Gazprom-AR2014

Risk Management
135
OAO Gazprom’s operating risks
Subsoil license non-renewal risks
The Company explores and produces hydrocarbons under subsoil licenses. Most of its licenses
may be suspended, altered or revoked in case of non-compliance with the license agreements.
Risk management/mitigation. The Company complies with the license requirements and
takes all necessary steps to mitigate the risk of license revocation, suspension or alteration.
Cost risk
Increased prices for equipment, technical devices, spare parts, as well as works and services,
which form the actual cost of capital construction projects, constitute one of the most significant
investment risks. Such price increases are driven mainly by changes in the foreign exchange rates.
Risk management/mitigation. Competitive procurement, when the suppliers offering goods
of adequate quality and submitting the lowest price bids are selected, is used to cut the costs of
procurement and sourcing of feedstock, materials, spare parts, works and services.
Facilities risks
The key operations, including hydrocarbon production, transportation, refining and storage, carry
a wide range of process and engineering, natural and climatic risks, as well as risks of adverse
actions by personnel or third parties, inter alia, due to human error, embezzlement, terrorist attacks
or sabotage.
Risk management/mitigation. The Unified Gas Supply System (UGSS) ensures reliable gas
supplies. Stable operation of the system is achieved by implementing advanced diagnostic methods,
and reconstructing and upgrading existing facilities. Insurance coverage is provided to protect
subsidiaries’ property interests, which includes property insurance (including offshore facilities),
business interruption insurance for GPPs and liability insurance for construction, repair and
operation of production facilities.
Hydrocarbon reserve estimation risks
Accuracy of reserve estimates depends on the quality of available information, as well as on interpretation
of engineering and geological data.
Risk management/mitigation. The Company’s reserves estimated under Russian reserves
classification standards are recorded in its books only after the annual review and approval by the
State Reserves Commission of the Russian Ministry of Natural Resources. Independent reserves
estimation procedures have been developed and are implemented in accordance with the PRMS
standards.
Environmental risks
Environmental risks, if realised, may have legal implications, including suspension of business,
financial costs related to penalties and compensation for damages, and damage to business
reputation.
Risk management/mitigation. The Company pursues a consistent environmental policy,
implements programmes and initiatives to reduce its environmental footprint, finances environmental
activities, takes out environmental risk insurance, and introduces advanced environmental
protection technologies. Most of subsidiaries have in place and continuously improve environmental
management systems certified under ISO 14001:2004.
OAO Gazprom Annual Report 2014