On 28 June 2007 OAO Gazprom issued its audited consolidated financial statements for 2006 prepared in accordance with International Financial Reporting Standards.

A significant factor impacting the comparability of the consolidated financial statements of Gazprom Group for 2006 with 2005 was the acquisition in October 2005 of OAO Sibneft (from June 2006 – OAO Gazprom Neft). Higher oil and gas market prices also significantly impacted the results.

The table below presents the audited consolidated statement of income for 2006 and 2005. All amounts are presented in millions of Russian Roubles, unless otherwise stated.

	Year ended 31 December
	2006	2005
Sales (net of excise tax, value added tax (VAT) and customs duties)	2,152,111	1,383,545
Operating expenses	(1,363,923)	(929,561)
Operating profit	788,188	453,984
Finance income	97,923	53,890
Finance expenses	(65,220)	(69,926)
Share of net income of associated undertakings and jointly controlled entities	26,363	11,782
Gain on disposal of available-for-sale financial assets	8,811	385
Profit before profit tax	856,065	450,115
Current profit tax expense	(213,844)	(118,028)
Deferred profit tax expense	(5,760)	(16,156)
Profit tax expense	(219,604)	(134,184)
Profit for the period	636,461	315,931
Profit for the period attributable to:
Equity holders of OAO Gazprom	613,345	311,125
Minority interest	23,116	4,806
	636,461	315,931

Sales (net of excise tax, VAT and customs duties) increased by RR768,566 million, or 56%, to RR2,152,111 million in 2006 compared to 2005. More detailed information on our sales for 2006 and 2005 is presented in the table below.

in million RR (unless otherwise stated)	Year ended 31 December
Sales of gas	2006	2005
Europe
Net sales (net of excise tax and customs duties)	845,867	619,099
Volumes in bcm	161.5	156.1
Gross average price, RR/mcm (including excise tax and customs duties)	7,119.4	5,443.6
FSU
Net sales (net of excise tax, VAT and customs duties)	209,719	108,391
Volumes in bcm	101.0	76.6
Gross average price, RR/mcm (including excise tax, customs duties and net of VAT)	2,408.4	1,716.1
Russia
Net sales (net of excise tax and VAT)	356,033	309,985
Volumes in bcm	316.3	307.0
Gross average price, RR/mcm (including excise tax and net of VAT)	1,129.4	1,014.1
Total sales of gas
Net sales (net of excise tax, VAT and customs duties)	1,411,619	1,037,475
Volumes in bcm	578.8	539.7
Net sales of refined products (net of excise tax, VAT and customs duties)	434,985	202,870
Net sales of crude oil and gas condensate (net of excise tax, VAT and customs duties)	171,709	52,591
Gas transportation sales (net of VAT)	34,500	25,050
Other revenues (net of VAT)	99,298	65,559
Total sales (net of excise tax, VAT and customs duties)	2,152,111	1,383,545

Net sales of gas increased by RR374,144 million, or 36%, to RR1,411,619 million in 2006 compared to 2005. This increase was primarily due to higher European and FSU prices for gas as well as higher volumes of gas sold.

Net sales of gas to Europe increased by RR226,768 million, or 37%, to RR845,867 million in 2006 compared to 2005. This was primarily due to higher gross average prices for gas to European customers and the 3% increase in the volume of gas sold.

Net sales of gas to FSU countries increased by RR101,328 million, or 93%, to RR209,719 million in 2006 compared to 2005. The increase of sales in this segment is explained by higher prices and higher sales volumes.

Net sales of gas in the domestic market increased by RR46,048 million, or 15%, to RR356,033 million in 2006 compared to 2005. This is explained primarily by increased average domestic price for gas established by the Federal Tariff Service, and increased volumes.

In 2006, net sales of refined products increased by RR232,115 million, primarily due to the consolidation of Gazprom Neft as well as increased market prices for refined products in 2006 compared to 2005.

In 2006, net sales of crude oil and gas condensate increased by RR119,118 million. The increase in sales of crude oil is explained by the consolidation of Gazprom Neft starting from October 2005.

Operating expenses increased by RR434,362 million, or 47%, to RR1,363,923 million in 2006 compared to 2005 primarily due to the consolidation of Gazprom Neft’s results from the date control was established by the Group – starting from Qr 4, 2005.

The increase in operating expenses included higher expenses on purchased oil and gas (RR192,339 million, including Gazprom Neft - RR66,801 million), higher taxes other than on income (RR73,279 million, including Gazprom Neft - RR58,076 million), higher expenses on transit of gas, oil and refined products (RR45,626 million, including Gazprom Neft - RR34,946 million), higher depreciation (RR42,663 million, including Gazprom Neft - RR35,413 million), and higher staff costs (RR31,512 million). The increase in purchased oil and gas was caused by the appearance of a new type of expenses - “purchased oil” - due to consolidation of Gazprom Neft, and increase in cost of gas purchased in Central Asia. The increase in taxes other than on income was primarily due to consolidation of Gazprom Neft and changes in tax legislation related to natural resources production tax effective from 1 January 2006. The increase in expenses on transit of gas, oil and refined products was primarily due to consolidation of Gazprom Neft as well as a general increase in gas volumes sold to Europe and FSU customers and the growth of transit tariffs. The increase in the staff costs resulted from the increase in average base salaries and other payments and the increase in average number of employees.

The profit tax expense increased by RR85,420 million, or 64%, to RR219,604 million in 2006 compared to RR134,184 million in 2005. Our total effective profit tax rate in 2006 was 25.7% compared to 29.8% in 2005.

Our net debt balance (defined as the sum of short-term borrowings, current portion of long-term borrowings, short-term promissory notes payable, long-term borrowings, long-term promissory notes payable and restructured tax liabilities, net of cash and cash equivalents and balances of cash and cash equivalents restricted as to withdrawal under the terms of certain borrowings and other contractual obligations) increased by RR10,349 million, or 1%, from RR797,465 million as of 31 December 2005 to RR807,814 million as of 31 December 2006.

More detailed information on the IFRS consolidated financial statements for 2006 can be found here.