhelson was appointed Chief Engineer of Ryazantruboprovodstroy. In 1987, he became General Director of Kuibishevtruboprovodstroy, which in 1991, was the first company in the region to sell its shares and became private company, AO SNP NOVA. Mr. Mikhelson remained SNP NOVA‘s Managing Director from August 1987 through October 1994. Subsequently, he became a General Director of the management company Novafininvest, the holding and finance structure which included SNP NOVA as an asset, amongst others, and is the predecessor to NOVATEK. Since 2002, Mr. Mikhelson has served as a member of the Board of Directors and Chairman of the Management Board of NOVATEK. Since 2008, he has been a member of the Board of Directors of OAO Stroytransgas and a member of the Board of Directors of OOO Art Finance. Since June 2009, he has been Chairman of the Board of Directors of OAO Yamal LNG. Mr Mikhelson is the recipient of the Russian Federation‘s Order of the Badge of Honor.

MR. KIRILL G. SELEZNEV Member of the Management Board, Director of Gas and Liquid Hydrocarbons Marketing and Processing Department of OAO Gazprom, General Director of OOO Mezhregiongaz, Member of NOVATEK’s Board of Directors and its Strategy and Investments Committee Born in 1974 Mr. Seleznev, graduated from the D.F. Ustinov Baltic State Institute of Technology in 1997 and, in 2002, received a degree in Finance and Credit from the St. Petersburg State University. Upon completion of his university studies, Mr. Seleznev managed OOO Baltic Finance Company, OAO Investment and Financial Group Management Investments Development and OAO St. Petersburg Sea Port, all of which are located in St. Petersburg, Russia. In 2000, Mr. Seleznev was appointed as Chief of the Tax Group at ОАО Baltic Pipeline System, St. Petersburg, Russia. Between 2001 and 2002, Mr. Seleznev held the position of Deputy Chief of Staff of the Management Board and Assistant to Chief Executive Officer of OAO Gazprom, in Moscow, Russia. Since 2002, he has been the head of the Gas and Liquid Hydrocarbons Marketing and Processing Department of OAO Gazprom and a Member of the OAO Gazprom Management Board. Since 2003, Mr. Seleznev has been the General Director of OOO Mezhregiongaz. Mr. Seleznev is also a member of the Board of Directors and Supervisory Board of several other entities.


33

MR. GENNADY TIMCHENKO Chairman of the Board of Directors of Transoil, Member of NOVATEK’s Board of Directors and its Strategy and Investments Committee Born in 1952 In 1976, Mr. Timchenko graduated with a Masters of Science from the Mechanical University in Leningrad. He began his career at the Izjorskii Factory in Leningrad, an industrial plant which made components for the energy industry. Between 1982 and 1988, he was a Senior Engineer at the Ministry of Foreign Trade. Mr. Timchenko has more than 20 years of experience in Russian and International energy sectors and he has built interests in trading, logistics and transportation related companies. In 1988, Mr. Timchenko became a vice president of Kirishineftekhimexport, the export and trading arm of the Kirishi refinery in the Leningrad region. In 1991, he worked for Urals Finland which specialized in oil and petrochemical trading. Between 1994 and 2001, Mr. Timchenko was managing Director of IPP OY Finland and IPP AB Sweden. In 1997, he co-founded Gunvor, a leading independent oil-trading company.

SHARES IN NOVATEK’S EQUITY CAPITAL HELD BY MEMBERS OF THE COMPANY’S BOARD OF DIRECTORS11

Share in equity capital and number of ordinary shares

Share as of 31 December 2009, %

Number of ordinary shares

Natalenko A.Y. - -

Akimov A.I. - -

Bergmann B. 0.0005 15,000

Vardanian R.K. - -

Gyetvay M. - -

Dmitriev V.A. - -

Mikhelson L.V. 0.4686 14, 228, 940

Seleznev K.G. - -

Timchenko G.N. - -

11

Shares are given based according to NOVATEK shareholders register under the Russian law.


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NOVATEK’S MANAGEMENT COMMITTEE

The current Management Committee of NOVATEK was elected by a resolution of the Company‘s Board of Directors (Minutes No. 89 on 27 August 2007 and Minutes No 118 on 3 December 2009) and is comprised of the following individuals: Mr. Leonid V. Mikhelson (Chairman) Mr. Vladimir A. Baskov Mr. Viktor I. Guiria Mr. Mark A. Gyetvay Mr. Evgeny A. Kot Ms. Tatyana S. Kuznetsova Mr. Iosif L. Levinzon Mr. Mikhail V. Popov Mr. Sergei V. Protosenya Mr. Valery N. Retivov Mr. Vladimir A. Smirnov Mr. Nikolai N. Titarenko Mr. Lev V. Feodosiev Mr. Alexander M. Fridman Mr. Kirill N. Yanovskiy

INFORMATION ON MEMBERS OF NOVATEK’S MANAGEMENT COMMITTEE

LEONID VIKTOROVICH MIKHELSON

Chairman of NOVATEK’s Management Committee, Member of NOVATEK’s Board of Directors

Born in: 1955 Details on Mr. Leonid V. Mikhelson are available in the ―Information on Members of NOVATEK‘s Board of Directors‖ section. VLADIMIR ALEKSEEVICH BASKOV Born in: 1960

Deputy Chairman of NOVATEK’s Management Committee

In 1986, Mr. Baskov graduated from the Moscow Higher Police School of the USSR. In 2000, he completed courses at the Management Academy at the Russian Ministry for Internal Affairs. From 1981 to 2003, he served in various departments within the Russian Ministry for Internal Affairs. From 2001 to 2003, Mr. Baskov held managerial positions within the aforementioned Ministry's organizational structures. In August 2003, he accepted the position as Director of NOVATEK‘s Project Supervision Department, and was elected as a Member of NOVATEK‘s Management Committee. Since 2005, Mr. Baskov has been Deputy Chairman of NOVATEK‘s Management Committee.


35

VIKTOR IVANOVICH GUIRIA Born in: 1959

Deputy Chairman of NOVATEK’s Management Committee, Director of Resource Base Development and Drilling Operations

Mr. Guiria graduated from the Tyumen Industrial Institute and began his career in the oil and gas industry in 1978 as an assistant-driller for the Karskaya geological expedition. Subsequently he worked as a foreman in the Urengoy oil and gas exploration expedition and was later promoted to Head of the Regional Engineering and Technical Service. From 1994 to 2006, Mr. Guiria has been General Director of NOVATEK-TARKOSALENEFTEGAZ. Since 2006, he has been Deputy Chairman of NOVATEK‘s Management Committee and Director for Resource Base Development and Drilling Operations. Mr. Guiria is the recipient of the Honorable Oilman of Russia award and was elected as a deputy of the State Duma representing the Yamal-Nenets Autonomous Region.

MARK ANTHONY GYETVAY Born in: 1957

Deputy Chairman of NOVATEK’s Management Committee, Director of NOVATEK Finance and Development Strategy Department (CFO), member of NOVATEK’s Board of Directors and its Strategy and Investments Committee

Details on Mr. Mark A. Gyetvay are available in the Information on Members of NOVATEK‘s Board of Directors section. EVGENY A. KOT Born in: 1974

Deputy Chairman of NOVATEK’s Management Committee, Director of NOVATEK’s LNG Project Department

Mr. Kot graduated from Tyumen State Academy of Architecture and Construction and St. Petersburg State University of Engineering and Economics and is a Candidate of Economics Science. From 1997 to 2001, he worked at the Tyumen branch of GAZPROMBANK, the commercial bank for the Russian natural gas industry. From 2001 to 2002, he held the position of Deputy Head of the Financial Department at SNP Nova which subsequently became OAO Pur-Land and later merged with OAO NGK ITERA. Since 2002, Mr. Kot held various positions in NOVATEK including, Chief Specialist, Chief of Division, Deputy Director and Director of Corporate Finance Department. In August 2009, Mr. Kot was appointed to the position of Deputy Chairman of the Management Board of NOVATEK and became the Director of NOVATEK‘s LNG Project Department. Since December 2009 he has also been a Member of NOVATEK‘s Management Committee.

TATYANA SERGEEVNA KUZNETSOVA

Born in: 1960

Deputy Chairman of NOVATEK’s Management Committee, Director of NOVATEK’s Legal Department

Ms. Kuznetsova graduated from the Far East State University with a degree in Law. From 1986, she was Senior Legal Advisor for a legal bureau. In 1993, Ms. Kuznetsova became Deputy


36

General Director for Legal Issues and from 1996, Marketing Director for OAO Purneftegasgeologiya. In 1998, she was appointed Deputy General Director General of OAO Nordpipes. Since 2002, she has been Director of the Legal Department for NOVATEK. Since 2003, Ms. Kuznetsova has been а member of NOVATEK‘s Management Committee and since 2005 Deputy Chairman of NOVATEK‘s Management Committee.

IOSIF LIPATIEVICH LEVINZON

Born in: 1956


Mr. Levinzon graduated from the Tyumen Industrial Institute specializing in geology and is a Candidate of Geological and Mineralogical Science. He continued postgraduate studies in Perm State Technical University. From 1978 to 1987, he was the Head of the Urengoy oil expedition and from 1987 to 1996 he was the General Director of Purneftegasgeologiya. From 1996 to 2005, Mr. Levinzon was the Deputy Governor, 1st Deputy Governor and Vice-Governor of the Yamal-Nenets Autonomous Region. From 2005 to 2006, Mr. Levinzon he has been an Advisor to the Chairman of the Federation Council of the Federal Assembly of the Russian Federation. From 2006 to 2009, Mr. Levinzon has been an Advisor on Corporate and Strategic Development at ZAO OSTER and also at ZAO Investgeoservis Since 2009, Mr. Levinzon has held the position of Deputy Chairman of NOVATEK‘s Management Committee. Mr. Levinzon is a recipient of the Honored Geologist of Russia, the Order of the Badge of Honor and the Order of the Friendship of Peoples awards and has been awarded the Certificate of Merit from the Governor of the Yamal-Nenets Autonomous Region.

MIKHAIL VIKTOROVICH POPOV Born in: 1969

First Deputy Chairman of NOVATEK’s Management Committee

Mr. Popov studied at the Gubkin State Academy of Oil and Gas and in 1994, graduated from the Kiev Institute of National Economy. In 1992, he held the position of Deputy Chairman of AO Bankomsvyaz‘s Managing Committee (Kiev). In 2002, he was appointed Director of the Capital Construction Department and Deputy General Director of OAO Novafininvest. Since 2003, he has been Director of NOVATEK‘s Oil and Oil Products Department and in March 2003, Mr. Popov was elected to NOVATEK‘s Management Committee. In 2004, Mr. Popov became First Deputy Chairman of NOVATEK‘s Management Committee. SERGEI VALERIEVICH PROTOSENYA Born in: 1966

Deputy Chairman of NOVATEK’s Management Committee, NOVATEK Chief Accountant

In 1991, Mr. Protosenya graduated from the Kuybyshev Institute of Engineering and Construction in Moscow, with a degree in Engineering and Economics. From 1995 to1997, he was Deputy General Director General at SNP NOVA OJSC. From 1997 to 2001, he was head of the Finance Department at OAO NK Tarkosaleneftegas. In 2001, he became Director of OAO Pur-Land‘s


37

Accounting Department. Since 2002, Mr. Protosenya has been NOVATEK‘s Chief Accountant, and in 2005he was elected to NOVATEK‘s Management Committee. In 2009, Mr. Protosenya became Deputy Chairman of NOVATEK‘s Management Committee. VALERY NIKOLAEVICH RETIVOV Born in: 1962

Deputy Chairman of NOVATEK’s Management Committee, Director of NOVATEK Liquid Hydrocarbons Sales Department

Mr. Retivov received his degree from the Moscow Institute of Steel and Alloys in 1984. From 1984 to 1991, Mr. Retivov worked as an engineer at the Almaty (Khazakhstan) Hydromash experimental-mechanical plant. From 1991 to 1999, he held the position of Director at the following companies: KKPMN Suncar, TOO FIRMA VIN and AOOT Taganrog motor-transport passenger enterprise. In 1999, Mr. Retivov worked as Gas Sales Manager and Head of Foreign-Economic Activity and Transportation for the Liquid Hydrocarbons Department in the Commercial Division of ITERA. Since 2002, Mr. Retivov has been Deputy Commercial Director and Director of NOVATEK‘s Liquid Hydrocarbons Sales and Marketing Department. In 2009, Mr. Retivov was elected Deputy Chairman of NOVATEK‘s Management Committee. VLADIMIR ALBERTOVICH SMIRNOV Born in: 1967


In 1991, Mr. Smirnov graduated from the Gubkin Institute of Oil and Gas in Moscow with a degree in Offshore Oil and Gas Structures. In 1994, he was employed as a Front Office Engineer by OAO SNP NOVA. From 1995 to 2002, he was Deputy General Director and later General Director for OAO Novafininvest FIC and from 2002 to 2005 he was General Director of OOO Novafininvest. In February 2004, Mr. Smirnov was elected to NOVATEK‘s Management Committee and since 2005 he has been a Deputy Chairman of the Management Committee. NIKOLAI NIKOLAYEVICH TITARENKO Born in: 1958

Deputy Chairman of NOVATEK’s Management Committee, NOVATEK Chief Commercial Officer

In 1981, Mr. Titarenko graduated from the Azizbekov Institute of Oil and Chemistry in Azerbaijan. He was a member of the Krasnoselkupskaya Oil and Gas Prospecting Expedition in the Yamal-Nenets Autonomous Region. From 1991 to 1994, Mr. Titarenko was the First Deputy to the Administration Head of Krasnoselkup District in the Tyumen Region. From 1994 to 1998, he held various managerial positions in different companies. From 1999 to 2002, Mr. Titarenko was Deputy Director General with OAO ITERA-Rus TEC. In 2002, he became Deputy General Director with OAO Novafininvest FIC. In March 2003, Mr. Titarenko was elected as Deputy Chairman of NOVATEK‘s Management Committee and became NOVATEK‘s Chief Commercial Officer.


38

LEV VLADIMIROVICH FEODOSIEV Born in: 1979

Member of NOVATEK’s Management Committee, Director of Strategic Planning and Development

Mr. Feodosiev received his degree from the Moscow State Technical University‘s Bauman School. From 2002 to 2003, he was a Senior Specialist at the Russian Federation‘s Ministry of Energy. From 2003 to 2007, Mr. Feodosiev worked as a Leading Specialist and Deputy Director of the Department for Government Regulation of Tariffs and Infrastructure Reforms of the Russian Federation‘s Ministry of Economic Development and Trade. Mr. Feodosiev joined NOVATEK in 2007 as Director of Strategic Planning and Development and in December 2009 he was elected to the Management Committee. ALEXANDER MIKHAILOVICH FRIDMAN Born in: 1951


In 1973, Mr. Fridman graduated from the Gubkin Institute of Oil and Gas in Moscow, with a degree in Oil and Gas Fields Development and Exploitation. Since 1984, he was employed by various Gazprom companies: as Chief Engineer of Nadymgazprom, Head of the Production and Technical Department of the Industrial Association, and Chief Engineer of Mostransgaz‘s Kaluga Department for Gas Transportation and Underground Storage. From 1992 to 2003, he was First Deputy General Director of a joint venture established by OAO Gazprom and DKG-EAST (Hungary). Since 2003 Mr. Fridman was the Deputy General Director of Novafininvest. In March 2003, Mr. Fridman was elected to NOVATEK‘s Management Committee and since 2004 he has been Deputy Chairman of the Management Committee. In June 2009, Mr. Fridman was elected as a Member of the Management Committee of OAO Yamal LNG. KIRILL NIKOLAYEVICH YANOVSKIY Born in: 1967

Member of NOVATEK’s Management Committee, Deputy Director for NOVATEK Finance and Development Strategy Department

In 1991, Mr. Yanovskiy graduated from the Gubkin Institute of Oil and Gas in Moscow. From 1992, he headed a department of the Yugorsky Joint-Stock Bank. From 1995, he headed the Securities Department at the Neftek Joint-Stock Commercial Bank. Since 2002, he has been Director of NOVATEK‘s Financial Planning, Analysis and Control Department. In May 2004, Mr. Yanovskiy was elected to NOVATEK‘s Management Committee and in 2007 he was appointed Deputy Director for Finance and Development Strategy Department.


39

SHARES IN NOVATEK’S EQUITY CAPITAL HELD BY MEMBERS OF THE COMPANY’S MANAGEMENT COMMITTEE12

Share in equity capital and number of ordinary shares

Share as of 31 December 2009, % Number of ordinary shares

Mikhelson L.V. *information is given in the section on the Board of Directors

Baskov V.A. 0.0288 874,408

Guiria V.I. 0.1296 3,934,834

Gyetvay M. - -

Kot E.A. - -

Kuznetsova T.S. 0.1944 5,903,035

Levinzon I.L. - -

Popov M.V. 0.1440 4,372,038

Protosenya S.V. 0.0864 2,623,223

Retivov V.N. - -

Smirnov V.A. 0.5093 15,465,317

Titarenko N.N. 0.0408 1,238,235

Feodosiev L.V. - -

Fridman A.M. 0.0720 2,187,009

Yanovskiy K.N. 0.1086 3,297,630

12

Shares are given based according to NOVATEK shareholders register under the Russian law.


40

INFORMATION ON PAYMENTS MADE TO MEMBERS OF THE COMPANY’S BOARD OF DIRECTORS AND THE MANAGEMENT COMMITTEE IN 2009

Payment Description

Board of Directors13

Management Committee

Total paid, RR including:

38,007,675 624,167,817

Salaries, RR

261,314,174

Bonuses, RR.

362,719,980

Fees, RR.

37,900,000 -

Other property advancements 107,675 133,663

The procedure and criteria for determining fees payable and expenses reimbursable to NOVATEK‘s Chairman of the Management Committee and Members of the Management Committee are set forth in the Company‘s Regulations on the Management Committee and employment agreements entered into between the Company and the individual committee members.

The procedure and criteria for determining fees payable and expenses reimbursable to NOVATEK‘s Members of the Board of Directors are set forth in NOVATEK‘s Articles of Association and the Regulations for Board of Directors.

13

Some Members of OAO NOVATEK‘s Board of Directors are also Members of the Company‘s Management Committee. Payments

made to such persons, as compensation for their activities as Members of the Management Committee, are included into the total amount paid to the Management Committee‘s members.


41

INFORMATION ON THE COMPANY’S COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE

The Corporate Governance Code of NOVATEK was approved by a resolution of the Board of Directors (Minutes No. 60 of 15 December 2005). The Code represents a set of corporate principles which has been elaborated on in accordance with the laws of the Russian Federation, international best practices, generally accepted principles of corporate governance, the Corporate Governance Code compiled by the Federal Commission for Securities Markets of Russia and the by the Company‘s Articles of Association.

No. List of Corporate Governance Standards

+/-14

Comments

General Meeting of Shareholders

1. The issuer‘s Articles of Association must provide for the notice of a General Meeting of Shareholders to be given at least 30 days prior to the Meeting‘s starting date, unless a longer term is provided for by the laws

+ OAO NOVATEK‘s Articles of Association, Clause 9.8, approved by a resolution of the General Meeting of Shareholders (Minutes No. 96 on 10 June 2005) with amendments, approved by a resolution of the Extraordinary General Meeting of Shareholders on 15 October 2009 (Minutes No. 108 on 21 October 2009) Regulations on the General Meeting of Shareholders of OAO NOVATEK, Clause 1, Article 20, approved by a resolution of the General Meeting of Shareholders (Minutes No. 95 on 25 March 2005) with amendments, approved by a resolution of the Extraordinary General Meeting of Shareholders on 15 October 2009 (Minutes No. 108 on 21 October 2009)

2. Ability for the shareholders with at least one percent of the votes to have information access to the list of persons entitled to attend a General Meeting. Such access must be provided within the period between the notification and conclusion dates of the General Meeting in the form of joint attendance, or, in the event of an absentee General Meeting, until the deadline for accepting voting ballots

+ Regulations on the General Meeting of Shareholders of OAO NOVATEK, Article 18

3. Ability for the shareholders to have access to the information (materials) to be provided for the purpose of preparation for a General Meeting of Shareholders, by electronic means, including Internet access

+ Materials for annual General Meetings are available on the Company‘s web-site in Russian and in English; particular materials, in response to nominee shareholders‘ requests, may be sent by email

4. Ability for any shareholder to propose items to the agenda of a General Meeting of Shareholders or to demand the convening of a General Meeting without producing an excerpt from the shareholders‘ register, if the shareholder‘s rights to the shares are accounted for in the shareholders‘ register maintenance system; or

+ Articles of Association do not demand from the shareholders the production of an excerpt from the shareholders‘ register, in the case described

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Compliance mark: (+) stands for full compliance, (+/-) stands for partial compliance, and (-) stands for non-compliance


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sufficiency of the excerpt from the securities account for exercising the said rights, if they are accounted for in the deposit (―depo‖) account

5. The Company‘s internal documents providing for a registration procedure for persons attending a General Meeting

+ Regulations on the General Meeting of Shareholders of OAO NOVATEK, Articles 36,37, and 38

No. List of Corporate Governance Standards +/- Comments

Board of Directors

6. The Company must elect the Board of Directors (BoD) by cumulative voting

+ OAO NOVATEK‘s Articles of Association approved by a resolution of the General Meeting of Shareholders, Minutes No. 96 on 10 June 2005, Clause 9.23 Regulation of NOVATEK BD approved by resolution of the general shareholders meeting (minutes N96 of 10.06.2005) Minutes of NOVATEK AGM (No106 of 28 May 2009) agenda item 3 – on election of NOVATEK‘s BoD

7. Availability of risk management procedure approved by the BoD.

Regulation of NOVATEK internal control, clause 3.2., approved by resolution of NOVATEK BoD (Minutes N114 of 31 August 2009).

8. A provision in the Company‘s charter envisaging the Company‘s right to establish requirements to the qualification and size of remuneration to the CEO and Management Committee members

Requirements to qualification are provided for by the Regulation of the BoD‘s Corporate Governance Committee. The monthly salary size is contemplated by the labor contract which is signed on the Company‘s behalf by the BoD Chairman. The size of remuneration is determined by the BoD‘s resolution and by the Regulation of the Management Committee Article 2, par. 2.8 The Regulation of the Management Committee approved by resolution of NOVATEK the Extraordinary General Meeting of Shareholders on 25 March 2005 (Minutes No. 95 on 28 March 2005) with amendments, approved by a resolution of the Extraordinary General Meeting of Shareholders on 15 October 2009 (Minutes No. 108 on 21 October 2009).

9. The Company‘s internal documents providing for the BoD Members‘ obligation to abstain from any acts which will or may cause a conflict between their personal interests and those of the Company, and, should a conflict arise, disclose details of the same to the BoD

+ Regulations on the BoD, Clause 12.2

10. The Company‘s internal documents providing for the BoD Members‘ obligation to notify the BoD in written

+ Regulations on the BoD, Clause 12.2


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form of their intent to make transactions with the Company‘s securities

11. Availability of internal documents approved by the BoD and providing for the formation and operating procedures for the Committees of the BoD

+ Regulations on the Audit Committee, approved by resolution of the BoD (Minutes No. 108 on 7 April 2009). Regulations on the Corporate Governance and Remuneration Committee, approved by resolution of the BoD (Minutes No. 43 on 24 March 2005) with amendments, approved by a resolution of the BoD (Minutes No. 65 on 21 April 2006 and No. 112 on 29 June 2009). Regulations on the Strategy and Investments Committee, approved by resolution of the BoD (Minutes No. 43 on 24 March 2005).

12. The Company‘s internal documents providing for the procedure of the BoD‘ meetings

+ Regulations on the BoD, section 8

13. Presence of at least third part of independent directors (meeting the Corporate Governance Code requirements) on the issuer‘s BoD

+ Seven independent directors are on the BoD, namely: Mr. Akimov A.I. Dr. Bergmann Mr. Vardanian R.K. Mr. Dmitriev V.A. Mr. Natalenko A.Y. Mr. Seleznev K.G. Mr. Timchenko G.N. Regulations on the BoD of OAO NOVATEK Clause 3.9

14. The issuer‘s BoD must have a committee exclusively in charge of the review of candidates for the company‘s auditors, estimation of the auditor‘s report, evaluation of the issuer‘s internal control procedures efficiency, and preparation of proposals for their improvement, i.e. the Audit Committee headed by a director meeting statutory requirements Members of the Audit Committee must include solely the BOD of Directors members not constituting the issuer‘s sole executive body and/or members of the issuer‘s collegial executive body

+

+

Regulations on the Audit Committee of OAO NOVATEK approved by a resolution of the BoD, Clauses 2.1.2 to 2.1.4, and 3.1.8, 3.1.12, 3.1.14, 5.1. Corporate Governance Code of OAO NOVATEK approved by a resolution of the BoD (Minutes No. 60 of 15 December 2005), Paragraph 4, Section 8 Regulations on Internal Control within OAO NOVATEK approved by a resolution of the BoD (Minutes No. 114 of 28 August 2009), Clause 5.2 to 5.5. The Audit Committee includes the following members: Mr. Vladimir A. Dmitriev – Chairman of the Committee; Mr. Andrey I. Akimov; and Mr. Ruben K. Vardanian approved by a resolution of the BoD


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The issuer‘s auditor‘s report estimation made by the Audit Committee must be provided as a part of the materials for an issuer‘s annual General Meeting of Shareholders

+

(Minutes No. 111 of 27 May 2009) The Company adheres to this requirement in its day-to-day business

15. The issuer‘s internal documents must provide for the obligation of the BoD members, members of the collegial executive body, and persons exercising functions of the sole executive body (including management company and its officers) to disclose information on holding the issuer‘s securities, and their sale and/or purchase

OAO NOVATEK‘s Articles of Association, Clause 10.4; Regulations on the BoD of OAO NOVATEK, Clause 12.2; Regulations on the Management Committee of OAO NOVATEK, Clause 2.11

No. List of Corporate Governance Standards +/- Comments

16. The issuer‘s BoD must approve the document on the use of information on the issuer‘s activities, securities and transactions therewith, as not being in the public domain and disclosure of which may significantly affect the market price of the issuer‘s securities

+ Information Policy Statement of OAO NOVATEK approved by a resolution of the BoD, Minutes No. 45 of 10 May 2005, Clauses 14.1 to 14.12

17. The issuer‘s BoD must approve the document determining the procedures of internal control over the issuer‘s financial & economic activities, the compliance control in respect of which procedures is performed by the issuer‘s structural unit reporting any disclosed breaches to the Audit Committee

+ Regulations on the Internal Control within OAO NOVATEK, Articles 4 to 6

18. The Company‘s internal documents providing for the Audit Committee members‘ right of access to any of the Company‘s documents and information subject to their compliance with the non-disclosure obligation

+ The Audit Committee is entitled to request any information (Regulations on the Audit Committee, Clause 4.1.1.)

Executive Bodies

19. Existence of a collegial executive body Management Committee

20. Executive bodies having no person who is a member (shareholder), the Director General, a management body member or an employee of any of the Company‘s competitors

+ No such persons

21. Contracts entered into by the Company with a sole executive body and members of a collegial executive body providing for liability for breach of confidentiality provisions

+ Contracts entered into with the Management Committee‘s Chairman and the Members of the Management Committee provide for liability for breach of confidentiality provisions

Significant Corporate Actions

22. Articles of Association or internal documents providing for the compulsory approval of major transactions before making them

+ The Company observes the said requirement

Information Disclosure

23. Availability of an internal document approved by the BoD and determining the Company‘s disclosure policy

+ Information Policy Statement

24. Internal documents containing a list of information, documents, and materials to be provided to the shareholders for solving any questions brought before the General Meeting of Shareholders

+ Regulations on the General Meeting of Shareholders (Article 22)

25. Availability of the Company‘s web-site and regular + Information is regularly and timely


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disclosure of information on the Company on such site disclosed on the Company‘s web-site

26. Availability of an internal document approved by the BoD and regulating the use of material information on the Company‘s activities, shares, and other securities, and transactions therewith, which has not been made public and disclosure of which may significantly affect the market prices of such shares and other securities

+ Information Policy Statement, Section 14 (Insider Information)

Control over the Financial & Economic Activities

27. Availability of procedures of internal control over the Company‘s financial & economic activities as approved by the BoD

+ Regulations on the Internal Control, Article 4

28. Existence within the Company of a special department in charge of the internal control procedures compliance

+ Internal Audit Department

29. Availability of provisions in the Company‘s internal documents requiring to define the structure and composition of its supervision departments

+ Regulations on the Revision Commission; Regulations on the Internal Control

30. Supervision departments employing no person found guilty of crime in the field of economic activities, or crime against state authorities or the interests of the public and municipal service, or found guilty of administrative offences in the fields of business, finance, or taxes and charges

+ No such persons

31. Availability of the Company‘s internal documents providing for a supervision department‘s obligation to report any disclosed breaches to the Audit Committee or the BoD

+ Such obligations have been provided for. Regulations on the Internal Control, Clause 6.3.

32. The Audit Committee reviews and evaluates an auditor‘s report before it is presented to the shareholders at a General Meeting

+ These requirements are complied with

novatek open joint-stock company novatek’s annual report is prepared in accordance with the...

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