This will reassure European customers concerned about its capacity to meet export commitments. However, Gazprom's capacity to deliver will be severely tested as it tackles an array of ambitious projects.

Gazprom has been under fire at home and abroad for failing to invest in new production. The company has channeled much of its strong cash flow of recent years to non-core acquisitions, including:

· a 13 billion-dollar stake in the Sibneft oil company;

· European downstream assets;

· media interests; and

· stakes in several power plants in Russia.

In 2007 it paid 10 billion dollars for a 50% stake in the Sakhalin-2 project -- at the expense of Shell and its Japanese partners -- and an increased stake in Moscow's main power utility, Mosenergo. As a result, it twice reduced its investment programme for the year.

Investment plan. In a bond prospectus published in late March, the firm said that it expects its capital investment to rise by nearly 40% in 2009 compared with the present year, with the total amounting to 65 billion dollars in 2009-10. At the same time, planned levels of financial investment (including mergers and acquisitions spending) is to fall significantly compared with recent years.

As production from its super-giant fields in West Siberia declines steadily, Gazprom is finally taking serious steps to establish a new core production base on the Yamal peninsula, where 26 fields have been discovered with explored reserves of 10.4 trillion cubic metres. The development of these fields is an enormous project requiring significant new infrastructure. Cost forecasts are in the region of 160 billion dollars. Gazprom will rely on the resulting gas to maintain growth in overall production even as key existing fields decline.

Looming concerns. Behind the impressive figures for coming years are a number of unsettling trends for Gazprom:

· Falling production. Output at Gazprom's three super-giant fields in West Siberia is declining at a rate of around 25-30 billion cubic metres (bcm) per annum. Overall levels of production are also stagnating. In 2007, the firm produced 548 bcm of natural gas, down 1.3% on the 2006 total.

· Rising demand. Demand is growing in both Gazprom's domestic and export markets. Russian domestic demand is forecast to increase by 50 bcm per annum by 2015. As the EU's own natural gas production declines, net EU imports are set to grow by around 100 bcm per annum. Russia will have a strong incentive to increase its exports to EU member states and is looking to grow its market share from 26% in 2007 to at least 33% by 2020.

· Cost pressure. Input costs for new projects in the global oil and gas industry -- including contractor services, materials and equipment -- have grown exponentially in recent years. According to one calculation, Gazprom's planned investments for 2009-10 are 2.7 times higher than in 2002, but with adjustment for inflation the increase is only 22.6%.

· Price change. Imports of Central Asian gas have played a key role in helping to meet export commitments to Europe. However, these are set to become significantly more expensive following an agreement in March under which Gazprom undertook to pay 'European prices' for its gas purchases from the region from 2009.

· Capacity questions. Gazprom is embarking on a number of ambitious projects simultaneously. These include new production in the Yamal peninsula, Sakhalin Island and the Shtokman field, and major pipeline construction, including the Nord Stream and South Stream projects, a proposed pipeline to China, and extensive gasification projects within Russia. It also needs to invest in storage facilities and in its ageing pipeline network, of which around a third is over 30 years old.