2008 Moscow Carbon Market Forum Moscow, April 28 & 29, 2008

1. 2008 Moscow Carbon Market ForumMoscow, April 28 & 29, 2008 PROJECTS FORREDUCTION OFREPUGNANT SUBSTANCE EMISSIONS, AND FOR REDUCTION OFANY LOSSES&NON-PRODUCTIVEEXPENSESRELATED TO NATURAL GAS TRANSPORTATIONBY CROSS-COUNTRYGAS PIPELINES By Mssrs Ye. Gavrikov, V. Zhabin, A. Zhukov, D. Kosarev, K. Leschukov, G. Melnikov, Ye. Shtin & N. Schoukin

2. Part 1 USE OF THECONTROLLABLEELECTRIC GAS-COMPRESSOR PLANTS (EGCPs)C/WAVOITHTURBOHYDROCOUPLE ATTHE GAS INDUSTRYFACILITIESFORREDUCING THEPOWERCONSUMPTIONLEVELS ANDTHEREPUGNANT SUBSTANCE EMISSIONS

3. Introducing aVoith Turbo Hydrocoupleat theCheboksary Compressor Station of the VolgoTransGas LLC

4. Introducing aVoith Turbo Hydrocoupleat theCheboksary Compressor Station of the VolgoTransGas LLC EGCP automatic control system from a Russianmanufacturer(Systema-Service PF) has been used Oil coolers from aRussianmanufacturer(GasKholodTechnika OJSC) have been used

5. Controllable EGCP vs. aGas-Turbine Plant (GTP) EGCP operation: EGCP c/w a Voith hydrocouple - Driveparameterstability Cheap night-time tariff option High reliability- 99.9% Fastand100%reliablestart Longservicelife Minimumcosts onmaintenance&spare parts GTP operation: Capacityvariationsubject toair temperatureandunit running time Gas consumptionto meet the on-siteneeds Reliabilityof up to 97% 95% reliable start Resource of up to 100,000 h Expensivepreventiverepairs&spare parts

6. Controllable EGCP vs. aGas-Turbine Plant (GTP)

7. Whyarethe controllable EGCPs being elaborated? • Availability/Faststart • Durability • Reliability • Lowercost • Lowerrepair& maintenance costs • Good environmental properties • Lowernoise levels

8. EGCP Advantages vs. aGTP • Simplicity • Reliability/Availability • Maintenanceusing the on-site resources • Lower price (installation included) • Compactability

9. US Gas-TransportationSystem Profile Naturalgasconsumption in theUSAwill growfrom 625 billionm3 per annum in 2008to 850 billionm3 per annum by 2015 andto 1,000 billionm3 per annumby 2020 The majority ofnewpower-station electricity-generatingunitshave been thegasturbinesthat would requiremore and more gas Due to an increase inthe price ofgas foron-site needs,an electric drivewould becomeeconomicallycompetitive Environmentallegislation has requiredreducing anyGHG emissionswhile operating thegas-compressorequipment

10. Use ofthe Voith HydrocouplesforGas Transportationin theUSA Controllable EGCPshave been themaininjector type employed atany newGCSsofthe US cross-country gas pipelines Over 30 Voith hydrocouplesrated 6 up to 30 MWhave beensoldin the USAfor theaboveuseto the satisfaction of gas-transportationcompanies Comparison betweenthe EGCPsc/w hydrocouplesandthe GTUshas become astandard FS sectionin the US gas industry

11. Advantages ofusinga hydrocouple while operating anadjustable drive

12. Part 2 DIAGNOSTICSANDRECOVERY OFHERMETICITY OF VALVING ATTHE UKRTRANSGAS COMPANY FACILITIESFOR REDUCING ANYMETHANE RELEASES INTO THE AIR

13. ORGGASNEFTESERVICE CJSC(Consumablesfor maintaining anyvalving at theGTSfacilities) • Consumables (couplingpastes &slushingcompounds) andequipment (high-viscosity material injector) formaintaining anyvalving usedat the GasProm facilities. • 2000– commencement ofcooperation withthe GasProm OJSC. • Over 500 ton – current volume ofdeliveries atthe GasProm subsidiaryenterprises. • The GasProm lettershave recommendedthe above materials for on-site usefor valving maintenance. • The productshave been provided with the operation permits, licenses & approvals (certificates, sanitary & epidemiologicconclusionsetc.). • The productshave beenpatentedandincluded into aregisterof theGasProm materialsto be usedat cross-country gas-pipeline facilities.

14. ORGGASNEFTESERVICE CJSC(Diagnostics&recovery ofvalving hermeticityto reduce anymethane releases) End-to-endmaintenance shall include: Development ofregulatorydocumentation; Valving condition diagnosticsin the part ofvalve hermeticity; Valvingservicemaintenance; Recovery ofvalving hermeticityusingany in-house technologies& consumables; and Valving condition conclusion c/w a recommendation forreplacing anydiagnosedequipment. 2006 – works atthe GasProm subsidiaryenterprises carried out. 2006 – OrgGasNefteService CJSCadmitted tothe diagnostics& maintenance ofthe GasProm gas-transportation facilities.

15. ORGGASNEFTESERVICE CJSC(Diagnostics&recovery ofvalving hermeticityto reduce anymethane releases) Valving end-to-end maintenanceshall include: Review, processing&expertise of apackage ofregulatory & engineeringdocumentation; Visualandmeasurement control of the crucialcomponents; Drive performability monitoring; Valve hermeticity monitoring; Shell metal &weldedjointcondition monitoring using any non-destructive methods (ifnecessary); and Technicalcondition evaluation (reports on safe operation resources, replacement, repair, removal of anyspecificunitsetc.). All worksshall be carried out inaccordance with the GasProm standards.

16. DEMONSTRATION WORKS AT THEUKRTRANSGAS COMPANY FACILITIES

17. PROGRAM FORTHE WORKS ATTHE UKRTRANSGAS COMPANY FACILITIES • End-to-endmaintenancehas envisagedthe valving hermeticity diagnostics&recoveryusing thematerials andequipment fromthe Melax Group of Companies • The facilities have been theDu 300 to 1,400 mm valving atacross-country gas-pipeline and theDu 50 to 1,000 mm valving atthe compressor-station process piping • The sitehas been the gas-pipelineandthe compressor station ofthe CherkassyTransGas Company • Period – June 18, 2007 throughJune 27, 2007 • Anticipatedoutcomes – reduction ofany GHG (methane) releases through the valving attheUkrTransGas Company facilities

18. QUANTITATIVE ASSESSMENT OFANY GAS RELEASES THROUGH VALVING • Quantitativeassessment ofany gas releaseshas been madeusingthe acousticequipmentfor thesurface&underground valving. • A dedicatedsoftware c/wa database onvariousvalving types&sizesandon the entrance & exit pressure oftransportedproducts has been used for assessing any gas releases. • Valving hermeticity diagnosticshas beenmade directly atthe inspectedequipmentwhen in service.

19. OUTCOMES OFQUANTITATIVEASSESSMENTOF ANY GAS RELEASES THROUGH VALVINGA

20. DIAGNOSTICS-BASED LIST OF VALVINGTO BE COVERED BYHERMITICITY RECOVERY MEASURES

21. VALVING HERMETICITY RECOVERYUSING THEPROCESSES &MATERIALS FROMTHE MELAX GROUP OFCOMPANIES • Consumables forhermeticity recovery – slushingcompounds andcoupling pastes fromthe MELAX Group of Companies. • Equipment – high-viscosity material injectorof in-house design. • Hermeticityrecovery processbased on an IndividualApproachPrinciple (IAP) with the following equipment features taken into account: • manufacturer, • installation site, • operation period, • designfeatures, • the Company specialists’ operating experience and the statistical databaseon any similar previous works. Hermeticityrecovery processshall include: 1. Washing anyvalve holes to aseal areawith the use ofa slushingcompound (“purifier”); and 2. Pressure feeding ofthe coupling paste of aspecifictype orgradeat the valving seal area.

22. MAINTENANCE OUTCOMES AT THE UKRTRANSGAS COMPANY FACILITIES

23. CONCLUSIONS ONTHEWORKS PERFORMED ATTHEUKRTRANSGAS COMPANY FACILITIES Halving hermeticity recovery processapplied bythe MELAX Group of Companieshasproved efficient: • Performability of 16 out of 20 valving holeshas been recovered. • Hermeticity ofvalve#20 of a junction point atKirovograd Compressor Station (CS-2) has been recovered. • Registered СН4emission reductionsatthe CS-34А (Т/А 3-1) have been 35.9 t/year,or 753.9 t/year of СО2-equiv.

24. CONCLUSIONS ONTHEWORKS PERFORMED ATTHEUKRTRANSGAS COMPANY FACILITIES • Use of the acoustic equipment by the specialists ofthe OrgGasNefteService CJSCfor the valving diagnosticshas provedefficientwhile assessing theactualequipment conditions; • Reliability ofthe quantitativeassessment of anygas releasesmade bythe specialists of theMELAX Group of Companieshas been confirmedby the parallel measurements bythe UMG representatives; and • The processes, equipment&materials fromthe MELAX Group of Companiescould be recommendedforrecovering thevalvinghermeticity and reducinganyGHG emissions.

25. VALVING END-TO-END MAINTENANCE AS ATOOL FORREDUCING ANYGHG EMISSIONS THE PROPOSEDEND-TO-ENDMAINTENANCEWOULD ALLOW TO: • Assessthe actualvalvingconditions; • Assessanymethane releasesthroughsurface and undergroundvalving; • Assess anygas cross-flowswithin the GCU processpipingtooptimizethe CS operation; • Make a technical substantiationof the quantityof valving atthe GTS facilitiesto be replaced; • Removeorreduce anymethane releases into theair; • Optimizethe GCU fuel gas consumptionthusreducing anycombustion product emissions into the air; and • Establish adata base and accumulate anyGHG (methane) emission reductionsatthe Client’s accountunder a relevantcarbon unit registerfor further trading at theglobal market.

26. TESTINGOF THE HERMETICITY OFVALVE#20AT THE KIROVOGRAD COMPRESSOR STATION (CS-2) FOLLOWING ANEND-TO-ENDMAINTENANCE

27. MEASUREMENT OFANY GAS CROSS-FLOWSATVALVE#20 OFTHE KIROVOGRADCOMPRESSOR STATION (CS-2)

28. Part 3 USE OFMOBILECOMPRESSORSTATIONS(MCSs) FORGAS TRANSFER FROMTHE GAS-PIPELINE SECTIONS UNDER REPAIR

29. BasicAssumptions and Motivations Presently,prior to anyworks atthe off-linegas-pipeline sections,naturalgasshall be vented intothe air. According to theGasProm environmentalreporting,any methane emissionshave been as follows: • 1,402.1 thousand ton in 2004; • 1,434.4 thousandton in 2005; • 1,529.9 thousand ton in 2006; and • 8,818 thousand ton in 2001-2005.

30. Experiments in the MCS Use InAugust & September of 2006,theGasPromTransGasChaikovskyLLC performed theexperimentalworks ona two-phase gas transfer at the Almaznoe gas-pipeline including: • Phase 1– gas transferfrom anoff-lineUrengoi-Petrovsk gas-pipeline section (1,702 to 1,727 km, Du 1,420) to an Urengoi-Novopskov gas-pipeline line; and • Phase 2- gas transferfrom anoff-lineUrengoi-Novopskov gas-pipeline line (1,704 to 1,729 km, Du 1,420) to anUrengoi-Petrovsk gas-pipeline line.

31. Hanover MCS

32. General Layout forConnecting anMCS to aCross-Country Gas-Pipeline

33. ExperimentalWorkOutcomes The amount of gas transfer froman off-lineUrengoi-Petrovskgas-pipeline section (1,702 to 1,727 km, Du of 1,420) to an Urengoi-Novopskovgas-pipeline line has been as follows: • 1,885,075 m3including 24,753 m3 of fuel gas. The amount of gas transfer froman off-lineUrengoi-Novopskovgas-pipeline section (1,704 to 1,729 km, Du of 1,420) to anUrengoi-Petrovsk gas-pipeline section has been as follows: • 2,032,361 m3including 34,940 m3of fuel gas.

34. ControlSection Parameters According to the MCS Operational Requirements approvedby Mr. B. Budzulyak, Director ofthe GasProm Gas Transportation, Underground Storage & Use DepartmentonJune 29, 2005, the control section parameters shall be as follows: • Length – 30 km; • Du – 1,420 mm; • Pressure – 75 kgc/cm2; and • Gas transfer amount – 3,054 thousandNm3.

35. Conversion into СО2Equivalent 3,054,822 Nm3of natural gascould be transferred from a single control gas-pipeline section under repair. With 18 transfers per annum,the gastransfer amountwould be 54.987 millionNm3, whichwould make 38,490.757 ton. A conversion would give 808,305.901 ton of СО2equivalent.

36. Thank You For Your Time! 115054,Russia,Moscow, 4th MonetchivovskyPereulok (Lane), 1/6,Building 3, Telephone: +7(495) 789-68-73, +7 (495) 789-68-74, Fax: +7 (495) 951-22-51, www.gk-melaks.ru